Tax preparation software makes it easy to navigate tax law changes year after year, and TurboTax is our top pick for best tax preparation software this year.
There have been changes to the entire itemized deduction structure, including both threshold and the items you can still deduct.
TurboTax is the perfect tax software for that purpose.
It’s not only the most popular tax software there is, but it’s probably also the standard against which all others are compared.
Whatever level of expertise you have in tax preparation, TurboTax can enable you to prepare your return quickly and easily.
It’s the next best thing to having your return prepared by a CPA, but at only a fraction of the price.
How TurboTax Works
Even if you don’t know anything about income tax preparation, the sequence can easily guide you through the process.
Let’s take a quick look at the TurboTax process so you’ll know what to expect and what documents you’ll need to provide information from.
How The TurboTax Questionnaire Works
Not only are the questions basic and easy to answer, but they’re grouped by basic topics.
For example, they start by asking the kind of questions you might see on just about any questionnaire anywhere. This portion includes general information, and you can get past it in a matter of minutes.
From there, the questions become more substantial, and most are fill-in-the-blank type questions.
For example, you’ll be asked to fill in information directly from your W2.
However, the W2 forms of many large employers are available for direct import, making the job even easier.
You’ll also be asked to provide information from 1099s, like bank interest or dividends earned.
It gets a little bit more complicated when you have to enter stock transactions. But even with these, it’s possible to import the capital transactions schedule from a broker.
With that capability, entering stock trades becomes a breeze. Next, you come to the deductions portion.
The program will use the same question and answer format, enabling you to enter your deductible expenses one by one.
You’ll be asked to provide the information for medical expenses, mortgage interest paid, state and local taxes, charitable deductions, and business expenses, if you have any.
What Happens Next
Once all the information has been entered, TurboTax will review the return and let you know if there are any errors or missing information. It will then make suggestions on how to lower your tax liability, such as by taking an IRA deduction.
TurboTax will provide you with a summary to review before filing your return. If you’re satisfied the information is accurate, you can then go about the business of actually filing your return.
In most cases, you’ll be able to e-file, at least for your federal return. But you always have the option to print your return and file it by traditional mail. You’ll also have the ability to print copies for your records or save them to your computer for future use.
But TurboTax doesn’t disappear on you once you file. They’ll notify you by email when your e-filed tax return has been accepted by the IRS.
This will usually happen within one or two days, but in my experience, it’s usually within a few minutes – it’s that fast!
If you’re entitled to a refund, TurboTax enables you to track it. They do this through their Where’s My Refund? feature, which enables you to track your refund from filing through receipt.
What’s New in TurboTax for 2020
Last year, TurboTax added an additional version – turbotaxlive – and it’s the most comprehensive yet.
You prepare your income tax the way you normally do, but if you run into a snag, you can get live Assistance from either a CPA or an enrolled agent (EA). This is what “live” refers to in the name of the version.
That’s not all. Once your tax return is complete, it will be reviewed by the tax expert. If any changes are needed before filing, the CPA or EA will make them.
This is an excellent option for someone who wants to have the highest level of tax preparation expertise, but doesn’t want to pay the high cost of engaging a CPA to do the entire job. We’ll go into more detail on turbotaxlive a bit further on.
The 2019-2020 site and app navigation has also improved, making filing on the go a breeze. And if you have used TurboTax in previous years, your information should still be accessible in the system. When you answer a few simple questions, TurboTax will direct you to the most fitting solution for your needs.
You can download the TurboTax Mobile App for free in the App Store or Google Play to get started.
TurboTax Features and Benefits
TurboTax has more features and benefits than we have time or space to cover completely, but here are the most important ones:
- Prepare multiple returns with one package. Each edition of TurboTax enables you to prepare and e-file up to five federal income tax returns. That means you can also file returns for your children if they have earned income, or for both you and your spouse, if you file separately.
- Multi-state package. With each TurboTax edition, there’s a basic fee for the software, plus an additional fee to prepare and file a state tax return. But if you need to file multiple state income tax returns, you can purchase TurboTax State. It enables you to file an unlimited number of state returns. The cost of this addition is $44.99.
- 100% Accuracy Guarantee. TurboTax is so confident their software will prepare your return correctly that they’ll pay both the penalty and interest to the IRS or your state tax authority if the error is the result of an mistake made by TurboTax. That kind of guarantee can give you a higher level of confidence in the product.
- Audit Support Guarantee. If you’re audited by either the IRS or the state, TurboTax provides you with one-on-one audit guidance from a trained tax professional. They don’t represent you in the audit, but they can explain the issue being questioned, and help you prepare for it. There’s no additional charge for this service, it comes with the package.
- Audit Representation. If you do want direct representation in an audit, TurboTax offers their Audit Defense program. It’s an add-on service when you purchase the MAX Defend & Restore plan, and it will be like having a CPA or EA represent you for an audit. The cost of the plan is $44.99, and it must be purchased before you file your return. The protection will be available for as long as your return can be audited. The plan also covers identity theft monitoring and full identity restoration if your identity is compromised.
- QuickBooks interface. This will be of special interest to QuickBooks users. Since TurboTax and QuickBooks are related companies, you can import information directly from QuickBooks into TurboTax. That will save you a whole lot of inputting, especially if you have a business and use QuickBooks as your bookkeeping software.
- Military Discount. TurboTax does offer a discount for members of the military. It’s not much, at just a $5 discount. I’d like to see a higher discount for military service, but at least they’re offering something.
Refer a Friend. When you refer a friend to TurboTax you’ll get a $10 Amazon Gift Card when they complete their taxes. Meanwhile, your friend will get 20% off the edition they buy.
TurboTax Plans and Prices
TurboTax comes in five editions:
- TurboTax Free – Cost: $0 + $29.99 for each state return.
- TurboTax Deluxe – Cost: $59.99 + $39.99 for each state return.
- TurboTax Premier – Cost: $79.99 + $39.99 for each state return.
- TurboTax Self-Employed – Cost: $119.99 + $39.99 for each state return.
- turbotaxlive – Cost: $179.99 + $39.99 for each state return
These are the prices for TurboTax based on purchasing the product online. If you purchase it from other sources, the prices may be higher.
File for free. You can prepare your return for free, then pay the fee when you file. You also have the option to pay the fee out of your federal tax refund. But if you do, there’s a Refund Processing Service Fee of $39.99 that will also be deducted from your refund.
TurboTax Free Edition
With TurboTax Free Edition, you can prepare and file your federal return absolutely free. As indicated above, there is a charge of $29.99 to prepare and file your state return.
As you might expect, TurboTax Free is only for the simplest returns.
You can use this version if you will be filing either 1040EZ or 1040A. You must have W 2 income of less than $100,000, and you can have interest income or file for the earned income credit.
However, it’s not available if you’re self-employed, itemize deductions, or have 1099 income. TurboTax Free comes with the following features:
Snap. Tap. Done. We mentioned earlier that you may be able to import your W2 information if you work for a large employer (TurboTax can import the information from over 1 million employers).
But TurboTax also enables you to download your W 2 from your smartphone.
All you need to do is snap a picture of the form, and TurboTax will do the rest. You’ll really appreciate this feature if you have several W2s, and none of them can be imported from the employer.
Answers 24/7. Customer service is one of the features that most distinguishes TurboTax from the competition. They have a very large database with tax information that you can access from any screen in the program.
Most times, all you have to do is enter a few keywords, and you’ll get the information you need.
In this way, TurboTax recognizes that not all self-preparers may be aware of the specific names of certain forms or tax provisions.
If you can’t find what you’re looking for in the information database, you can get answers online from a tax specialist. They really do make it easy for people who don’t know much about preparing income taxes.
CompleteCheck. Once you complete your return, TurboTax will do a comprehensive review before filing the return.
They’ll let you know if any information is missing, if there may be any math errors, or if you might save on taxes with certain deductions, such as making an IRA contribution.
This is the most popular edition of TurboTax, since it’s designed for preparing Form 1040.
You can use this version if you itemize deductions and if your income exceeds $100,000.
But if you’re self-employed, or you own rental real estate, you’ll need to use a different edition. TurboTax Deluxe comes with all the features of the Free Edition, plus:
Deduction Finder. TurboTax will search for more than 350 tax deductions and credits, to help you get you the biggest refund.
One-on-one help, on demand. A TurboTax specialist is available to provide customized answers to your tax questions. They can even patch into your computer screen, to provide you with the most specific information.
50% done in a click. If you’ve used TurboTax to prepare return last year, your information will automatically be transferred to this year’s tax return. You can also import a PDF file of last year’s return from other major tax preparation services.
Either method will save you a whole bunch of time and inputting effort.
TurboTax Premier is for more complicated returns.
You’ll want to use this version if you have substantial investment income and/or investment rental properties.
It can help you with stocks, bonds, employee stock plans, and other investment income.
TurboTax Premier comes with all the features of TurboTax Deluxe, but adds a few more:
Set up new rental properties. This can be one of the more complicated processes in preparing an income tax return. But TurboTax will take you through all the steps.
You can set up new investment properties, rental property depreciation schedules, and even determine the fair market rental value on the property.
Import investment information. TurboTax automatically imports investment information from thousands of participating financial institutions.
If you have dozens or hundreds of stock trades throughout the year, entering this information manually can take forever. The import feature not only saves you time, but it will also be more accurate.
Find your cost basis. This feature enables you to find the purchase price of the securities you sold during the year.
TurboTax can turn this often complicated step into a much easier one, especially if you have a lot of trades, and the broker hasn’t supplied the cost basis.
TurboTax Self-Employed is the top-of-the-line TurboTax edition.
It’s designed for anyone who has income from self-employment, including independent contractors and anyone who earns money by freelancing.
It comes with all the features of the Premier Edition, but adds the following, specifically for businesses:
Employee tax forms. Does your business have employees or contractors?
If it does, that’s not a problem for TurboTax. It can enable you to prepare an unlimited number of either W2s for employees or 1099s for contractors. If you use a third-party payroll service, this feature won’t be necessary.
But if you don’t, it’s one of the better small business tools they have available.
Industry-specific deductions. There are certain deductible expenses that are unique to virtually any business or industry.
TurboTax has the ability to identify deductions you may not be aware of. For example, they can include expenses for ridesharing, real estate, web design, and other businesses.
Track business miles automatically. You can track your mileage through your mobile phone with QuickBooks Self-Employed. The service is complimentary if you sign up by October 15, 2019.
Capture receipts in a snap. Similar to what you can do with a W2, you can also take photos of business receipts on your mobile device and import them directly into TurboTax through QuickBooks Self-Employed.
Vehicle tax deduction. This tool automatically determines if you should use the standard mileage deduction or actual expenses.
It will give you the biggest possible deduction for your vehicle expense.
If you need help in preparing your return, you can add this service to your plan. With it, you can get direct help in preparing your return from either a CPA or an enrolled agent (EA).
This is an excellent option to have if you’re not familiar with preparing your tax return, or if you have a return that’s particularly complicated.
By clicking the “Expert Help” button at any time during the preparation process, a CPA or EA will be available to provide helpful information or review your return.
What’s really impressive about this service is that the tax expert can access is your return remotely.
That means both you and the tax expert will be working on your return at the same time. How much work the tax expert does on your return is entirely up to you.
When your return has been completed, the CPA/EA can review it to make sure it’s correct.
As is usually the case with tax preparation software, turbotaxlive is a premium service that will involve a higher fee.
But even with this service level, you’ll still pay only a fraction of the fee you would pay to a professional tax preparer, particularly a CPA.
Should You Sign Up with TurboTax?
If you decide to use a tax software program, you can’t do better than TurboTax.
Not only is it incredibly user-friendly, but you can get help from tax experts at any time during the preparation process.
The turbotaxlive option, which is available at a very reasonable cost, enables you to get direct tax preparation assistance from either a CPA or an enrolled agent.
You can work the return as far as you’re able, then bring in the tax expert to help you with what you don’t understand.
You can even have that expert help you prepare and complete the return online, through remote access.
TurboTax also offers both audit assistance and audit defense – it’s your choice.
In the unfortunate event you do face an audit, TurboTax can make sure that you’re not doing it completely alone. And as complicated as the tax code is, that’s an important feature to have.
The bottom line is that TurboTax is the best tax preparation strategy short of having your return prepared by a CPA.
But you can even engage the services of a CPA using the service, but at just a fraction of the cost.
If you’re going to prepare your own tax return, you absolutely can’t go wrong with TurboTax.
If you’d like to get more information, or if you’d like to sign up for the service, visit the Turbo tax website.