Given how much our lives have been disrupted in the past year, it’s easy to forget about important obligations like renewing driver’s licenses, responding to jury duty summonses, and preparing for tax season. This time can be stressful, and many earners opt for tax preparation software to help navigate the process. Let’s take a closer look at two of the most popular options on the market: TaxAct and TurboTax.
Tax documents can often feel overwhelming. It’s understandable; most of us only think about taxes once a year, and we’re not accustomed to reading tax documents unless we’re tax professionals.
Fortunately, some applications aim to make this yearly requirement more user-friendly. Instead of expecting users to decipher deductions and figure out which lines or forms to fill out, they frame each aspect as a question. This approach reduces confusion and minimizes the risk of making significant errors.
In this comparison, we’ll evaluate both TaxAct and TurboTax, highlighting their respective strengths and weaknesses, and discussing situations where it might be preferable to seek assistance from a certified public accountant (CPA).
Prices for TaxAct vs TurboTax
TurboTax and TaxAct both offer free versions to start with, which might suffice for many taxpayers. TaxAct includes a $19 fee for state taxes, while TurboTax provides a free option for state taxes as well. However, these options are typically suitable only for the simplest returns with minimal deductions.
Both companies offer higher-tier packages like “Deluxe” and “Premier.” TaxAct’s Deluxe package costs around $75, whereas TurboTax’s equivalent is priced at $120. Similarly, TaxAct’s Premier-level service is available for $95, while TurboTax charges $170.
For freelancers and self-employed individuals facing more complex tax situations, there’s a noticeable difference. Self-employment taxes are inherently more intricate, and those working as independent contractors often require additional assistance. TurboTax’s fee for self-employment taxes with live support is $200, compared to TaxAct’s $139 for professional assistance.
If cost is your primary concern beyond the basic tier, TaxAct emerges as the more affordable option.
Customer Experiences for TaxAct vs TurboTax
In addition to considering price, it’s wise to consult user reviews to gauge overall satisfaction with the product. Websites like Consumer Affairs provide valuable insights into how customers rate their experiences with tax software.
While both TurboTax and TaxAct boast high ratings of around 4.75 stars, it’s worth noting that TurboTax has approximately 800 reviews, while TaxAct has fewer than 200.
Professional reviews are also worth considering. A 2019 article from Consumer Reports highlighted that while both TurboTax and TaxAct offer good information, support, and user experience, they may sometimes provide outdated explanations for certain tax law changes. Given the fluid nature of tax laws, this is something to bear in mind when using either software.
When to Reach Out to a CPA
While tax preparation software can be a lifesaver during tax season, it might not be sufficient for individuals with high incomes or complex financial portfolios. In such cases, engaging the services of an accounting firm is advisable. While the cost may be higher, the expertise and support provided by certified public accountants (CPAs) can help prevent major errors and mitigate the risk of audits.
CPAs possess additional certifications, training, and experience compared to tax software, making them better equipped to handle complex financial situations. If you’re dealing with aspects like small business ownership, trusts, estates, real estate investments, or other high-yield assets, a professional accountant is likely the best option. Moreover, they can offer strategic advice throughout the year to minimize tax liabilities and optimize financial management.
In Conclusion
While TaxAct may not be as widely recognized as TurboTax, its performance is comparable. However, TurboTax offers a 100% free option, whereas TaxAct does not provide this.
For taxpayers with complex returns, especially those with intricate financial situations, consulting a CPA is advisable. However, if brand recognition isn’t a priority and your returns are relatively straightforward with a few special deductions or minor investments, TaxAct presents a cost-effective option that could save you money.