Compared to the ink-on-paper approach to tax preparation, any online tax service should be a huge improvement.
If you’re old enough to remember the bad old days, you’ll know what I’m talking about.
Back then, doing taxes required spending a few evenings every spring with a stack of paper forms and a calculator.
Though we didn’t have to fight off mastodons on the way to the post office to mail in our taxes, in other ways you may have thought it was the dark ages.
If you got confused filling out your return, for example, you’d consult the tiny type in that year’s newsprint-style tax guide, or else wait for the public library to open so you could ask someone a question.
Now, every time I enter data online and let the software do all the calculations and populate all the right forms, I am grateful for the Internet age.
Not All Conveniences Are Created Equal
Despite the instant improvement an online tax service will offer, you should still spend a few minutes choosing the best service for you, paying attention to issues such as:
- User interface: Some online tax services are easier to use than others. For example, using a service that saves re-usable information such as Social Security numbers or previous years’ returns can save a lot of time.
- Price: Advertised prices and real prices are two different things with many tax services, especially those who advertise free services.
- Personal preference: A certain tax service may simply jibe better with your way of thinking. Someone else may rate the service poorly, but if you like it and it’s accurate, go with it.
- Reliability: Inaccuracies can get you into trouble with your state’s department of revenue or the federal Internal Revenue Service. If you enter your data correctly, your service should guarantee accurate output.
About TaxAct.com and Its $100K Guarantee
Those standards led me to the subject of this review, Taxact.com, which backs its accuracy with a $100,000 guarantee.
Not only does the site guarantee the accuracy of its calculations, but it also guarantees it will maximize your possible tax return (or minimize what you owe) as it works from the data you enter.
A guarantee this big got my attention, so I looked into TaxAct.com more closely to see how it delivers on this promise and how it stacks up with the other leading services.
First, let’s be clear about the guarantee: The site will not pay you $100,000 if it makes a mistake.
However, it will reimburse you up to $100,000 for fines or other losses you incur as a result of a mistake or an oversight in your returns.
The site would also refund the fee you’d paid to use its services in such a case.)
The specifics become clear in the site’s fine print.
How Does TaxAct.com Compare to Competitors?
Reading the fine print can also tell you a lot about the actual price and services a tax site provides.
On the IRS’s website, for example, you can find a long list of online tax services that meet the government’s requirements.
Any of them should get the job done.
Many advertise free returns.
But which one should you choose?
Sites offering free returns often mean they will not charge you to file an IRS 1040-EZ form, which is the equivalent of the single page, fill-in-the-blank return you can use if you have the simplest possible tax situation.
If you need to use an actual 1040 form, you’d like to file a state return (which you definitely should do), or if you need to include basic exemptions or credits, you’re introduced to a fee structure before being allowed to continue.
So as you compare tax services, look beyond the introductory rates at the real prices you’d pay for returns.
You can also simplify the process with our federal income tax guide to assess your needs.
The Real Fees for Using TaxAct and Other Services
Since H&R Block and TurboTax have emerged as industry leaders along with TaxAct.com over the past decade, we’ll use them as models for comparison.
All three sites offer basic services such as simple state and federal returns at no charge.
However, each site also has a “deluxe” or “premium” plan you’d need to buy for more complicated returns.
TaxAct’s Deluxe plan offers a cheaper alternative for federal tax returns.
In 2018, the service cost $25 while the other two services charged $39.99.
All three services charge around $37 for state returns.
All three sites also offer special packages for freelancers and business owners.
At each level of service, TaxAct.com offers the lowest prices.
This seems simple enough, right?
Like a lot of tax-related issues, though, you can uncover a more complex reality by digging a little deeper.
For example, the threshold at which you would need to upgrade to a Deluxe or Premium plan differs for each of these three leading services.
So, if one of the services’ free plans can handle all your needs, you can save by avoiding the upgrade altogether even if it does not offer the lowest price.
Because taxes are individualized, you can’t always easily identify “the best deal” and recommend it to a large audience.
To find out whether you should upgrade, you’ll need to consider your specific needs.
For example, if you have student loan interest you’d like to deduct, H&R Block’s free plan will allow it while the other two services will not.
How TaxAct.com’s User Experience Compares
TaxAct.com, H&R Block, and TurboTax all became leaders in the tax service industry by consistently offering high rates of customer satisfaction.
It’s no surprise, then, that all three services offer user-friendly tools, and that each service improves its interface each year.
These leading services no longer require you to enter numbers into fields that resemble a tax form.
Instead, they ask simple questions then use your responses to make calculations and populate the actual tax forms.
So how do you choose a leader?
In this case, it can come down to something as simple as personal preference, and your personal preference matters more than mine.
I could tell you whether I prefer an iPhone or an Android, a Nikon or a Canon, or a Toyota or a Honda.
But chances are you’d still stick with your favorite.
Tax services are becoming the same way.
This is not to say you couldn’t possibly have a problem.
Any kind of website can experience technical issues, which is why all three of our leading services offer help through phone and chat support.
The TaxAct Guarantee: Reliability and Accuracy Matter… a lot
Originally, tax software primarily offered convenience.
As online and downloadable tax services have evolved, they’ve started to offer something more: knowledge.
State and federal tax laws change from year to year.
Sometimes they change a lot.
While software still can’t replicate a human tax preparer’s ability to strategize and anticipate the effects of upcoming changes, they have come a long way.
If you’re an individual taxpayer or even a small business owner, the right software or online service may provide enough expertise for your tax returns.
Some people can’t afford a professional, but they can manage to pay a software fee, which is why accuracy and reliability matter so much.
Naturally, you’ll have to be sure you’re entering data correctly.
If you say you earned $21,000 last year and you actually earned $121,000, you’ll have a problem that did not originate with the software.
But if you do your part entering numbers correctly, shouldn’t you expect your software to apply its knowledge accurately?
Of course. TaxAct.com, along with other industry leaders, excels, which is why TaxAct can offer to pay up to $100,000 if it does not maximize your refund or minimize your liability.
Once again, this guarantee applies only to the data you enter.
If you forget to report $3,000 in work-related travel expenses, you can’t blame the system for not writing off those expenses.
Bottom Line
Reliability, accuracy, and price matter because, when you choose an online tax partner, you may be making more than a one-year commitment.
As you enter data for yourself, your spouse, and each of your dependents, wouldn’t it be nice if you could reuse that information from year to year?
If you liked the service you use this year, for example, you could simply log in and update your income, expenses, and deductions next year, making the entire process even more seamless.
It’s not a huge deal to start over from scratch with a new service.
If your tax situation changes and you need a more complicated set-up, you’ll be better off switching services.
But the fewer sites that have your family’s Social Security numbers stored in their servers the better, right?
So as you decide which service to use, think about whether you’d like to continue using the service in the foreseeable future.
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