We're not familiar with Wirecutter.com however they've come up with the most complete and thorough "Best Tax Software" evaluation we've seen thus far in 2014. Kevin Purdy for Wirecutter writes:
For renters, people with a single source of income, and anybody who waited until the last minute to file their taxes, the most seamless way to file online is via TurboTax. For those simplest of federal and state tax returns, TurboTax asks the right questions and causes the least confusion as you click your way to done.
How can we say that the leading name in online tax filing is, in fact, the smartest pick for most people? I spent more than a dozen hours clicking through each step of the online tax suites, as did Mark Francis, EA, a professional tax preparer with Lapidos, Leung & Francis, Inc. in San Francisco. Not as ourselves, but as four fictional individuals (the “Four Fake Filers,” as we called them) we designed to represent a comprehensive variety of possible tax-filing scenarios. We created them to test out different variables and conditions in the suites and represent the complexity in modern tax filing.
Francis ran most of these people through most of the scenarios (see the next section, “How We Picked,” for more detail on the Four Fake Filers). Meanwhile, I ran a very simple “Jim” and a far more complicated couple, “Bill and Amanda,” through each of the four online tax suites we considered. TurboTax worked well for Jim and could also scale up to help Bill and Amanda. That is not to say, however, that it was the only thing we would recommend.
Indeed, TurboTax wasn’t the only option that had good results. TaxACT tended to both teach people more about why their taxes would come out the way they did and catch the widest possible range of exceptions or quirks in your filling, earning our tax professional’s favor.
We also found that FreeTaxUSA was a decent cheap option for those who knew what they needed.
How we picked
What can the best tax software do for you? The answer is that maddening flavor of “it depends.”
There are people with one full-time job, no children or spouse, a rented apartment, and not enough non-profit giving or expense deductions to require itemization. There are also independent contractors with more than a dozen income statements, a spouse, two kids, a mortgage, student loan interest, membership in an LLC, and a trip to China that was kind of business, kind of fun. Good tax programs, like good accountants, have to have a system for handling all types and making them all feel welcome.
The interface should be as clean and intuitive as possible, because entering the wrong number in the wrong place could truly hurt you (or at least, your wallet).
We searched around to find online tax suites that were known entities. We decided to focus on web options because they’re more accessible to everyone; the majority of download/packaged tax suites are made for professionals, or are at least notably more expensive than their online counterparts. 75 percent of TurboTax customers file online, according to an Intuit rep quoted by USA Today. Boxed software is mostly helpful for those who need to hold on to their tax documents or file multiple returns for family members.
It’s also important to file only with established software with a good reputation. This is very sensitive financial and identity data you are typing into these fields.
…we created a handful of fake people spread across the country and its workforce to run through these suites…
- Jim, a single man in upstate New York who has one job, a small savings account, and rents an apartment.
- Lisa, a single woman in central Ohio who also rents and has a job, but has student loan debt and a side craft business that nets some cash.
- Bill and Amanda, a married couple living in Arizona who just bought a house, had a baby, and made some trades in their investment portfolio.
- Richard, a single man living in Portland, OR, who makes his income from a few different jobs as an independent contractor, owns stock from a previous job, and turned half of his house into a rental property last year.
We looked for things that would make our tax pro Mark Francis happy, like asking smart questions about life changes, taking into account very recent law changes that affect withholdings and refunds, and preventing errors that you might never catch. We also took note of things that made a picky writer happy: easily understandable language, clean interfaces, the least awful upsell pitches, and no errors or goofy browser requirements.
Why listen to us?
As noted, we solicited Francis, who has filed hundreds of business, corporate, and individual taxes, to examine online tax software. Myself, I can barely link two spreadsheets. I have, however, spent a good amount of time judging, testing, and critiquing web apps, previously for more than three years as an editor at Lifehacker and since 2011 as a freelance writer for sites like Fast Company, ITworld, and others.
More relevantly, though, I am a freelance writer who co-owns an LLC, organizes an annual non-profit event, and is married with a mortgaged house and some investments normal to an early-30′s type; my taxes are decently complicated, relative to most self-filers. I have a few years of experience in maximizing my own deductions, keeping revenues straight, writing off relevant expenses, and so forth.
This background, combined with Francis’ professional experience filing taxes on behalf of his clients, was what allowed us to combine our powers to sniff out the best online tax software.
What didn’t matter (much): the actual return amounts
Every one of the suites we reviewed offered some version of a “Maximum RefundPledge,” where your fee is waived if you get a larger tax return from entering the same data in any other tax prep tool (sometimes even extended to human accountants).
…there’s not one tax suite that knows something the others don’t know.
Take “Jim,” our single job/apartment fellow. Other than one minor state aberration (inside the range of likely human error), his calculated returns across the five software suites were exactly the same.
“Jim” (single-job filer in NY)
Software
|
Federal Return Amount
|
State Return Amount
|
TurboTax
|
$1,552
|
$492
|
H&R Block
|
$1,552
|
$492
|
TaxACT
|
$1,552
|
$450
|
FreeTaxUSA
|
$1,552
|
$492
|
eSmartTax (Liberty Tax)
|
$1,552
|
$492
|
This wasn’t just the case for our simplest Fake Filer, either. The same applied to our most complicated filers, “Bill and Amanda,” the married Arizona couple with a new child, a new house, charitable deductions, investments, student loan interest, and a higher tax bracket.
The refund amounts for Bill and Amanda came out the same across all the sites as well (which, when entered by an accountant with a set pool of data, makes a certain amount of sense). This reinforced our decision to focus largely on usability, wording, and ease of understanding when testing these packages.
What others say about tax software
We also sought the opinions of reviewing publications, such as they could be found. Considering the “it depends” nature of tax software and the short shelf life, not many publications put real energy and time into truly reviewing this year’s consumer tax filing apps. But some do.
Consumer Reports (subscription required) did some head-to-head testing, and head-to-head-to-head reviews are a staple of the burgeoning personal finance blog realm:MyMoneyBlog, The Simple Dollar, The Motley Fool, Money Crashers, and many, many more all compiled tax software reviews.
Some tech and productivity blogs, too, have a take: Techlicious, and my old stomping grounds, Lifehacker, offer up polls and reviews plus one notable human versus TurboTax accounting showdown.
Read through those links and use the software itself, and you realize that what self-filers want is for tax software to rise above utility and competence and distinguish itself with its ability to pull details, and therefore savings, out of people who might not otherwise recognize those things.
There is a flip side: It is just as important to prevent the entering of erroneous, error-triggering amounts as it is to suggest little-known breaks.
If you have taxes that you do not comfortably understand, it’s a good idea to find a human to file your taxes.
Only a human can tell you for sure that your deductions make no sense or that one of your side jobs reported your income to the wrong state last year. The government will never let you know that you missed out on a big deduction, but if you have a hunch and bring your returns to a professional, they can determine (within a few years of filing) if you owe or are owed money.
That said, more than 40 percent of people are filing their own taxes these days, and if an online solution is what gets you to get your simple-ish taxes done, then done is better. On to what you should use.
Our pick: TurboTax (“Federal Free” edition)
TurboTax is simple to use and makes filing your taxes quick and confusion-free. It’s straightforward, asking all the right questions and discarding the unnecessary ones.
…tax software options perform extremely similarly in generating refund amounts, it’s wise to go with the tool that’s the easiest to use.
The TurboTax “interview” process for “Jim,” our simple, single filer.
It’s easy to dismiss look and feel when it comes to utilitarian software, but they can make a huge difference when it comes to filing your taxes. The easier it is to use, the more likely you are to use it correctly. TurboTax offers a huge database of employers and non-profits from which it can automatically pull ID and donation data and speed things along.
More importantly, TurboTax makes wading through forms and questions less stressful by pointing out annoyances that won’t significantly affect outcomes. The end result is fewer errors. Most times, when you have to head back or forward, the page load is almost imperceptible. The layout and data entry are similarly clean and coherent.
…TurboTax makes wading through forms and questions less stressful by pointing out annoyances that won’t significantly affect outcomes.
- “Don’t worry, this information doesn’t affect your tax outcome,”
- “Some people have W-2s with a couple of these uncommon things. Enter it if you’ve got it, skip down if you don’t.”
- “If you put money into a retirement account, such as a 401(k), without taking any money out, you don’t need to go through this area,” with an “Explain This” link that pops out a text box.
Running through the prompts on your first shot is a smooth flow, and it’s very easy to log back in and add or correct something. The transition from the federal taxes to state-specific filing is also smooth, and the final review of your taxes for likely errors or missed deduction opportunities caught quite a few items with both single-job Jim and complicated Bill and Amanda: missing employer identification details, double-checking the per-child deductions, asking about moving costs because the house was only owned for one year.
Some of the errors were likely due to the nature of filling out the details of a fake life. That said, after checking out the support forums on several of these tax suites we tested, we learned that some (real) people know less about their own taxes than I knew about Jim’s situation, so the error-checking feature is especially useful.
The language and style in which information is requested and presented is also a big part of TurboTax’s success. The tone is conversational but confident—a big step up from the typical instruction manual language employed by other software packages like H&R Block or TaxACT. It almost feels like you’re talking to a real person over instant messaging. In fact, sometimes you do end up talking to a real person over instant messaging—the software is quick to prompt you to ask for help or to ask a question of a representative by chat if you get bogged down.
It’s also worth noting that TurboTax is made by Intuit, which has been around since 1983 and maintained a reliable reputation throughout. In fact, our testing accountant uses different (and much more expensive) Intuit software to file taxes for his clients. As such, one can reasonably assume that Intuit has years of experience with security and privacy and some analytical knowledge of which returns get audited and which questions cause the most consternation. This translates to a number of guarantees, audit likelihood estimates, and offers for professional help throughout TurboTax.
The company’s experience and reputation may not be the main reason you would use TurboTax over a competitor, but they’re worth taking into consideration.
But TurboTax is also the market leader in self-filed tax returns, and that is reflected in the above-average pricing.
For example, the “Federal Free” online version that works for most single-income-earning, apartment-renting individuals and couples is, indeed, free for a federal return and then $27.99 per state filing. The prices scale up from there: $29.99 federal and $36.99 per state for the “Deluxe” package that covers homeowners, charitable deductions, 1099 income, and (importantly) saving of your returns for easy access the following year. H&R Block has a near-identical price sheet, while TaxACT and FreeTaxUSA (and dozens of others) are cheaper.
…beyond “Deluxe” needs, you almost certainly want an accountant to review your taxes.
What our accountant and myself would tell you, though, is that beyond “Deluxe” needs, you almost certainly want an accountant to review your taxes.
You need to understand your rental income, investment transactions, small business ownership, and other matters—at least until you are familiar with the process and your needs and goals. As our accountant noted: “With more data entry comes more potential for error.” -SNIP-
Kevin Purdy is a freelance writer for Fast Company,ITWorld, and other publications. FormerLifehacker editor. Author ofThe Complete Android Guide.
You can follow Kevin Purdy on Twitter here.
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