One of the fun things I get to do is interview folks from all the major tax-software companies to learn about their products and best advise my clients. The tax-software companies produce tax programs for online use and as boxed software. Which is the best choice for you?
What’s Available Online?
If you want to prepare your tax returns online, you have lots of options for free federal tax-preparation services. State tax returns are not included with these services. Check your state’s website to see if it offers free online filing.
Free Tax Service #2: Free File Alliance (FFA). FFA provides free federal efiled tax returns if your income is under $58,000. Many FFA partners also provide services to members of the military and seniors. One drawback: If you start working on your tax return and it doesn’t qualify for the FFA service, you must exit and start over elsewhere with paid software. Consider skipping FFA. Start with the next option.
Free Tax Service #3: Tax-software companies’ free service. Every major tax-software company offers free federal tax return preparation. Most include more forms and income types than ever. New customers can upload PDF copies of last year’s 1040 created by the major software companies. TaxACT can read anyone’s PDF files—and produce summaries for FAFSA applications. CompleteTax offers free filing for the unemployed or folks switching providers.
You get different levels of support from the various companies. TurboTax’s team of enrolled agents and CPAs staffs its “Ask a Tax Expert” phone lines and Live Community forums.
In all cases, you can start with the free tax return. If your situation is more complex, the software will alert you that you are moving up to a paid tax return. That’s a nice bonus; you won’t have to exit and start all over.
Paid Online Tax Services
Online personal federal and state tax-preparation prices range from about $15 to $80, depending on the complexity of your tax returns.
All the companies provide some audit support, but most paid audit-support services require a fee for up to three years.
In the Box
Boxed software is essentially the same as online software. The three main advantages of boxed software are
You get the same assistance and audit support for the boxed software as for the online version, depending on price.
People who help their family members prepare their tax returns will find the boxed software a better value. Anyone needing only one tax return should use the online services. Once you choose a provider, stay with it so your data rolls over to the following year’s tax return and you can access your prior years’ returns online.
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