Do Your Taxes Online
The Tax Cuts and Jobs Act, passed by Congress and signed by President Trump last December, is supposed to simplify and reduce the income taxes paid by US citizens next year. While no one yet knows what the 2018 tax forms and schedules will look like, the IRS has finalized the 2017 tax year forms and schedules, and the doors are open for filing. Most US taxpayers should already have received their W-2 (they were due on January 31) so it’s time to get to work. You can still pick up paper copies at your local public library, but there’s no need for that anymore. Several sites and apps make short work of simple returns for free; you can prepare and file yours in minutes—even on your smartphone.
If your financial situation involves more than, say, a W-2 and some interest income or student loan interest, you can sign up for one of the many sites that support the preparation and filing of all major IRS forms and schedules.
These online personal tax applications aren’t putting all the tax-preparation professionals out of work. Though the best tax sites are capable of producing very complex returns, some individuals may still want professional guidance to ensure accuracy and avoid IRS corrections and audits.
This Year’s Field
We tested the midrange versions of eight personal tax preparation websites, the most popular options among the largest group of US taxpayers. Most of them don’t tackle particularly thorny topics like self-employment, capital gains and losses, and rental income, but they can handle W-2s, miscellaneous income, interest income, ordinary dividends, and itemized deductions.
Every tax software company offers versions that can take on more complex incomes, deductions, and credits—in fact, more than one has introduced a new version this year designed for self-employment and the gig economy—but you pay more for this advanced coverage. Prices for the editions we reviewed range from totally free for both federal and state returns (Credit Karma Tax) to $69.95 for federal and $36.95 for state (Jackson Hewitt Deluxe).
What Tax Sites Do
Personal tax preparation websites work similarly, though there are some major differences between their user experiences, the tax topics they cover, and the quantity, quality, and accessibility of the guidance they offer. You’ll see this when you read the reviews.
All of them act as virtual tax preparers. Instead of forcing you to see the actual IRS forms and schedules, they ask you a lengthy series of simple (usually) questions about your tax-related income and expenses. They start with your contact details and questions about your filing status and dependents. Then they launch into your W-2 and other income, and proceed through any other issues that apply to you.
Tax sites follow the path of the Form 1040 (or 1040EZ) and its related forms and schedules (1099, Schedule A, Schedule B, and so on), posing relevant queries along the way. They take your responses, do all necessary calculations, and deposit your numbers and other data onto the correct, official IRS documents—all in the background, out of sight.
When you’ve provided all the tax data that applies to you, these applications do three things. They check your return for potential mistakes, warning you about any errors or omissions they’ve found and giving you the opportunity to fix them. They transfer needed data over to any state returns you must file and help you answer any state-specific questions. Finally, they help you file your return electronically or print it out and collect any fees due.
How To Use Tax Software
These services offer two ways to move through their virtual interviews. During the early stages, after you’ve created a user name and password and complied with any security requirements, they work like any other wizard. They solicit personal information by sometimes providing blank fields for you to fill in. Other times, you’ll select options from drop-down lists or click buttons to indicate a yes-or-no response.
When you’ve completed all the required information on a screen, you advance to the next. You can back up to the previous screen when you need to. Most sites don’t let you proceed until you’ve answered all the questions on a page; they stop you and highlight the problem. If you’re not sure about a particular detail, such as an amount or the necessity of a middle initial, some sites let you bookmark or flag the page so you can move on; they then remind you to go back before finishing your return.
This navigation pattern—clicking to move forward or retreat—continues throughout each website. Once you’ve started entering data, other navigation options appear, toolbars that divide the site into sections, outlines of the site’s tax items, lists of forms, and topics.
Providing the Numbers
Once you complete the personal information section, you move on and start to answer questions about your income and expenses. On some screens, you’ll be responding to a basic question that doesn’t require numerical data, and other times, you’ll need to refer to your W-2, 1099s, etc. At other times, you’ll have to consult the careful records you’ve kept throughout the year, documenting things like charitable contributions and medical expenses.
Every site divides its tax content into (roughly) the logical groupings originated by the IRS: income, deductions, credits, health insurance, taxes paid, and miscellaneous issues. They all have a kind of home page for each section that displays a list of the topics covered. You click a button to start every section that applies to you, answer the questions in the miniwizard that appears, and then return to the list. The topic you just visited now have a button that reads Edit or Revisit, so you can go back and check your work and make any necessary changes.
When you finish the income section, you see a summary of what you entered there. If you’re satisfied, you can move on to the deduction home page and repeat the process until you’re finished.
Some sites offer an alternative. Instead of moving back and forth to the section home pages, you can ask to visit just about every topic in one long, continuous wizard. Of course, you can click through anything that doesn’t apply, but at least this shows you all the possibilities.
Help at Hand
Even if a query in these site’s onscreen interviews is clearly worded, you may still be unsure whether you’re supposed to supply information, and what that information might be. Tax websites help you understand those confusing elements in a variety of ways. They might turn a word or phrase into a hyperlink that opens a small window containing a more detailed explanation. Likewise, they might anticipate your questions and post links to related Q&As right on the pages that would spur you to ask the question.
This kind of context-sensitive help is extremely important. If you need to consult any of the other methods of help detailed below, it means that the service has failed to anticipate your needs, your time has been wasted, and your blood pressure has probably gone up. Sites that lack good context-sensitive help are heavily penalized in our reviews.
Still, no service can anticipate every contingency or question. Most tax preparation applications offer a second tier of giant help databases of tax information that you can search if you’re really stuck. Some offer glossaries, too. You may be directed occasionally to read IRS instructions or peruse an IRS publication, but that should be vanishingly rare in a good service. After all, IRS documents are free, and unless you’re using Credit Karma Tax, you’re largely paying for the convenience of not reading IRS documents. The IRS is, of course, the last word on taxes, but creating lucid, reassuring guides is not one of its notable strengths.
If all that isn’t enough, you might want to interact with a real human being. These sites offer connections to tax professionals via chat, email, or phone. If you think you’re likely to need to rely on this kind of direct contact with your tax service, you’re much better off doing your taxes early. Otherwise they might be overwhelmed by last-minute e-filers.
If you’re using H&R Block, Jackson Hewitt, or Liberty Tax, and you’re just not confident enough about some of your tax issues, you can always hand over your return to someone in one of their offices and let them take it from there (for additional fees, of course).
TurboTax provides the most innovative way to get human help. Its SmartLook feature creates a connection between you and a tax expert. You see them talking to you live on your screen. At the same time, they can see where you’re having trouble by viewing your screen and troubleshooting your problem. These individuals can help you put the right information in the right place on the TurboTax site and provide some additional basic guidance, but they can’t serve as tax advisors, like CPAs or EAs (Enrolled Agents) could.
If anticipate needing that kind of personal service, you might explore the new TurboTax Live (for which you’d pay $179.99 for federal e-filing, and $39.99 per state). You’ll be able to ask questions of a CPA or EA employed by Intuit as often as you need to during the preparation process. This version uses a split-screen when you’re getting help, so your taxes will be on one side of the screen and the friendly face of your financial professional on the other. The two of you will review your final return together before filing, and Intuit’s 100% Accuracy Guarantee applies.
Taxes on the Run
Probably the easiest way to prepare your taxes using one of these solutions is to plop down in front of your desktop or laptop and use their browser-based versions. But if you want to take care of this annual task while you’re away from your PC, any of them can accommodate you. H&R Block, TaxSlayer, and TurboTax have mobile apps that support all major IRS forms and schedules. The other five use responsive web design, so you can view and use their sites just fine on your mobile browser, too. We’ll be reviewing those soon.
It will, of course, be months before we see what the tax-year 2018 IRS forms and schedules look like with the new tax cuts implemented. It’s taking even the professionals some time to unpack and analyze everything that’s in the massive new law, but you probably have an idea already about how you might be affected, so start planning accordingly until the new crop of personal tax preparation websites appears next fall.
Once you have your your 2017 taxes in order, you might want to get a head start on managing your money in preparation for next year with our favorite personal finance services. Have sensitive tax documents you want to dispose of safely? For that, check out the top shredders for tax time and beyond.