TaxACT 2011 Review: My User Experience With Screenshots

According to my tax software poll, it appears that the vast majority of readers are using one of the “big 3″ tax filing software: TurboTax, H&R Block At Home, or TaxACT. This matches industry-wide estimates; Did you know that H&R Block tried to buy TaxAct last year but was blocked by the Justice Department as it would hurt competition and basically create a duopoly?

Here is my hopefully-useful review of TaxACT.com, the first part of a series to try out each of these three products to do my real-life taxes and then compare each of them.

Tax Situation
Here’s a quick summary of our personal tax situation, which I think should cover the most common features of tax software. We don’t have any rental income, however.

  • Married filing jointly, subject to state income tax
  • Both with W-2 income, as well as self-employed income (Schedule C).
  • Interest income and dividend income from bank accounts, stocks, and bonds (Schedule B).
  • Contribute to retirement accounts (401ks and IRAs).
  • Capital gains and losses from brokerage accounts (Schedule D).
  • Itemized deductions (Schedule A), including mortgage interest and charitable giving.

Retail Price
Of the Big 3, TaxACT regularly has the lowest retail price. I will be using the online version of TaxACT, of which there are two editions:

  • Federal Free Edition (Basic): Free for Federal return + efile, $14.95 for State return + efile
  • Deluxe: $9.95 for Federal return + efile, $8.00 for State return + efile

Both versions include all Schedules and all e-fileable IRS Forms. Reasons for upgrading to Deluxe (basically an extra $3 for Fed + State) are the ability to import information from your 2010 TaxACT return, import info electronically from Gainskeeper, help with valuing donation items, as well as free phone support. If you are not subject to state income tax, then you can indeed use TaxACT completely free including efile regardless of income level or complexity of return. Nice! There is also a desktop version available on CD and via download for Windows only.

User Review


So I gathered up all my tax documents (W-2, 1099-INT, 1099-B, 1099-DIV, 1098) and started my tax return. One aspect to remember is that you can start your return for free at any of these sites, but they’ll only ask you to pay just before you efile to the IRS or print out your return. I guess they figure if you commit that much effort already, you’ll probably pay to file your return.

Import from Turbotax & H&R Block at Home
Since I didn’t use TaxACT last year, I was planning to go with the Free Edition since I didn’t have anything to import. However, even the Basic edition has something called QuickConvert that can import data from the PDF generated from other tax software. It scans and imports basic things like personal information and your AGI, but for example you won’t get last year’s W-2 employer data brought over.

Bookmarks
One nice feature allows you to assign “bookmarks” to any questions that you may be unsure of and want to revisit later. This saves you from wasting time searching around for that one little question that you weren’t totally sure about…

W-2 Import
The W-2 import feature that tries to save you some time by downloading your information directly from the internet only works if prepared by “TALX W-2 Express”. I believe that TurboTax imports from some of the larger payroll providers like ADP.

Investment Income
As I’ve started to invest more money into taxable brokerage accounts and not just tax-sheltered accounts like IRAs and 401ks, I’ve had to spend more and more time keeping track of capital gains and losses. Let me tell you, it’s almost enough to stop me from trading. I’m going to seriously look into GainsKeeper software to automate things for me. TaxACT Deluxe allows you to import from Gainskeeper as well as import transactions via .CSV file.

Alerts
As with the other guys, TaxACT will run a screen on your tax return information when you’re done to catch any errors or discrepancies.

Upselling and Price Tricks?
With a base product that is free, you would expect TaxACT to try and upsell you to a higher-priced product. Well, they do try and upsell the Deluxe version throughout the interview when there is an available feature that you may want to use. Honestly, I ended up upgrading to Deluxe just to see what you get, but in the end I don’t think I used any of the features. After upgrading though, I was not able to find a way to downgrade back to the Free Edition. So watch out for that. However, if you do have a State tax return then the extra $3 is probably worth it if you use any of the import feature to save you some time and effort.

Other than that, the only other upsell is for something called the TaxACT Data Archive Service (DAS) which provides access to a backup of your return for 3 years for $5.95. Actually, I would prefer they didn’t keep my personal information at all.

Overall Q&A Interface
I’ve used all three of these major brands over the years, and the question-and-answer interview style is pretty consistent across all of them. TaxACT does not feel relatively unpolished or inferior in any way.

Guarantee
TaxAct provides a “maximum refund guarantee”, where if you find a “larger refund or smaller tax due from another tax preparation method with the same data, we will refund the applicable product price you paid for your TaxACT Deluxe federal return. TaxACT Free Edition customers are entitled to a payment of $4.95.” Rather wimpy, but hey, it’s free.

Recap
TaxACT.com worked as advertised, and it provided a full-featured free Federal return at any income level and for all tax forms. Many other providers have “free” editions that are restricted to certain income levels or are only for 1040-EZ forms with no investment income or business income. At $17.95 for their top version including Federal + State with efile for both, I like the straightforward pricing and the software itself is pretty indistinguishable from the competitors. One thing they don’t provide is audit support, although I don’t know if I’d want generic support in the event of an IRS audit anyhow.

Comments

  1. Jonathan,

    Good review on the product. Being a long time user of TaxAct, I like to add few things.
    1. You can get the Deluxe version for $7.95 if you sign up early bird specials which comes around Nov-Dec time line. I don’t have state tax and I guess you get cheaper as when you sign early bird specials.

    2. Tax codes are complicated and convoluted, even as a guy who has good grasp on important things from my CFP exposure, I do need to review before filing things and Deluxe version comes in real handy. Especially some rules behind working from home and claiming deductions topics. Even their support/customer service people are good and fast on explaining things.

    3. I have found their eforms direct access is so better than other competitors which allows you to add any forms to your return even though you choose the wizard Q&A path.

    4. I have compared the returns from TaxAct and Turbo for few years and always got better returns from TaxAct and stopped comparing nowadays.

    5. I use their business version as well which is bit pricey but worth it with same level of details.

    As you mentioned, you don’t have option to downgrade once you upgrade to Deluxe version but if you didn’t use it since they track your usage they are pretty flexible in refunding the difference by calling or emailing their customer support.

    BTW, I am not an employee or no way connected to TaxAct. Just sharing my views.

    Vijai

  2. Michael says:

    Jonathan, here is a quick writing tip: The correct phrase is TRY TO not TRY AND.

  3. One thing to watch for filers with foreign accounts: Form 8938 (the new FATCA regulation) is not complete -the tax year info can’t be filled in. That means that anyone needing this form will have to print out their return and manually fill in the data, then mail everything.
    I talked to the support people on the phone, and this was the only advice they could give me.
    Also, there’s no warning at all in the Q&A that this form has to be filled in, and no link to it. It’s hidden in the ‘forms’ tab. Given the massive penalties for failure to file this form (among other things, the clock stops indefinitely on the 3-year statute of limitations for audits), this could be quite painful.
    I wonder how many other things Taxact has missed. You really cannot rely on the program for anything beyond basic filing requirements.

  4. I have used online taxact for a few years for free. This was the first year I got sucked into the upgrade when it asked if I wanted to import data from last year. I could not find a way to un-upgrade after I realized this (did not continue) so I just did the install of the standalone pkg instead. Not sure if I will be able to log in next year with online version or if they will forever wait for me to pay for an unused option.

  5. Matt Klein says:

    Just filed both Federal and State. First time doing my own taxes in about 17 years. I just always operated under the assumption that the tax guy could maximize my return, but I came up with similar numbers to what he did last year. Just saved a $100!

  6. Nice review! I’ve been a long time user of the HR Block TaxCut. I don’t really have anything bad to say about them, as I’m able to work through my taxes pretty well, but if there is a cheaper solution that still does everything, may as well try it. Do you know if the TaxAct imports returns from prior years in other formats (specifically TaxCut) or TurboTax?

  7. So??? Did you end up with a comparable return to previous years? I thought you used a tax professional? Will you compare the 3 then file or compare those to a professional opinion?

    I use turbotax’s freedom edition, which if accessed from the Minnesota Department of Revenue, includes a free state filing(if you are filing a Minnesota state return). Otherwise, I have had trouble finding the freedom edition sometimes, and I believe Turbo Tax also does not provide a means to undo an upgrade. I have redone returns to avoid paying them.

    I used tax act the one year I had a self-employed 1099 and had to file a schedule C, and I agree that it is easier to choose forms to add them on at will.

  8. Good thorough review – well written.

    Michael – of all things – did you REALLY need to comment on that?!? Geeze…

  9. @Vijai – Thanks for the tip on asking for a refund if you don’t use the Deluxe features. I wonder if you can downgrade if you contact customer service while in the middle of your return.

    @Michael – Thanks I’ll TRY TO remember that, but probably won’t. ;)

    @Udo – Thanks for your comment, I am unfamiliar with that aspect of taxes.

    @CultofMoney – Yes, TaxACT imports information from the PDFs generated from TaxCut H&R Block and TurboTax like personal details (name, address, SSN) and also critical numbers like AGI. I don’t think it imports everything, though, at least they didn’t noticeably change the questions based on my past return.

    @teeej – I didn’t actually file with TaxACT, I do plan to use both H&R Block and TurboTax with the same information and see what happens. Last year, I used an accountant to file my business return, and then used TurboTax for my personal return since all the complicated stuff was the business depreciation and all that.

    @Julie – Thanks :)

  10. In regards to keeping track of capital gains/losses for taxable accounts … I think the new regulation required brokerage firms to keep track of cost basis should simplify future cap gains reporting on schedule Ds … thoughts?

  11. @Tom – I would think so, but entering them in manually is still a pain if you a large amount of tax lots.

  12. The 2012 online edition of TaxAct has an apparent error in IRA distributions. These are supposed to go on line 11 of the IRS 1040, but TaxAct appears to be combining these with pensions on line 12.
    I think the final tax amount is still correct, but suspect it might trigger an audit when the matching does not match.

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