Refund & Payment Options
Best Online Tax Software
Why Online Tax Software?
We’ve been reviewing online tax software for 14 years. For the 2018 update we looked at eight of the most popular online tax programs and filed returns through them using common scenarios. While most of the companies offer free versions, if you have a complicated return or want to take advantage of tax credits or deductions, you’ll have to pay to file for most of the products. The costs for a federal return range from $17 to $37. State returns rarely have free options and cost between $12.95 and $39.99 to file.
Our pick for the best tax software is Turbo Tax. It’s the easiest to use, with helpful tools that make finding deduction and tax credits simple. If you’re just filing a 1040EZ, you can do so for free, but more advanced returns can be pricey.
Credit Karma is the one service that doesn’t charge anything at all to file your return, no matter how complicated. You’ll have to sign up for an account, which includes its credit score service. Credit Karma lacks some of the additional services other programs offer, like audit support.
If you want a professional to look over your return, H&R Block is the best choice. You won’t have to go to an H&R Block location; you’ll just fill out your return online and pay extra to have a professional look it over, find any deductions or credits you missed, and submit your return for you.
Why Trust Us
At Top Ten Reviews we’ve reviewed tax software for 14 years. We make sure to only test the most recent version of each program. We also keep our eye out for new programs and try to avoid white label versions of the same software. This year we’ve included FreetaxUSA and Credit Karma.
As we evaluated tax programs, we consulted the National Association of Tax Professionals, an association dedicated to providing tax professionals with resources and education, about deductions and tax credits to look out for. One of the best credits is the Child and Dependent Care Tax Credit, which can be overlooked if you paid for the care through a flexible spending account. The NATP advises looking for tax credits, which are superior to deductions because they reduce your tax bill dollar for dollar.
When Can You File Your 2018 Taxes?
Tax Day in 2019 falls on Monday, April 15. You can file anytime between now and that date, provided you have the necessary information. Employers are required to file and postmark W-2 forms by the end of January, so you should receive that information by February.
This is the first tax season affected by the 2017 tax law changes, and the Inspector General for Tax Administration has cautioned that this may delay the start of the tax filing season. The IG estimates that the IRS needs to create or revise more than 450 forms, which may lead to delays in those forms being distributed.
If you haven’t received your W-2 by February, you may need to contact your employer and request that it be re-sent. You can also contact the IRS at 800-829-1040. You need to provide your Social Security number, address and other personal information. In addition, you need information about your employer and an estimate of how much you earned.
Online tax programs usually release their newest versions toward the end of the previous year. If you used one for last year’s returns, you’ll likely get an email about the service’s update for the 2018 tax filing season.
How We Tested
To find the best tax program we filled out returns using a common scenario. We looked at how easy it was to fill out a return. Filing your taxes can be frustrating, no matter how complicated they are, so we looked for features that make filing your taxes as smooth as possible.
The best programs are easy to navigate, clearly showing you all the steps you need to go through to enter your information. We liked ones that highlight all the most important places you might want to backtrack to. Many now include the option to import your W-2, a time saving feature that ensures your information is accurate.
One of the most crucial things we found was the way each program flags errors. It’s easy to make mistakes – we made a few by putting an income amount in a tax-withheld box. Programs like Turbo Tax and FreeTaxUSA won’t let you proceed if you make an error. They call it out immediately and have you correct it before moving on. Programs like Jackson Hewitt are lacking in this regard. They wait till the end to show errors and, even more frustratingly, make you click back through your return without noting what needs to be corrected.
For most of these programs, filing your state returns is even easier than the federal return. The tax software transfers the information you already entered to complete your state return automatically.
Most of the programs we reviewed offer some type of free return. Usually this is for the most basic type of return, a 1040EZ or 1040A. If you’ve got a complex return, want to itemize your deductions or are self-employed, you’ll likely have to pay for more advanced versions with features for those specific situations.
What Else to Consider When Choosing Tax Software
Audit is a scary word, and most of these programs try to upsell you some form of protection. Often these come bundled with identity theft protection or other services. The typical audit protection means that you’ll get one-on-one guidance from a tax professional. Some audit defense packages include representation from the company, who will gather documents and work with the IRS on your behalf. These protection plans can be expensive, with costs ranging from $44.95 to $6.99.
Many services, such as Turbo Tax and H&R Block, have free audit support. This is a scaled-down version of the audit protection you pay for, and the main benefit is that the tax software company will provide an explanation and assistance in preparing for an audit. It doesn’t provide any representation or help with preparing documents.
Audits are rare. Usually only about one in 100 returns are audited. Really, you only need to worry about an audit if you’re filing a complicated return. If you’re filing a Schedule C for self-employment income, you are more likely to be audited. Often audits occur due to a lack of good record keeping, something that audit protection can’t really help with. Audit protection, like accuracy guarantees, generally cover little more than assurance that the return was done correctly, based on information that you provided.
The most common way to get your tax refund, if you do get one, is either through direct deposit or a check in the mail. Some places may also provide prepaid cards. If you need the refund immediately due to some financial hardship, you may be able to get an advance. H&R Block, Credit Karma, Liberty Tax and Jackson Hewitt are the companies we reviewed that offer advances.
The advance isn’t quite a loan – there’s no interest or fees, only the requirement that you file through the company providing the advance.
The advances are often loaded onto a prepaid card, so be conscious of any fees associated with those cards. Generally the fee is a few dollars per withdrawal, so check to make sure the card has a free ATM network associated with it. Some advances can be direct deposited as well.
Recent Tax Law Changes Will Affect Deductions for 2018 Taxes
The tax law passed in 2017 takes effect on 2018 tax returns, and the changes it introduces affect a variety of deductions and credits, including some very popular ones. The most significant change involves the standard deduction, which nearly doubles from the previous year. The standard deduction for someone filing their own return is now $12,000, up from $6,350. If you’re married and file jointly, the deduction will be $24,000, up from the previous deduction of $12,700.
Another big change affects deductions on mortgages and home equity loans. The amount on a mortgage you can deduct reduces from $1 million to $750,000, and you can only deduct the interest on a home equity loan if you used the loan for home improvements.
Further, child or dependant deduction limits increased, up to $2,000 from $1,000. Smaller, miscellaneous deductions, such as those for moving or investment expenses, have also been eliminated.
These changes will reduce the number of people who itemize their deductions. As such, filing your 2018 taxes will be simpler than in years past.
Can I Do My Taxes Online for Free?
Most tax programs let you file for free, provided you meet their criteria. This usually means you can file simple returns for free, but you must pay to file more complex returns. Generally, if you plan to itemize your deductions, expect to pay to use tax software.
You can also file for free through the IRS FreeFile program if your income is below $66,000. According to the IRS, this encompasses around 70 percent of eligible taxpayers. FreeFile is a partnership with a variety of programs, and it allows you to file both state and federal returns for free.
Programs like TurboTax allow you to file for free if you claim the standard deduction, have minimal interest and dividend income, have mainly W-2 income, or claim the Earned Income Tax Credit. If you itemize deductions or file 1099s, you have to use a paid version.
If you freelance or work for a rideshare, you may want to look into Credit Karma. You can file state and federal returns for free through this service. There are no restrictions on the type of return, though you need to create an account with Credit Karma’s credit monitoring service to use it. We’ve reviewed Credit Karma and found it to be a good service, so signing up can kill two birds with one stone.
How Much Does It Cost to Have Taxes Prepared Professionally?
Taxes can be daunting, and the idea of having a professional do them for you is very appealing. It can be expensive though, with standard returns costing around $100 and returns with itemized deductions costing upward of $200. If you’re self-employed and need to file a Schedule C, it can cost even more, up to $400. You can use an online tax program for free if you have a simple return, though a more complex return can cost between $40 to $80 to file, depending complexity.
If you itemize your deductions or have a lot of business or investment income, you may want to find an accountant or tax preparer. Most online tax software includes the option to have a professional review your return.
If you choose to have your taxes prepared by a professional, know that they can only charge a flat fee. Avoid anyone who charges a percentage of your return. Also, tax preparers can’t charge contingency fees, except in rare circumstances.
Professional tax preparers may also charge more during peak season – if you try to get your returns done at the last minute, it can be more expensive, sometimes costing as much as $100 extra. You also must pay an additional fee if you need a return expedited or need to file an extension.
How to File If You Don’t Get a W-2
Generally, if you work a job, taxes are withheld from each paycheck and you receive a W-2 at the end of the year. However, freelance and contract work is becoming more common. In fact, an NPR/Marist University poll shows that one in five American workers are contract employees. Some experts estimate that within a decade, more than half of all workers will be employed on a contract basis.
While freelance positions give you flexibility and control, you’re also on the hook for your own taxes. You’ll get a form 1099-MISC that documents the income you received, but as part of your returns, you’ll need to figure out the taxes yourself. Because income, Social Security and Medicare taxes aren’t taken out by the person who paid you, you have to deduct them yourself. In some cases, the IRS may expect you to make quarterly income tax payments.
Fortunately, there are also many deductions you may be eligible for, which can potentially reduce the amount you pay. For example, you can deduct your home office, travel and other expenses. If you work for a ride share, you can deduct your mileage, car insurance and other expenses.
One drawback of having to file taxes as a self-employed person is your returns will be more complex, which is why most online tax programs don’t support free filing for self-employed workers. As such, you’ll have to pay to use those services.
How Will the Government Shutdown Affect Tax Returns?
Many government agencies have been affected by the shutdown, and there’s a lot of confusion about which are operating. With tax season fast approaching, there’s also been some uncertainty about whether or not tax returns will be processed and refunds sent out. Though it's unlikely the shutdown will last until April 15, the earliest day for filing returns is Jan. 28.
The IRS recently stated it would bring back furloughed workers and begin the filing season as normal on Jan. 28. This means as soon as you get your W-2 and other necessary documents, you can begin filing your taxes as you normally would. You can also use a tax program or professional to prepare your return earlier and submit it as soon as you’re eligible too.
Though tax returns will continue on schedule, there are other ways the shutdown will affect people trying to file their tax returns. The primary way is it will likely affect people trying to get help with their returns. Many workers who remain furloughed are those who answer the public’s questions. This could be compounded by the fact that this is the first year with significant changes to the tax code, which could result in many more people needing help.
There are also some new regulations and deductions that are unclear, especially for small businesses. Until there’s clarity about them, it will be difficult to file returns. In addition, people filing amended returns will likely be delayed even longer. Amended returns are usually processed by hand and take up to 16 weeks in optimal conditions.
Life Changes That Can Affect Your Taxes
Your tax status can change a lot depending on what happened in your life the preceding year. Here’s how some common major life events can affect your taxes:
Getting Married: This has one of the greatest effects on your taxes. When you get married, you can choose to file jointly or separately. Most often, people file jointly because doing so gets you a larger standard deduction, and you end up paying less in taxes. You also become eligible for other tax benefits like a student loan interest deduction. It’s rare, but there are occasions where you may be better off filing separately.
Having a Child: Having a baby, adopting or otherwise claiming a dependent gives you many other opportunities for tax benefits. You can claim the child tax credit, which is worth $1,000 per qualifying child. If you adopt, there’s a separate tax credit you can claim. Also, you can claim a deduction for out-of-pocket child care costs.
Buying a Home: There are some tax deductions available to homeowners. Chief among them is the mortgage interest deduction, though it is usually only an option if you itemize your deductions. Deductions may be available for mortgage points and property tax payments.
Going Back to School: There are a variety of deductions you can claim on your education costs when you go back to school. You can deduct tuition, fees, supplies or other expenses, but you can’t claim more than one tax break for the same expenses in the same year.