The first few years I filed my taxes, I used Intuit’s TurboTax.
Back in the early 2000s, there weren’t too many options. There are almost no free options.
TurboTax walked me through all the questions, imported my payroll data, and checked my federal tax return for common mistakes and errors – all for free. I had a very simple return but their process made me feel like I had done them correctly. To their credit, or perhaps because I had such a simple return, I was never audited!
Today, there are many options out there and some of them are very good and extremely affordable (if not free).
If you’re looking for an alternative or replacement for TurboTax, here are some of your best options that offer an improvement on what TurboTax offers:
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Credit Karma Tax
Credit Karma is best known as the free online credit score and monitoring service but in recent years they’ve expanded what they offer to include tax preparation.
Credit Karma Tax is absolutely free for federal and state taxes. They offer everything you get with TurboTax Free Edition (auto-import W2, earned income & child tax credits, 1099-DIV and 1099-INT forms).
They also offer these, which TurboTax Free Edition doesn’t:
- Mortgage interest deduction
- Property tax deduction
- Other itemized deductions
- Schedule B: Interest & dividend income
- Schedule C: Profit or loss from business
- Schedule E: Rental property income
- Scehdule D: Capital gains and losses
- Schedule SE: Self-employment tax
You also get their “Audit Defense” feature, also for free. Once you file your return, one of the pages of your tax package will include instructions and a voucher code you can use for audit defense with Tax Protection Plus, which is a third party provider. You are unlikely to be audited if you use their service, given the simple nature of your return, but it’s nice to have in your back pocket.
What I like most about Credit Karma Tax is that there is absolutely no up-sell. They either do it for free or they cannot do your returns at all. They don’t play games where they take all your information and then tell you “oops, sorry, you have to pay to get that.”
Who can’t use Credit Karma Tax?
If you need to file more than one state return, you can’t use Credit Karma Tax because they don’t support it. The full list is below but the bullet points are all versions of a similar scenario – multiple state returns.
Here’s their full list of situations:
- Multiple state returns: If you earned income in more than one state and have to file multiple returns, they don’t support this.
- Part-year state returns: Where you or your spouse lived in a state for only part of the year
- Nonresident state returns: If you earned income out of the state of residency
- Married filing separately in community property states
- Form 1040-PR: which is for self-employed persons resident in Puerto Rico
- Filing state taxes without filing federal taxes
Here’s the list of forms they do not support, which includes a lot of more esoteric forms (Schedule J, Income Averaging for Farmers and Fisherman) but some more common ones (Schedule K-1 – Estate or Trust Income).
FreeTaxUSA offers free federal income tax returns but they charge a $12.95 fee for e-filing state income tax returns. If you have a more complicated tax situation and can’t use their free version, the Deluxe version for just $6.99. Those are very reasonable fees and that’s it – you won’t be surprised with some $50 upcharge down the road.
FreeTaxUSA is similar to TurboTax Free Edition but it also includes the forms needed by self-employed persons, rental income, K-1 forms (from an LLC, partnership, or S-Corp), or need to take the home office deduction.
Best of all, you can import the previous year’s tax return from TurboTax, H&R Block, or TaxAct so you aren’t starting from scratch.
The big difference between the Deluxe and Free versions is support. With Deluxe, you get live chat, priority support, as well as Audit Assist if you get correspondence from the IRS. It’s customer support only though, they can’t represent you, but they can walk you through the processes. You also get free amended federal tax returns.
There is one drawback to FreeTaxUSA – they don’t import data from payroll processors or banks. Many other tax preparation services can offer this (usually because they pay for it) but you can’t import W-2 or 1099-INT information into your return. If you have stock transactions, you’ll have to manually enter them in.
All in all, for slightly more complicated tax returns, you can’t beat FreeTaxUSA.
TaxSlayer is one of the most affordable tax preparation packages because their price is based on the level of support you need in completing your taxes – not the functionality you need. If you have a complex tax situation, other services will charge you more than if you have a simpler tax situation. With TaxSlayer, you pay based on how much help you need from TaxSlayer – so a complex tax situation and a simple tax situation will cost you the same if you don’t need much support.
The best part is that there’s no feeling of bait and switch, which you can get with other services if you discover you need a higher tier package.
They offer four packages:
- Simply Free – $0 for Federal and State, which is for the simple tax situation where you earn less than $100,00, have no dependents, don’t itemize, and you don’t have investments, rental income, or a business; you also don’t take the earned income tax credit.
- Classic – $17 for Federal, $32 for State; this will work for almost everyone else (free for active-duty military) who do not need much support.
- Premium – $37 for Federal, $32 for State; same as Classic but you get priority phone and email support, audit assistance, and access to tax professionals (unlimited).
- Self-Employed – $47 for Federal, $32 for State; access to professionals who specialize in self-employment.
H&R Block has been around for ages and in many minds, they are interchangeable except for the color schemes. In many respects, they are quite similar with similar pricing schemes too.
Both companies have a free basic version that offers a similar set of forms and features, with one key difference. The H&R Block free version supports the child and dependent care expenses, student loan interest deduction, tuition and fees statements, and health coverage exemptions.
Another big cost difference is that TurboTax’s free plan only lets you file one state return for free. H&R Block will file multiple states for free.
Finally, if you want to talk to a person, H&R Block has offices you can visit whereas most of the other companies on this list are online only.
TurboTax Is Still Good
This article is about all the alternatives if you don’t want to use TurboTax but for the price, TurboTax is still one of the best tax preparation packages out there. It still offers good value even as you get up into the more complex and expensive versions. I know sometimes we try to cut costs when possible but there are instances where you can’t escape it. If you have a complex situation, TurboTax is much cheaper than an accountant!
The free version for simple returns covers quite a bit. If you only have W-2 income, limited interest and dividend income, claim the standard deduction and only the Earned Income Tax Credit and child tax credits – you qualify. It’s only when you add itemized deductions, business and MISC income, stock activity, and the other schedules that it starts becoming more expensive.
Finally, if you want a live tax expert, they offer TurboTax Live and on-demand expert consultations. A real certified public accountant will review your return, as if you walked into an accountant’s office to have them check it out. The level of service will depend on how much you pay but even at the lowest “Basic” tier, you get a hands on review.
Why Only These Three?
A list of three seems short and you may be wondering why I only list Credit Karma Tax, FreeTaxUSA, and H&R Block – it’s because I didn’t see some of the other (unlisted) companies as being that much better.
TaxAct is an alternative but doesn’t offer a significant improvement in any area over TurboTax. I don’t know a lot about LibertyTax, other than they have a lot of offices similar to H&R Block, but their Simple Tax Return (which is similar to others on this list) costs $34.95. TaxSlayer looks just like TurboTax and may be slightly cheaper… and they sponsor the Gator Bowl each year.
If you have an alternative I should consider, let me know!