Overview: Best Online Tax Preparation Software for Individuals
The ever-changing landscape of the United States tax code often presents challenges to individual taxpayers, creating a looming dread every tax season. Filers fear mistakes due to missing information, incorrect form submissions, or a general misunderstanding of deductions or credits applied. However, there exists a bevy of resources available for filing individual tax returns for the 2015 tax year that can ease the anxiety of tax season.
Instead of completing and submitting paper forms, the Internal Revenue Service (IRS) allows taxpayers to file individual tax returns electronically, known as e-file. According to the IRS, more than 90% of all tax-paying citizens electronically filed taxes during 2014 for the previous tax year, some with the help of a tax professional and some on their own. While professional tax preparation is the preferred method of filing a tax return for some individuals, online tax software has become a smart, cost-effective alternative.
Benefits of Using the Best Online Tax Filing Software
In lieu of professional tax preparation, there has been a shift to utilizing the best tax filing software available online. The benefits of filing taxes through online software programs include ease of use, time and location flexibility, and substantial cost savings in most cases. Additionally, a number of the best free tax software programs provide filers with financial education that leads to a greater degree of understanding of how specific tax situations impact overall financial health.
Image Source: Best Online Tax Preparation Software for Individuals
Best Tax Preparation Software
For individuals utilizing electronic submission of tax return data through tax preparation software, sans the help of a tax preparer, the options seem endless. To help navigate through software selections for the 2015 tax year, we have compiled a list of the six best online tax filing software options for individuals. The best tax prep software includes the following:
At the top of the list for best tax software for 2016 is TurboTax. Powered by Intuit, TurboTax is highly regarded among individual tax filers who choose to utilize online tax preparation software each year. TurboTax is specifically designed to provide easy and efficient processes that guide the user through each step seamlessly. The interface allows for a simple experience, even for first-time users, and the navigation is both clean and intuitive. As one of the strongest contenders for the best tax filing software, TurboTax offers a wide range of capabilities for taxpayers with simple to complex situations.
For a substantial portion of the tax-paying population, TurboTax proves to be incredibly cost-effective. This is because anyone who is eligible to file a federal 1040EZ/A can file through TurboTax, the best online tax software, for free. Individuals eligible to file a 1040EZ/A generally have a simple tax situation by not owning a rental property, not having self-employment income, not selling certain investments, or not earning income by way of 1099s. Individuals who fall into this category can file under the Absolute Zero edition of TurboTax and pay nothing to submit their returns.
Other editions of TurboTax allow for more complex tax situations, including the following:
- TurboTax Deluxe: Federal filing costs $34.99, while state filing costs $36.99 (per state)
- TurboTax Premier: Federal filing costs $54.99, while state filing costs $36.99 (per state)
- TurboTax Home and Business: Federal filing costs $79.99, while state filing costs $36.99 (per state)
While these costs may seem relatively high when compared to other options for the best tax software for 2016, TurboTax provides additional value to users through its intuitive processes, mobile access, learning resources, and audit risk identification.
Streamline Processes in Each Edition
TurboTax is well-known as one of the best tax prep software because of its powerful backend system. Whether a user utilizes the free edition or one of the more complex editions, the online tax software provides a high degree of integration throughout the process. Users answer a number of questions at the beginning of the filing process, and the answers are used by the software to prompt additional tax concerns or implications of which the user may be unaware. In the software’s “Other Tax Situations,” users can review the items the software suggests for additional consideration instead of fumbling through sections that may be irrelevant.
In addition to its intuitive workflow, TurboTax offers superior deduction identification. Based on the user’s situation, the software identifies a wide variety of possible deductions, including education, business ownership, home improvement, family, rental property and charitable donation deductions. Each of these assist in ensuring the best possible outcome for tax filing for the user.
One of the factors that makes TurboTax stand out as one of the best online tax filing software options is its mobile application. TurboTax offers its users a robust mobile app for both Android and iOS devices that is rich with features and works as well as the online version. The user has the ability to take photos of W-2s and other necessary tax filing forms, and the app provides a video chat option for assistance throughout the filing process.
Additional Learning Resources
Individuals using TurboTax have access to some of the best online learning tools available in the tax filing universe. Whether a user is new to filing a tax return online or simply wants to become more educated on his financial situation as it relates to taxes, TurboTax offers a multitude of resources including a glossary of terms, a discussion forum, a vast knowledge base of articles, as well as video tutorials.
More complex tax filing situations often present a higher risk of audit than simpler returns that typically have fewer deductions or credits. Regardless of the complexity of the tax filer’s situation, TurboTax provides an audit risk meter that represents how likely a user is to be audited based on his input data. This feature places TurboTax at the top of the list for the best tax software for the self-employed, as business owners face additional scrutiny over individual filers.
A highly competitive option for the best free tax software is TaxACT, known best for its cost-conscious offerings. TaxACT supports nearly all of the most commonly used tax filing forms provided by the IRS and is a smart selection for taxpayers with simple returns to file. As a strong choice for one of the best tax software for 2016, TaxACT delivers through its pricing model, unique features, and educational resources offered to users.
TaxACT is by far one of the most cost-effective methods to file tax returns without the assistance of a professional tax preparer. The software offers a similar deal to those utilizing TurboTax Absolute Zero edition in that simple returns, or those eligible to file 1040EZ/A, can do so completely free of charge. Both federal and state returns have no cost under the TaxACT free edition.
In addition to the no-cost option through TaxACT, the software recently developed tiers of access for users with more complex tax situations. The editions include the following options:
- TaxACT Free: No cost for federal or state filings
- TaxACT Plus: Federal filing costs $14.99, and the additional state filing fee is $14.99 (per state)
- TaxACT Premium: Federal filing costs $19.99, and the additional state filing fee is $14.99 (per state)
One of the most helpful features within the TaxACT online software is the ability to import prior-year tax forms. The feature is available to users who utilized TaxACT to file a return in the previous tax year and is as simple as entering your username and password to access that data. The software also provides the functionality to import prior-year tax information from TurboTax and H&R Block forms for most users.
The stock assistance tool within TaxACT is unique to the software as well. This feature allows users the ability to enter specific stock purchase and sale information into a pre-built spreadsheet that tracks date of purchase, date of sale, proceeds, and applicable gains and losses. This data is then imported back into the TaxACT interface to assist in accounting for investment changes throughout the year.
TaxACT also stands out among the other options for best-rated tax software in that it alerts users to potential issues that may represent errors in data entry. With mini-alerts, TaxACT offers users insight into what problems may arise before filing and provides the opportunity to course-correct if needed.
Throughout each edition of TaxACT software, users have the opportunity to tap into the vast educational resources compiled for tax filers. TaxACT offers a glossary for common and lesser-known tax terms, video tutorials, and a large knowledge center that includes articles and expert posts.
Don’t Miss: What is a Tax Advisor?
H&R Block is most widely known for its brick and mortar locations, but to keep up with the demand for online tax filing options, the company also offers an online version to individuals and business owners. H&R Block is a strong player in the list of best tax filing software because of its competitive pricing structure, its design and workflow process, its built-in support system, and expansive mobile access.
Because H&R Block provides a robust variety of features and ongoing services to tax filers, the software’s price point is higher than other options for the best online tax software. Similar to other selections, however, individuals with simple tax situations can utilize the Free Federal Edition and submit returns for no cost. Here is the breakdown of pricing options for H&R Block:
- H&R Block Free Federal Edition: Federal filing is no cost, but the state filing fee is $27.99 (per state)
- H&R Block Basic Edition: Federal filing is $24.99, and the state filing fee is $36.99 (per state)
- H&R Block Deluxe Edition: Federal filing is $34.99, and the state filing fee is $36.99 (per state)
- H&R Block Premium Edition: Federal filing is $49.99, and the state filing fee is $36.99 (per state)
Design and Workflow
One of the features that makes H&R Block worth the higher price tag is the software’s flawless design. Each section a user enters begins with a clear overview of the information and a checklist of the data needed for input. Users have the ability to select which sections may apply to their specific tax situation, and the software prompts follow up questions based on unique inputs.
In addition to the design, H&R Block intuitively assists users throughout the filing process in a unique workflow system. Major sections of each user’s tax return offer distinct communication that addresses expectations for upcoming sections and potential data needed for a successful filing. Users can tailor their experience with H&R Block more than they could with other software options.
H&R Block also provides for bookmarking in certain sections. This process allows users to tag specific input and output data that may be confusing or may require additional information. Notes can be added and sections can easily be returned to by navigating to the bookmarks sections of the return.
Unlike some other online tax software programs, H&R Block offers in-person support for filers who have additional needs or questions. While e-mail support is an option, H&R Block allows for phone and chat functionality within the software, as well as video conferencing with tax experts and customer support representatives. The existence of physical locations also adds to the experience for users who lack full confidence in the online chassis.
What makes H&R Block superior to some other options for the best tax prep software is its helpful mobile application. Users have the ability to access their return data from any iOS or Android device on the go for any of the H&R Block software editions. The mobile app also provides for the same level of support via phone, chat, or video conferencing as the desktop version.
Image Source: Tax Filing Online
One of the lesser-known options for tax filing online is FreeTaxUSA. Like other online tax preparation selections, the software supports a broad set of applicable forms and schedules for tax filing individuals.
FreeTaxUSA also offers filing options for small business owners, investors, and rental property owners, making it one of the options for best tax software for self-employed individuals. FreeTaxUSA stands out from competitors in its pricing structure, its refund maximizer tool, its educational resources, and its ease of use.
Like most online tax preparation software programs, individuals who have a straightforward tax situation can utilize the most cost-effective version of FreeTaxUSA online. The program directs users with more complex situations to other, more robust editions as needed. FreeTaxUSA offers the following plan and pricing programs to tax filers:
- FreeTaxUSA Free Edition: Federal filing is no cost, but the state filing fee is $12.95 (per state)
- FreeTaxUSA Deluxe Edition: Federal filing fee is $5.95, and the state filing fee is $12.95 (per state)
Users should be aware that an additional cost of $5.95 is charged under the Free Edition for priority support. However, state filing fees are waived for any filer under the age of 22 as of the last day of the current tax year.
One of the most noted features of FreeTaxUSA is the refund maximizer, which provides users the opportunity to spot check any data input from another tax software’s return. This means that users who take the time to complete an abbreviated return through FreeTaxUSA are shown what the refund or liability would have been if the return was filed through the program.
If the refund is larger, users have the option to file an amended return with FreeTaxUSA under either available edition of the software.
While FreeTaxUSA may be lackluster in its features compared to other options for the best online tax software, the program does provide an array of educational material for individual users. A number of do-it-yourself topics appear within the software program for both current and prospective users.
This provides a great deal of information to assist users in understanding the financial position and common tax filing and form-related questions.
Ease of Use
FreeTaxUSA is also incredibly easy to navigate, even for the most novice user. Unlike more complex tax filing software, FreeTaxUSA allows users the ability to skip sections, add bookmarks to items that may need more attention or clarification, and review alerts generated by certain inputs.
The majority of online tax filers may not be familiar with e-Smart Tax, but the software effortlessly makes the cut for the list of best tax prep software for 2016. Backed by Liberty Tax, a well-known retail tax preparation outlet, e-Smart Tax offers a variety of pricing options, highly rated features, and in-person support.
While e-Smart Tax is not the least expensive option for filing a tax return online, it falls in line with other options to stay competitive. E-Smart Tax offers three tiers of pricing structures and editions, based on the complexity of an individual’s tax situation. The three editions offered by e-Smart Tax include:
- E-Smart Tax Basic Edition: Federal filing is free, but the state filing fee is $9.95 (per state)
- E-Smart Tax Deluxe Edition: Federal filing is $29.95, and the state filing fee is $9.95 (per state)
- E-Smart Tax Premium Edition: Federal filing is $49.95, and the state filing fee is $9.95 (per state)
For simple tax situations, e-Smart Tax can be a cost-effective choice.
In addition to its mid-range pricing structure, e-Smart Tax offers a number of features to assist users in the tax filing process. The software program recently went through a complete overhaul in terms of design, providing for a clean, streamlined experience for users from start to finish. Input screens are easy to navigate, and an always-visible help menu allows users to move in and out of sections of their return without jeopardizing the workflow or process.
Ongoing Support Services
Similar to H&R Block online, e-Smart Tax offers taxpayers the ability to access support in a myriad of ways, including phone and live chat connections with e-Smart Tax representatives. In the event a user needs additional help or feels less than confident utilizing the online chassis, retail locations supported by Liberty Tax provide in-person support not found with the majority of other online tax preparation software programs. For tax filers who need additional peace of mind in submitting their return, e-Smart Tax is a strong contender for the 2016 filing year.
Individuals looking for a truly low-cost alternative to tax return submission for the 2015 tax year may want to consider e-File. This online tax preparation software is different from other selections on this year’s list in that e-File is a dedicated team of professionals and tax software vendors who have come together to support an online chassis to file federal and state income taxes.
Headquartered in Fairfax, Virginia, e-File touts that it provides fast and easy tax preparation without all the frills and excess found in similar preparation software programs.
E-File is well-suited for individuals who do not want or need additional guidance or prompts for tax filing and who are focused on cost reduction more so than features.
Individuals utilizing e-File for their tax returns have three options as it relates to pricing packages. As with most providers, e-File offers a no-cost edition so that individuals with a simple tax situation can file a 1040EZ/A for free. More complex tax situations may require an enhanced edition that provides access to additional supported IRS forms. The editions available through e-File for 2016 include the following:
- E-File Free Federal Edition: Federal filing is no cost, but the state filing fee is $19.95 (per state)
- E-File Deluxe Plus Edition: Federal filing is $24.95, and the state filing fee is $19.95 (per state)
- E-File Premium Edition: Federal filing is $34.95, and the state filing fee is $19.95 (per state)
Individual taxpayers who require a home or business return can utilize the Premium Edition without an additional cost.
No Frills Experience
The most notable benefit of using e-File is the no-frills experience. Unlike other top contenders for the best tax return software, e-File offers a simple solution with simple features. Fortunately, a handful of tax tools are housed on the online portal, including a list of tax brackets and rate, education on tax credits and eligibility, and qualifying dependents information. The software also provides for support through the Contact Us menu and allows users to receive the assistance of an accountant or tax preparer for an additional fee. Individuals looking for a clean, straightforward experience may enjoy e-File for this tax year.
AdvisoryHQ (AHQ) Disclaimer:
Reasonable efforts have been made by AdvisoryHQ to present accurate information, however all info is presented without warranty. Review AdvisoryHQ’s Terms for details. Also review each firm’s site for the most updated data, rates and info.
Note: Firms and products, including the one(s) reviewed above, may be AdvisoryHQ's affiliates. Click to view AdvisoryHQ's advertiser disclosures.