Unless you wait until the very last minute, preparing your income tax return doesn't have to be a marathon, especially if you choose the right online tax preparation program. The right service for you should balance your requirements for ease of use and affordability. It also has to meet the needs of your particular financial situation.
Any one of the services reviewed here offers a substantial upgrade from the experience of filling tax forms out by hand, no matter what your tax story. Back in the days when you filled out your Form 1040 and its related forms and schedules manually, you probably had a calculator and pencils, receipts, IRS documents, and scribbled notes scattered all over your work surface. And you were afraid to stop until you were done, because it wasn't easy to just pick up where you left off.
Cloud-based personal tax preparation applications make it easy to do your taxes in chunks. They organize and store the data you've entered, and they even offer to take you to the screen where you left off when you resume this often-onerous task. Depending on the solution you choose, you may be able to move back and forth among your desktop, tablet, and smartphone.
It's not just this portability that makes online tax preparation preferable to the old paper method. All of the products reviewed here take the lead and walk you through your 1040 every step of the way. Instead of staring at an assortment of paper documents and instructions, wondering how to proceed without missing anything, you simply answer a lengthy series of questions presented to you, one screen at a time. The sites do all of the calculations required and fill in the forms and schedules you need, so that you can print them out or e-file them.
Different Situations, Different Solutions
Personal tax preparation website designers have created multiple versions of their applications so that you don't have to pay for more or less than your financial situation requires.
Three of the products rounded up here even let you prepare and file your income taxes free of charge—both federal and state—if you only need to submit a 1040EZ. These include Jackson Hewitt Free Edition, TaxACT Free, and TurboTax Federal Free Edition. H&R Block Free charges $9.99 per state return filed, and one state return using TaxSlayer Free Basic Edition costs $23.99 ($14.99 for each additional state). All except Jackson Hewitt offer a mobile app to accommodate these simple returns.
With the exception of TaxSlayer, the companies included here offer three other versions that add support for more advanced tax situations (TaxSlayer has three total). Top-of-the-line applications from each company typically provide all of the forms and schedules needed for the self-employed and proprietors of very small businesses.
Serving the Most
I reviewed the personal tax preparation solutions that fall in the middle, popular versions that serve a wide swath of U.S. taxpayers. These sites support W-2 income, itemized deductions, interest and dividend income, and other miscellaneous income and deduction items.
But only TaxSlayer Classic contains all IRS forms and schedules designed for individual taxpayers, including Schedule C. If you're self-employed and want to claim that income and all of its related expenses, you can't use the Jackson Hewitt Deluxe Edition, TaxACT Plus (up until this year, TaxACT offered comprehensive support for federal forms and schedules for free), or TurboTax Deluxe.
There are other differences. For example:
• All of the personal tax preparation apps reviewed here allow you to import data from a 2014 return prepared by at least some of the competing services, except for TaxSlayer.
• Only TurboTax and H&R Block have smartphone apps that cover the same ground as the browser-based versions.
• All of the services offer some level of help if you're audited, but only H&R Block helps you prepare and sends an agent to attend the audit with you.
Guidance is built into every tax website, but accessibility, depth, and quality differ dramatically among them. Price also varies a great deal. TaxSlayer Classic Edition is the least expensive, at $12.99 for federal and $14.99 for state. H&R Block Deluxe is the most expensive ($34.99 federal, $39.99 state); TurboTax Deluxe only promises the cost of its state versions until March 18, 2016.
Background Work
You've undoubtedly worked with software or website wizards before to provide needed information. Rather than displaying one page containing countless queries, wizards break the process down into a succession of smaller windows that contain a handful of questions. You respond by completing a field or clicking on a button or selecting an option from a drop-down list, advancing through each screen until you're done.
In the background, the website takes your answers and deposits them in the correct fields or boxes so that they're available in the right places at the right times.
This is how tax preparation websites (and their desktop counterparts) work. You're not faced with an official-looking IRS form that contains very brief descriptions—in tiny little print—of the numbers that are expected in the matching fields. You don't have to keep consulting the accompanying tomes of instructions to understand what is expected on each line.
Rather, tax preparation websites consist of dozens or hundreds of screens, each of which usually deals with one element of one tax topic. They usually offer clearly written explanations of what they're looking for right on that page and provide links to additional help resources. Most also let you ask tax-related questions via chat or email, and some have tax experts waiting to talk to you on the phone to give you personalized assistance. Information you've entered that needs to appear in your state form is transferred over.
And while you've been answering simple questions about your tax-related income and expenses, these sites have been preparing the actual IRS forms and schedules in the background, the 1040 and all of the forms and schedules identified by letters or numbers that you'll submit by filing electronically or printing your return.
The Best Option
Tax preparation websites provide the simplest, clearest way to fulfill your annual obligation to the IRS and to your state tax agency (where applicable). They try to help you find all reportable income and deductible expenses, and they do so in ways that make the massive and sometimes murky tax code more understandable.
They're not for everyone, though. You may find that your financial situation is too complex or you're simply too nervous to prepare your taxes yourself, even with the help of a tax preparation service. Sometimes it's worth spending the extra money to hire a professional.
But if you're one of the many millions of U.S. taxpayers who feels confident enough to go it alone, you have many good choices, each of which has its own style, strengths, and limitations. Dig into our thorough reviews linked below to find the offering that best meets your needs.
For more, check out 7 Tips for Getting the Most Out of TurboTax and Top Tips for Last-Minute E-Filers.