By Louis DeNicola, Cheapism.com
We haven't hit the mad scramble that comes during the second week of April, but taxes are already on peoples' minds. Perhaps you've gotten a W-2 or 1099 and put it away for "later." If you're thinking about handing off those documents to a tax professional, you may wind up spending more than necessary. Many taxpayers with straightforward returns can use free online software to prepare and electronically file federal taxes for free and state taxes for less than $20. Compare that to $80 for a popular software package or well over $100 for professional tax preparation at a brick-and-mortar location.Don't be late for tax filing!
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Here are Cheapism's top picks for free online tax software:
- TaxAct ($14.95 for state returns) can hold its own when compared with better-known competitors TurboTax and H&R Block, according to expert reviewers. The company provides not only online tax prep but also downloadable software and CDs. The service includes video tutorials and email support from tax professionals, as well as a searchable help center. Although TaxAct may be less helpful for homeowners, investors, and others with more complicated returns, many taxpayers say they've found it easy to use and sufficient for their needs.
- H&R Block Free File (free for many states, $14.95 for others) is part of a federal program that offers free tax services to taxpayers who meet certain eligibility requirements. Users must be 52 or younger, have adjusted gross income of $57,000 or less, and access the software through the Internal Revenue Service's Free File site. On the H&R Block website, you'll find similar free software without such restrictions but a $27.95 fee for state returns. H&R Block wins plaudits from experts for its accuracy and customer support.
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- ESmart Tax, which used to be known as CompleteTax, is backed by the national retail tax preparation firm Liberty Tax Service. As with H&R Block, accessing the software through the IRS, as opposed to the eSmart Tax home page, yields savings on state returns: Some are free and most are $12.95 instead of $19.95. The same age and income restrictions apply. Experts reviewing the platform note the convenience of being able to upload last year's return from a number of competitors, as well as information from W-2 and 1099 forms.
- FreeTaxUSA ($9.95 for state returns) supports a vast selection of forms and schedules. Even the free edition accommodates taxpayers with dependents, investments, and small business income, where some other programs require an upgrade to a paid package. Users praise the software's simplicity and compare it favorably with pricier offerings from big name providers, although the guidance isn't as thorough.
Industry leader TurboTax also offers free software through the IRS Free File program, with free filing for many states and a fee of $14.95 for others. However, that Freedom Edition is available only to taxpayers with adjusted gross income up to $31,000 ($57,000 for active military) and to those eligible for the Earned Income Tax Credit. The regular federal free edition on the TurboTax website carries a $27.99 fee for state taxes and includes fewer schedules and forms.
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Free tax services generally come with limitations. If you have investments, earn rental income, or run a small business, your tax situation may exceed the capabilities of some free software. You also may want to consider paying more for additional guidance and customer service. At TaxAct, for example, unlimited phone support costs an extra $7.95. Cheapism has found that software prices and filing fees rise as the April 15 deadline draws closer, so get started now to save money.
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