Tax software: The best online tax preparation of 2021
The 2021 tax deadline was extended again this year. We asked tax experts how to find the best online filing service for you.
Hanna Horvath
Hanna Horvath
The free version of H&R Block is one of the best, said Coombes. It supports W-2 income, interest income, dividend income, retirement distributions, the student loan interest deduction and the Earned Income Tax Credit, which is more than TurboTax covers for free. But if you’re a landlord, freelancer or small business owner, you may need to upgrade. H&R Block has several paid filing options at reasonable prices — federal returns range from $30 to $90 with state returns costing between $40 and $60 — with a chat format to guide you to the right product and make sure you get every deduction or credit you qualify for.
This is a good value pick for taxpayers seeking no-frills filing. While human support is available, it may not be as robust as other tax filing software. For example, unlike other services, TaxAct’s “tax pros” may not be certified public accountants. TaxAct is also relatively cheaper than other software: It has a free filing open and deluxe or self-employed packages range from $41 to $72. It won’t give concrete tax advice, but will instead offer support about how to best use the software itself throughout the process. TaxAct also offers a self-employed option, which helps identify industry-specific deductions, whether you're a freelance writer, contract worker or business owner. “I use TaxAct myself,” said Brown. “It’s cost-effective and you can very easily see and understand the forms. If you want to understand how your tax forms are filled out, this software is best for you.”
This tax software is free for all situations, no matter your income level or tax situation. Its interface is simple and easy to use. But there are plenty of exclusions — meaning your precise situation isn’t necessarily compatible with it — so those with complicated tax situations may be better off using a different service. For example, taxpayers cannot import investment or interest data. For this reason, Brown cautioned to consider free services with a grain of salt. “They can sometimes be overly simplistic and won’t work for everyone,” he said.
While there is some online customer support available, the company also has thousands of physical locations if you’re looking to file in person — but due to Covid-19, be sure to call the location to confirm its current hours. Jackson Hewitt online costs $49 for state and federal filing and $25 for federal only. The service is best for taxpayers with uncomplicated returns. If you need more support, you may want to consider filing in person at one of Jackson Hewitt’s brick-and-mortar stores, though filing this way will cost more, with prices varying by location. Keep in mind Jackson Hewitt’s online software doesn’t allow you to report mortgage interest or information about investment accounts, including retirement, stocks and bonds.
This software charges based on the level of support you use — so the more complicated your situation, the more expensive the software is. Simpler returns may be free, and prices then range from $25 for the Classic software to $55 for the Premium software. The Premium version offers audit assistance, unlimited access to tax professionals and priority access to support, which isn’t available in the other, more affordable versions. But Tax Slayer has more robust support options than its counterparts.
As the name suggests, this software is free for federal returns, but you may have to pay an additional $15 for state returns. And there are a number of tax forms not supported by FreeTaxUSA, including the foreign employment form and at-risk limitations forms. This software is best for taxpayers who know how to file their taxes themselves, and don’t need overly developed software to file.
Freelancers and small business owners should take extra time and preparation when filing their taxes. Not all tax software programs are suited for these groups, so it’s essential to do your research and your due diligence. Making sure you have everything together before you file will help avoid an audit down the road.
Due to the number of forms and documents needed to file, you’ll likely need to purchase a deluxe or premiere version of online tax software — especially one with robust customer support, if you think you might need it. One of the best options for small business owners, said Coombes, is TurboTax. If you use QuickBooks for your accounting, you can automatically import all of your data directly into TurboTax when filing. TurboTax Business also allows you to file quarterly with no additional cost, though the upfront price is substantial: $170. If your tax situation becomes complicated, it’s better long-term to invest in an accountant, said Brown. Missing a detail can be “catastrophic,” he added, especially if the IRS decides to later audit you.
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