Have you selected TurboTax or TaxAct as your tax software for this filing season? You may need to stop and think twice.
Table of Contents
1. You May Be Entitled to the Same Exact Software for Free
The easiest way to use TurboTax or TaxAct is to go to their own websites. The problem is that they’re either going to try to charge you or give you a watered-down free version. If you go through IRS Free File, you may be able to get the same exact thing for free.
What’s the catch? IRS Free File is a special program where if you earn $66,000 or less, you may be eligible for free tax filing. It’s still through TurboTax, TaxAct, or whatever software that you use, but you have to sign up via the IRS Free File site. If you don’t click the right link, you’ll never see that it was available for free.
2. You’re On Your Own for Your Mistakes
When tax filing software guarantees you won’t get audited, or they’ll pay for it, read the fine print. What it almost always means is that if they program the software incorrectly and it makes a math error, they’ll pay for that. They won’t pay for you checking the wrong box or forgetting to include something.
Tax filing software is more of an easier way to do your taxes by hand than it is a complete replacement for a tax professional. If you don’t know what you’re doing and why and have anything complex on your tax return, there’s a good chance that you could make a mistake that you’ll end up paying for in interest and penalties.
3. You Still Have to Keep a Copy of Your Tax Return
Don’t rely on a tax filing service to keep a copy of your tax return. They may delete it if you don’t come back next year, they may go out of business, or you may even forget who you filed with. This could mean trouble if the IRS comes for an audit and you don’t have a copy of your return. Always print a copy or download one to your computer.
4. No One Can Guarantee You a Bigger Tax Refund
Your refund is based on what you did during the year plus maybe some last-minute moves like IRA contributions. Every software should do the exact same thing unless there’s something wrong with it. Pick the one that’s easiest to use and has the best price.
5. You Can Still Mail a Tax Return
Some people get confused by electronic filing requirements for businesses or tax professionals. Individuals don’t have to file electronically. You can print the forms off of the IRS website or some other source, do them by hand, and send them in by mail if you choose to.
6. Your Data May be the Product
Some free services, like CreditKarma, openly sell your data. It’s usually not yours individually, but they aggregate it and sell statistics to marketing companies. For example, “X people in Y city filed a Schedule C last year.”
7. Tax Software Works Best for Simple Returns
Tax software companies are targeting the masses. If you have the same tax return as millions of other people, they’ve probably thoroughly tested everything and included good explanations of what you need to do. If only a few people have your situation, there’s a greater chance it won’t be supported, has undiscovered bugs, or just gives you the forms to figure out with no guidance.