Tax planning is one of the pillars of a good financial plan. But most people who are just starting out cannot afford a high end accountant If you’re going to prepare your taxes yourself, you should consider a tax software. Tax preparation software allows you to minimize your headaches and the income taxes you pay.
One cost-effective tax preparation software to consider is TaxAct. It features an updated user interface, easy review, and low cost pricing. For the side-hustler or simple filer who knows what they need, this could prove to be an ideal software. Here’s what you need to know.
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TaxAct Prep Process
The TaxAct software is now easier to use than ever before. You start by entering personal information about you and your dependents. Then you have the choice to walk through guided navigation or simply selecting the parts that are relevant to you.
In previous years, the navigation for TaxAct was clumsy and confusing. The company made huge strides in this department. You cannot jump from “Life Events” to relevant tax information, but the “Review” section makes it easy to navigate from section to section.
If you know what you’re after, TaxAct will make it easy to get the job done. They even provide “Mini-Alerts” that tell you if you’ve left something incomplete or incorrect. This can be a huge help if you’re guiding yourself through your taxes.
My only complaint about the prep process relates to depreciation and amortization. The IRS has standard schedules for depreciation and amortization, but you have to look in the guidance center to find the standard schedule. I would prefer for this to auto-populate based on a selection like it does in some of the higher end softwares.
I also struggled to find the correct way to depreciate my personal home which I use as a rental property. If you host via AirBnB or “house hack” by renting out your personal home, TaxAct is too clumsy. Go for something higher end.
Most other people will find exactly what they need in the TaxAct Software. Unlike some higher end software, TaxAct does not allow you to import documents directly into the software. It does, give guidance throughout the process. The Answer Center provides robust articles and guidance for most of my toughest questions.
What If I Get Confused?
If you get confused, TaxAct offers excellent articles through their Help Topics, TaxTutor Guidance, and Answer Center. They also provide free email and phone support for paying customers.
These are tax and software professionals who can help you with intricate questions.
Despite the improvements to the interface, first time filers (or those filing as a small business or rental property owner for the first time) might get confused. The TaxAct team can help you out, but you might have an easier time paying just a bit more upfront.
TaxAct Pricing And Plans
Anyone filling out a 1040A/1040EZ can get free State and Federal filings. This is easily the best free tax prep software for simple filings.
It's important to note that these prices were as of December 2016. They are subject to change. TaxAct offers a "price lock-in" feature, where you pay the price you saw when you signed up, not the price listed when you file. It might make sense to sign up early even if you don't plan to file later.
Homeowners, investors, and others without businesses or rental properties to report can use the “Plus” plan for $15 for Federal filing and $25 for state filing. The plan provides phone support and offers tremendous value for this group.
Small business owners, people with rental properties, and self-employed people will opt for the “Premium” plan. This costs $21 for Federal filing and $25 for state filing. The plan provides phone support, but the software isn’t great for people with complicated situations. If you know what you’re after this is a low price for decent software. First timers may need to look elsewhere.
$15 Federal + $25 State
$30 Federal + $25 State
Anyone filling out a 1040A or 1040EZ
Homeowners, investors, and others without businesses or rental properties
Small business owners, rental property owners, and self-employed freelancers or side hustlers
Overall, it’s tough to compete with TaxAct’s low prices. Only a few software packages offer lower prices, and these typically have inferior products. Those who qualify for the free filing plan should absolutely use TaxAct. It’s simpler and more robust than paper filing, and it takes just a few minutes to file.
For anyone seeking just a few extra deductions, the Plus plan offers tremendous value. It’s easy to enter investment income, and you can quickly research any questions. I highly recommend TaxAct for this group too.
Among those with more complicated situations, knowledgeable tax filers are unlikely to find a better deal for good software. But you can find better software for a higher price. Experienced filers need to decide whether they will sacrifice great quality for a bargain basement price.
The somewhat troublesome navigation and the lack of auto-population may hurt those with complicated situations who are filing for the first time. For those reasons, I still don’t recommend TaxAct to people filing a complicated situation for the first time.
The bottom line is that TaxAct is the best option for those who qualify for free filing or those without complicated tax situations. You just can't beat the pricing for what you get. Try TaxAct 2016 for free.
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