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TaxAct Review 2021 – Free Online Tax Software


FEATURED PROMOTION

At a glance

Our rating

4.3/5

TaxAct

  • CPA Involvement: No, but good support for complex tax situations from non-licensed tax professionals
  • Plans: Free — free state and federal filing for simple tax situations; Deluxe — $24.95 and up for federal and $54.95 per state filing, ideal for homeowners and others itemizing deductions; Premier (includes priority support) — $34.95 and up for federal and $54.95 per state filing, ideal for those with complex personal situations, such as landlords and investors; Self Employed (includes dedicated support) — $64.95 and up for federal and $54.95 for state filing, ideal for sole proprietors and other self-employed filers; plans for incorporated businesses, tax-exempt organizations, and trusts and estates (plan pricing increases closer to Tax Day)
  • State Returns Included: Included with Free plan; not included with higher-priced plans
  • Pay With Your Refund: Yes; pricing varies
  • Audit Defense: Free informational audit support for all users; hands-on defense available from third parties for an additional fee
  • Additional Benefits: Seven years of return access included; maximum refund guarantee; accuracy guarantee (up to $100,000)


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Millions of Americans rely on multiple streams of income: independent contractors, small-business owners, solopreneurs, freelance workers, hustlers stringing together side gigs, and folks who earn passive income through investing. Their tax situations are significantly more complicated than wage-earners with one or two jobs, especially if they’ve formally incorporated businesses to take advantage of valuable tax breaks and legal protections.

It’s frustrating but understandable that business owners and independent workers have to pay more to file their taxes with brand-name services like TurboTax or H&R Block. Or do they?

TaxAct Plans, Pricing, and Features

TaxAct is significantly cheaper than its two big-name competitors. However, its free version isn’t suitable for any but the most straightforward tax situations, and its support infrastructure inspires less confidence than nervous filers might like. But substantial improvements to usability make it a serious alternative to gold-plated DIY products and full-service CPAs.

TaxAct offers four main plans:

  • Free
  • Deluxe
  • Premier
  • Self Employed

Less common products include:

  • Estates & Trusts, a pricier option for taxpayers with income from trusts or estates
  • Distinct small-business tax products for various legal business structures, including sole proprietorships, partnerships, S-corporations, C-corporations, and tax-exempt organizations
  • Online tax prep and e-filing solutions for independent CPAs

TaxAct guarantees the accuracy of all returns prepared with its software.

TaxAct also has a maximum refund guarantee that’s technically distinct from its accuracy guarantee. If you receive less than the maximum refund you’re otherwise entitled to or get audited due to an error in TaxAct’s software, TaxAct will pay the refund difference or cover any audit-related liability, up to $100,000.

Each plan’s pricing is subject to change and may increase as the filing deadline approaches, so it’s in your best interest to file as soon as you have all the necessary documentation in hand. Once you’ve collected all your documents, the only thing left to do is decide which plan is right for you.

Free

TaxAct’s most basic plan is free. It costs nothing to file your federal and state returns. This plan caters to individual filers with straightforward tax situations.

But its functionality and features, such as prior-year return importing and phone support, are somewhat limited.

Key features of the Free plan include:

  • Simple Filing. The free version supports simple tax situations. If you earn all or the vast majority of your income from regular employment and don’t need to itemize your deductions, this version is probably all you’ll need. Importantly, it covers the earned income tax credit and child tax credits but not dependent care credits. If you have a more complicated situation that includes investment income, itemized deductions, or self-employment tax, you need to upgrade.
  • W-2 Importing. You can import W-2s from your employers, saving you the time necessary for manual entry.
  • At-a-Glance Help During the Filing Process. TaxAct’s filing system boasts a useful support panel on the right sidebar next to the fields you use to complete your return. The panel’s search feature can help you find answers to quick questions. But it’s worth noting that clicking on individual results to get more detail takes you to TaxAct’s dedicated support system (and temporarily away from your return), making it less user-friendly than other tax software’s help features.
  • Unlimited Tax and Technical Support. TaxAct’s email and phone support system includes unlimited help with tax-related questions and technical platform issues. TaxAct’s support staffers aren’t necessarily licensed accountants and may not be able to answer complicated tax questions, but they’re nevertheless authorized to handle general tax issues and provide basic advice and guidance for uncertain filers.
  • Personalized Financial Analysis. Known as BluPrint, this complimentary, automatically generated report uses your tax return (including deductions, investment earnings, and business activities) to recommend opportunities to save on taxes and make changes that may improve your financial situation in the future.

Deluxe

This plan costs $24.95 to file your federal return early in the tax season, then around $40 to $45 as the filing deadline approaches, depending on timing. It costs $54.95 per state return.

It’s a much more robust program that can handle moderately complicated tax situations, including itemized deductions and investments. But it’s not sufficient for small-business owners and others with very complex taxes. It includes everything in the Free plan, plus:

  • Itemized Deductions. If you choose to itemize your deductions, which is a common practice for those with more complicated tax situations, such as homeowners and parents, you need to file a tax form known as Schedule A.
  • Form 1040 Schedules 1 Through 6. This plan supports IRS Schedules 1 through 6, which cover various types of income, credits, and tax.
  • Donation Assistant. This useful mobile app lets you track charitable contributions throughout the tax year. It also helps track the fair market value of noncash donations, such as clothing, vehicles, and furniture. If you’ve kept paper records of these donations instead, you can also access Donation Assistant through your desktop TaxAct account. You can add to your Donation Assistant list throughout the year following your filing date.

Premier

This plan costs $34.95 to file your federal return early in the tax season, then around $60 to $70 as the filing deadline approaches, depending on timing. It costs $54.95 per state return.

Premier is designed for those with complex tax situations not adequately addressed by lower-priced plans, such as investors and rental property owners. Premier includes everything in the Deluxe plan, plus:

  • Interest and Dividend Income. If you earned more than $1,500 from interest or ordinary dividends during the tax year, you need to file a tax form known as Schedule B.
  • Capital Gains. If you earned capital gains income from the sale of an asset, such as a publicly traded security, you need to file Schedule D.
  • Rental Property Income. If you earned rental or royalty income from owned real estate, you need to file Schedule E.
  • Foreign Bank and Financial Accounts. This plan accommodates income from foreign deposit and investment accounts.
  • Priority Support. This plan comes with priority support from TaxAct’s in-house tax experts. Features include a dedicated phone line with screen-share capabilities and in-app chat functionality.

Self Employed

This plan costs $64.95 for the federal return early in the tax season, then around $85 to $95 as the filing deadline approaches, depending on timing. It costs $54.95 per state return.

It’s more comprehensive than Premier, making it ideal for those with complex or unusual tax situations, such as solopreneurs and small-business owners. Virtually all IRS tax forms and schedules are available. In addition to all the features and functions of the Premier plan, Self Employed includes:

  • Small-Business and Self-Employment Income. If you earn the bulk of your income from contract or consulting work or are the proprietor of a small business, you need to file Schedule C and pay self-employment tax.
  • Farm Income. If you earn income from farming activities, you need to file Schedule F. (If you earn rental income from farmland you own but don’t materially participate in farming activities, you can file Form 4835 with Schedule E.)
  • Year-Round Tax Planning Guidance. TaxAct’s team is available year-round for help with tax planning, a valuable perk for self-employed people who need to pay quarterly estimated taxes or make contributions to retirement plans like solo 401(k)s or individual retirement accounts.
  • Deduction Maximizer. This step-by-step guide helps self-employed filers claim every tax deduction they’re entitled to. It’s built into the prep interface, so you might not even notice it’s running.

Estates & Trusts

This plan costs $109.95 for your federal return and $49.95 per state return. It’s designed to provide additional support for customers who need to file IRS Form 1041 and related forms, so it may not be necessary if your tax situation doesn’t involve income from a trust or estate.

There’s a separate set of interview questions devoted to trusts and estates, so you don’t have to worry about completely winging it.


Small-Business and Tax-Exempt Organization Packages

TaxAct has four additional packages designed for small-business filers with complex tax situations and one for tax-exempt organizations.

The Sole Proprietor plan costs $64.95 for federal returns early in tax season, then $85 to $95 as the filing deadline approaches, depending on timing. State returns cost $54.95 apiece. The three other small-business plans and tax-exempt organization plan, which correspond to different legal business structures, cost $109.95 for the federal return and $54.95 per state.

That’s several hundred dollars cheaper than hiring a human CPA. The plans available for small businesses and tax-exempt organizations are:

  • Sole Proprietor. This plan includes support for IRS Form 1040 and Schedule C and is ideal for those who are self-employed as well as freelancers and contractors. This package is similar to Self Employed, and the two can be used interchangeably by sole proprietors without employees.
  • Partnership. This plan includes support for IRS Form 1065 (U.S. Return of Partnership Income) and a host of associated forms commonly used by partnerships.
  • C Corporation. This plan includes support for IRS Form 1120 (U.S. Corporation Income Tax Return) and associated forms.
  • S Corporation. This plan includes support for IRS Form 1120-S (Income Tax Return for S Corporations) and associated forms.
  • Tax-Exempt Organization. This plan includes all the support necessary to file an informational return under federal income tax exemptions outlined in Sections 501(a), 527, and 4947(a)(1) of the tax code.

Additional Features

In addition to its free and paid tax filing packages, TaxAct’s most notable features include free ways to access your information and special protections against tax problems.

Tax Return Status App

TaxAct offers a slick iOS and Android app that provides status updates on your federal and state taxes (including whether the IRS and your state treasury have accepted them) and helps you estimate how long it should take to get your refund.

It’s free for anyone to download and use (even if you don’t use TaxAct to file). The federal government also provides online updates to your return’s status and estimated refund arrival dates. But TaxAct’s app is far more mobile-friendly than the IRS’s website.

Prior Year Returns

If you want access to your TaxAct returns from the past three years, you can do so for free through your account dashboard. That’s useful for filers who need to amend a previously filed return due to an issue such as an IRS audit and folks who simply need to access accurate completed returns.

Guaranteed Pricing With Auto-Enroll

TaxAct’s Auto-Enroll service lets you lock in your return’s price once you create your account and begin your return — even if you don’t complete your return in a single sitting. That’s useful if TaxAct decides to raise its prices before or partway through the current tax season.

Audit Defense (Protection Plus)

TaxAct offers this benefit in partnership with Protection Plus, a third-party provider. You must purchase Protection Plus when you file, but you can cancel for a full refund within 30 days of purchase as long as you haven’t already received an audit notice. Pricing is subject to change, but the line-item cost for Protection Plus has never exceeded the cost of a Self Employed plan.

Protection Plus covers you for as long as the IRS can audit your state and federal returns. It connects you with tax professionals who handle all correspondence and discovery, helping to interpret IRS notices and requests and direct negotiation of penalties and potential settlements with the IRS or state treasuries.


Advantages

TaxAct has several core advantages for taxpayers looking to save time and money.

1. Affordable at All Service Levels

TaxAct is very affordable. Its most expensive federal package for individual filers, Self Employed, costs less than $100 for the federal return and less than $55 for each state return.

Some of TaxAct’s better-known competitors charge double or triple what TaxAct Premium costs for similar levels of service. The cumulative cost of TurboTax’s highest-priced federal plan approaches $300, for instance.

2. Not as Promotional as Competing Platforms

Though it does offer different price points, TaxAct is only minimally promotional. It doesn’t push you to upgrade to a higher-cost plan or hound you to purchase add-on services.

TaxAct’s website has a laid-back layout and tone. If you try to do something your current plan doesn’t support, the system politely prompts you to upgrade. TaxAct doesn’t constantly remind you of value-added services via jarring pop-ups or ad screens. If you’re interested in them, you can simply find them on each plan page.

By contrast, both H&R Block and TurboTax actively encourage customers to sign up for higher-cost plans or add-ons with varying degrees of pushiness.

3. Auto-Enroll Grants You Time

If you’re self-employed or otherwise have multiple sources of income, you may not be ready to file your taxes until mid-March after all the necessary forms and statements trickle in. Weeks may pass between the first time you sign in to your tax preparation account and the day you complete your state and federal returns.

TaxAct’s price guarantee is useful for people in that situation. No matter how long you procrastinate before filing, you get the best available price on your returns.

Many online tax filing services, including TurboTax and H&R Block, don’t automatically offer price-lock guarantees. If they raise prices before you finish your return, you could be stuck paying the higher price.

4. Helpful Editing Functions During the Import Process

TaxAct’s import feature lets you edit information on the previous year’s return before overlaying it onto the current year’s. That’s very helpful if you’ve recently experienced a life event that results in changes to your basic information, such as moving, getting married, or buying a new house.

Other online tax filing programs, including TurboTax, import your return as is and then walk you through the editing process step by step, asking if each detail is still accurate. That’s much more time-consuming.

5. Human Support Is Better Than Some Competitors

The quality of TaxAct’s human support team has improved markedly since the early 2010s. Today, most paying customers have access to complimentary in-app chat or live phone support. And those willing to spring for higher-priced plans enjoy dedicated lines to credentialed tax experts.

6. Direct Access to Prior-Year Returns Comes Standard

In years past, TaxAct hasn’t always offered free access to prior-year tax returns. To see filed and partially completed returns from the past three years, you had to pay a one-time fee of $13.99 per return. These days, prior-year access is included in your filing fee.


Disadvantages

TaxAct has several disadvantages, including not always being the most user-friendly tax software.

1. Text Support System Can Be Confusing

TaxAct’s customer support apparatus provides a lot of detail, almost to the point of being overwhelming. The help section is a hodgepodge of semi-related topics, and the search feature doesn’t always return relevant results.

It’s easy to get bogged down in irrelevant help topics on your way to content that addresses your questions. That’s not optimal for busy filers squeezing in tax prep between everything else they’ve got going on.

2. Short Timeout Window

TaxAct has a very short timeout window, which can be problematic for filers who need to step away from the computer during the prep process. While data loss is unlikely, having to sign back in is annoying and disruptive, particularly for those with just a few minutes to spare before the next obligation.

3. No Hands-Off Prep Option

TaxAct remains a DIY tax prep aid, even as competitors like TurboTax move toward hybrid models that see (at least at higher price points) certified tax preparers or CPAs doing much of the grunt work.

If you can’t devote several hours during tax season to prepping your return by yourself, you may be willing to pay more for hands-on help.


Final Word

In the car business, there’s an old saying: “Only suckers pay sticker price.” The sticker price is the dealer’s opening offer, and they expect you to counter with a lower offer.

With all the add-ons, upgrades, and processing fees, filing your taxes online can feel like the reverse. Your chosen plan’s sticker price is the bare minimum, an amount you’d be lucky to pay in the final reckoning.

That’s not the case with TaxAct, which remains cheaper than its better-known competitors. TaxAct requires some sacrifices and assumes a basic level of tax-filing familiarity, but at least it won’t leave you much lighter in the wallet.

If you’re looking to save even more money, check out our top options for free online tax preparation software and services.

FEATURED PROMOTION

The Verdict

Our rating

4.3/5

TaxAct

If affordability is a major concern, but you’re not willing to trade too much in the way of support and service, TaxAct may be the tax prep program you’re looking for. Though the Free plan can’t handle complex tax situations, higher-end versions are much more affordable than equivalent products from TaxAct’s top competitors. Value-added features like Deduction Maximizer and a personalized financial assessment are helpful too.

Editorial Note: The editorial content on this page is not provided by any bank, credit card issuer, airline, or hotel chain, and has not been reviewed, approved, or otherwise endorsed by any of these entities. Opinions expressed here are the author's alone, not those of the bank, credit card issuer, airline, or hotel chain, and have not been reviewed, approved, or otherwise endorsed by any of these entities.

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