It’s that time of year again. Where we frantically dig through our files trying to drum up all the paperwork we need to do our taxes. For those who are well organized, it can actually be a relaxing time to record all their earnings and losses for the past year. But for most of us, it is a time where we consider going to a CPA and doling out hundreds of dollars to have them sort through our financial lives. Since the idea of paying someone that much for work we can do ourselves, most frugal people use one of the three top tax preparation softwares in hopes of saving themselves some money and earn the highest possible IRS tax refund. Each one offers something a little different, and you might be surprised how little it actually costs to do your taxes.
TurboTax is the largest, most popular, at home software with which you can do your taxes. The very basic edition is free to use, and it can all be done online. If you just have a couple of W2’s and are not itemizing your deductions, you can do your taxes, including e-filing your federal return all online without downloading or buying the software. For those who have a little bit more complex of a return, such as those who have a mortgage, children, freelancing incomes, rental properties, or one of many other different sources of income, TurboTax offers different levels depending on complexity. You don’t have to worry about buying the wrong one, since at any point the program realizes that your return is more complex than the software you purchased, you will be given the option to upgrade. Regardless of which one you buy, you will be able to do your free federal e-file and you can either pay $19.99 to e-file your state return, or you can print it and mail it in for free.
Rapidly gaining popularity, in part because it is the cheapest tax preparation software out there, is TaxAct. Just like TurboTax, you can do your full return online, or you can buy the software. The basic federal edition is free, but the real savings are when you have a more complex return. You can do a more complex return online, and get both federal and state e-filing for just $17.95. This is compared to the minimum of $19.99 just for the state e-file from TurboTax. The reason TaxAct is so cheap is that their software is still a little clunky. They simply haven’t had as much time to perfect and fine tune what they do. But if you have a simple return, why not save as much money as possible and use TaxAct?
H&R Block at Home
Like the other two softwares, H&R Block at Home offers free online federal e-files for simple returns (state e-files will run $19.95). The software, which has varying levels of complexity depending on the individual’s situation, is usually easy to use. However, there are often complaints that when mistakes are made, and they are usually detected by the software, it is often unclear how to fix the problems. From personal experience with TurboTax vs. H&R Block, I have found the TurboTax to be much more intuitive. There may be a reason it is a little more difficult to use; the company might want people to give up and come pay someone to prepare their return instead.
There really is no reason to pay hundreds of dollars to have your taxes done. In fact, if you have a simple return, there is no reason to pay anything at all. Having a CPA or other expert (i.e. someone with an llm in taxation) professionally prepare your taxes will usually only get you is audit protection. This can be important if you have a large return, and if it is that important TurboTax offers audit protection for a small fee. While there will still be millions of people paying a professional, you can save yourself a considerable amount of money by selecting the proper tier from any of the three major do-it-yourself tax software providers. Spending a couple hours on any of the programs (they are all roughly the same price and they all do roughly the same job) will help you to get the largest refund possible.
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