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.
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.
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.
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.
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…
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.
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.
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.
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.
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.