The Cheapest and Easiest Way to File Your Taxes Online

Andrew Tarantola for Gizmodo.com writes: April 15th will be here before you know it, and it's not like you've got complicated offshore holdings (or any holdings, for that matter), so why put off your taxes any longer than necessary? There are plenty of online services that let you do your taxes as soon as a you have your W-2. And unlike last year's debacle at the CPA, you won't be scolded for not putting on pants. Here's a guide to filing your taxes online—including the best services for your buck.  

[Insert: ExactCPA we advises this path only for the most simple & straight forward returns only.  Some of these products are designed to "get you in the door with a low introductory price - then unbeknownst to you the consumer have additional fees and costs for support, additional features, etc.  you might need and only learn once you've bought the product and learn your Tax Return is more involved or detailed than you originally thought  -  at the end of the day you end up spending $100 - $300.  It's actually less expensive to use us, ExactCPA (and a real CPA) than many of these products, call us at 973.996.2284 and we'll explain how in detail.  If you do use one of these products, we offer at $29 "Second Look/ Review" of your return by  CPA looking for errors, omissions, and mistakes.]   Good Luck.

IRS Free File

Your first stop should be to the IRS website, which is thankfully much less opaque and much more navigable than the tax code it covers. Here, you can download and print the various forms and schedules you'll need to complete and file. As such, this is the least expensive option for filing taxes, costing little more than postage and a few hours of your time. It is also the riskiest. Even if you're just filing a basic 1040, the chances of calculating an incorrect sum, failing to enter the correct ID information or attach the correct schedule are very real and could well result in an audit if you're not careful.

That's a lot of risk for the average taxpayer to bear but, luckily, the IRS Free File program was created for just such a reason. The program is a free service funded by a public-private partnership between the IRS and commercial tax software companies like TurboTax. It's free for all taxpayers; however, some preparation companies do carry their own restrictions. They nearly universally limit joint income to $57,000 (and also universally charge a fee for filing state your taxes) and some restrict their service based on age, while a proportion will also use your state of residence, necessary forms, and military status as criteria.

There are 15 Free File partners in all; you can see each one's individual restrictions and requirements here.

Basic or Deluxe?

As with all things capitalistic, the free service you receive is generally the barest-boned version that the company is allowed to market. The upside is that this is still very useful to a lot of people. If, for example, you are single, have no dependents, make about $40,000 a year, rent your home, and are filing a single W-2, you probably don't need to pay a dime.

If you've filed your taxes with the same preparer in previous years and don't feel like reentering the data, you might want to spring for a slightly upgraded version that allows for information importation. Or if you are married and have kids, a mortgage, investments, or a ton of deductions, you'd do well to spring for a more deluxe package that is either looked over by a real accountant before submitting, or provides some other form of integrity check is a good idea.

Freelancers, people trying to leverage shady tax shelters, and anyone who knows what a schedule C involves should probably stop reading now and just hire a good CPA—you'll need it. For everybody else, these are a few of the bigger, more reputable brands in online tax prep:

The Cheap One: Tax Act

The Free Federal Edition service from Tax Act is among the least expensive—and least restrictive—of the major online services, offering free federal e-filing and $15 state filing for anyone ages 18 to 57 with a maximum adjusted gross income of $51,000 living anywhere in the country, as well as citizens with foreign addresses. The free service also includes multiple automatic verification scripts, dubbed "Examiners," for your deductions, credits, and income calculations. It will even help you file an extension if you need it.

The next step up, the Deluxe Federal Edition, allows returning customers to import their ID information, includes a donations calculator for folks trying to write off their charitable giving, additional Examiners and calculators for major life changes that may have occurred over the last year (death of a spouse, joining the armed forces, etc). This service costs $10, but you get a $5 discount off the state filing, for a $20 total.

The Ultimate bundle is also $20—the service is $19.95 and the state filing is gratis. It includes everything the lower iterations do as well as free phone support, which otherwise costs a one-time fee of $8 for the 2012 tax year, and a litany of guarantees.

Why not just get Ultimate, since it costs the same as Deluxe? Good question! It depends on how put off you are by unnecessary bells and whistles. Sometimes, less (confusing) is more (helpful).

The Popular One: Turbo Tax

Turbo Tax is the largest online tax service in America and offers five levels of service, with federal returns running from free to $100 and state returns from $28 to $37 Its free-offering state filing charges nearly double that of Tax Act, but includes free live chat tax advice. The Basic package costs $20 for federal and jumps to $37 for state but offers step-by-step guidance, information importing (both your personal info and your W2 info from participating employers). The Deluxe, Premier, and Home & Business packages above that offer improved deduction and donation calculators, and are designed for people with more complex tax liabilities such as landlords and the self-employed.

The State Selective One: eSmartTax By Liberty Tax Service

eSmartTax is a very inexpensive service as well, charging only $13 per state filing. Problem is, the service only handles 35 states: AL, AZ, AR, CA, CO, CT, DE, GA, HI, IA, IL, IN, KS, KY, LA, MI, ME, MD, MA, MN, MS, MO, MT, NE, NJ, NM, NY, NC, ND, OH, OK, OR, PA, RI, SC, UT, VA, VT, WA, DC, WV and WI. It is further restricted to people under the age of 52 with a maximum gross adjusted income of $57,000. The free version does also offer free information importing, free live chat support but does not support itemized deductions. You'll need to spring for the $20 Deluxe package for that.

The One I Use: H&R Block

H&R Block is the second-largest online tax service in America behind Tubo Tax and offer pricing and plans roughly inline with them. The Free Edition includes automated prep help, deduction and credit checks, a free federal e-filing, and one free session of live chat or email tax advice. The $20 Basic Edition also includes information importing and a step-by-step guide wizard, while the $40 Deluxe is geared towards home owners and allows users to import tax information and receive additional help with investment income questions. State filing costs $28 under the Free Edition and $35 under the others.