Best Values in Tax Software
Kiplinger's Personal Finance|March 2021
We ranked the most popular tax-prep packages to help you find the ones that provide the best experience at the lowest cost.
ROCKY MENGLE, RIVAN STINSON and SANDRA BLOCK

IF THE COVID-19 PANDEMIC forced you to move or work remotely, file for unemployment benefits or pick up a side gig to earn extra income, filing your tax return could be more complicated than in the past. The economic stimulus checks sent to millions of taxpayers, which represented advance payments of a 2020 tax credit, also create the potential for confusion.

Preparing your own return instead of hiring a preparer could save you money, but tax software can get expensive in a hurry, even for taxpayers with fairly straightforward returns. And a program that shortchanges your refund—or gets you in trouble with the IRS—is no bargain.

To help you find the program that’s right for you, Kiplinger reviewed the online versions of the most popular programs and ranked them based on cost, ease of use, tax help and more. We used two fictional tax returns: one for a single taxpayer who had income reported on Form W-2 and some freelance income, and a second for a married couple with a young child and a mortgage who itemized deductions. (For more on our methodology, see the box on the facing page.) To account for some pandemic-related circumstances that could affect taxpayers, we looked at how the programs handled the economic stimulus payments millions of taxpayers received in 2020 and early 2021, which represented an advance payment of a tax credit on your 2020 tax return. In addition, we gave one of the spouses in our fictional couple unemployment benefits, and we had our single taxpayer move from Maryland to his parents’ home in Ohio to determine how the programs accounted for multiple state filings. (For more on your tax obligations if you moved last year, see “You Can Still Save Money on Your Taxes,” on page 36.)

Prices quoted here are as of January 14. Many tax software providers engage in surge pricing, which means the cost could rise as the tax-filing deadline approaches.

1. FreeTax USA

PROS: Free federal return for even complex tax situations

CONS: Program can’t import W-2s and 1099s www.freetaxusa.com

FreeTax USA still earns top marks this year for making the tax-filing process as smooth as possible. Unlike the other programs, such as those offered by H&R Block and TurboTax, you don’t need to upgrade to a more expensive version to report health savings account contributions, gig income or investment income. Both of our fictional taxpayers were able to file a federal tax return for free.

However, FreeTax’s treatment of stimulus payments could confuse some users. The program refers to the taxpayer’s “economic impact payment” with “stimulus” in parentheses. If you’re a nervous taxpayer, that could be alarming. (Other programs we reviewed were more straightforward in their stimulus nomenclature.)

If you have questions about your stimulus payment (or anything else), live help is available for just $7. FreeTax is also a good option for taxpayers who need to file multiple state tax returns, which cost just $13 each. If our single taxpayer required live tax help along the way, his grand total would be $33 to file a federal tax return and two state returns.

OUR METHODOLOGY

We ranked the programs on cost, navigation (ease of use), the availability of tax help and the number of state returns included in the base price. We deducted points if more-expensive upgrades were needed. For each tax program on our list, we applied our criteria to two fictional tax returns. One of our returns was for a single taxpayer who rents an apartment, received one W-2 form, earned $5,000 in freelance income, has a student loan and has no dependents. In addition, he moved from Maryland to his parents’ home in Ohio. The other return was for a married couple who own a home, have a young child, received investment income, donated to charity and contributed to a health savings account. They both received a W-2 form for earned income and one spouse collected unemployment benefits. They both contributed to IRAs and 401(k) plans.

2. Credit Karma Tax

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