TaxAct is an online tax software product whose various pricing tiers cover most tax situations that you’d find yourself in, ranging from free simple returns for W-2 workers to paid returns for complex situations like freelancing, self-employment, investments and more.
The site’s four pricing tiers are Free, Plus, Freelancer and Premium – we’ll explain what those tiers include in a few seconds.
TaxAct started back in 1998 and was the resurrection of a failed software called Personal Tax Edge. Since then, the software has emerged as one of the top websites to use to file your taxes.
At this point, I think it’s important to ask, “So what?” So what if TaxAct is one of the most popular tax sites? Popularity doesn’t guarantee that TaxAct or any other product or service is right for you.
This review will focus on that one aspect: Is TaxAct the best online tax software for you?
To answer that question, we’re going to look at what TaxAct offers, how it compares to other tax software and what users are saying about their experience with the service.
At the end of our review, we’ll give you a quick section about the site’s general pros and cons.
TaxAct’s Four Tiers: Free, Plus, Freelancer and Premium
Every tax site you go to has price points that offer more features as you move from a lower price to a higher price. All of these sites start at free and escalate from there; TaxAct is no different.
Free tax returns are provided by all major tax sites. Though they share this tier in common, each site has a different set of requirements in order for you to file for free.
In order to file for free on this site, you have to meet one of the following standards, according to the IRS:
- Your adjusted gross income is $53,000 or less and you’re 56 or younger
- You’re eligible for the Earned Income Tax Credit (EITC)
The site won’t tell you at the beginning of your return if you qualify for the free version which is why we’re going to explain the tax talk in the bullet points we listed.
“Adjusted gross income” is what your income is after most of your deductions; it’s not your net take-home pay.
The EITC is given to individuals and couples who meet certain income maximums ranging from $15,310 for single people without kids to $53,998 for married couples with three kids or more. You can get all the details at the IRS’ EITC page.
The main drawback of the Free version is that it doesn’t meet the needs of the average American homeowner because the deductions associated with owning a home aren’t included.
Pro tip: Prices increase the closer you get to the filing deadline. In January, prices are lower at TaxAct than they are in February, for example.
TaxAct’s free version isn’t a good fit for homeowners but the Plus tier is because it’s designed for taxpayers who own homes, those with investments and those who make charitable donations.
More than 60% of Americans own a home, 24% claim charitable donations and around half of Americans own stock. So, there’s a really good chance that most taxpayers will have to use at least Plus, if not the other tiers. In this sense, the Free version is very limited and the numbers say you won’t qualify for it.
The Plus tier allows you to claim deductions for the interest you’ve paid on your mortgage, losses you’ve incurred from your investments as well as those charitable donations.
This tier is designed for self-employed workers who earn 1099 income. It offers deductions that freelancers usually take, including the home-office deduction and the cost of any utilities used specifically for working from home.
Other great deductions available through this tier include mileage you drive for work that doesn’t get reimbursed as well as money you spent on advertising, website design and business cards.
» SEE ALSO: 12 Best Tax Tips for Freelancers
All of these are included in what’s called a Schedule C, a tax form most often used to calculate deductions for freelancers and the self-employed.
If you’re a little worried that you’ll forget which deductions you can get, remember that TaxAct’s software will guide you through those deductions and help you claim what you should claim.
Also, you’ll receive a financial planning report that will help you understand what you can do in the upcoming tax year to maximize your deductions and reduce your tax bill.
The final pricing tier that TaxAct offers is Premium, which includes all the features you get with the previous tiers plus Audit Defense.
Basically, Audit Defense means that TaxAct will work on your behalf if the IRS audits you. Here’s how they describe it:
"We’ve got you covered with comprehensive response and resolution strategies, including assistance with tax debt relief, denied credits, fraud and more. We’ll even handle correspondence with the IRS and State on your behalf."
If you’re concerned about an audit, remember that less than 1% of all taxpayers get audited. Read through our guide to IRS audits to learn the three types of audits there are and how they work.
The big secret that most consumers don’t know is that TaxAct has the Plus and Freelancer tier available for download.
The price is higher – $66.95 for Plus and $81.95 for Freelancer – but you get five free returns included in that price. Per-year, that’s about $13.50 for Plus and $16.50 for Freelancer.
These versions provide a guided tax return like the online version, but only the Freelancer package gives guidance through business and farming deductions.
Pro tip: TaxAct charges $37 for state taxes. The downloaded software gives you your first state-tax filing for free before charging $37.
TaxAct vs. Other Tax Software Companies
In our comparison of the popular online tax software companies, we found that TaxAct’s pricing was among the best and that its freelancer package provided good value along with the Freelancer package from TaxSlayer.
As far as pricing goes, here’s a table that helps you see how this site compares to TurboTax, TaxSlayer and H&R Block:
|Plus: $29.95||Deluxe: $39.99||Classic: $17||Deluxe: $34.99|
|Freelancer: $44.95||Premier: $59.99||Premium: $35||Premium: $54.99|
|Premium: $59.95||Self-employed: $89.99||Self-employed: $55||Self-employed: $74.99|
Based on our research, we believe that TaxAct offers good value compared to its competitors, particularly in the freelancer/self-employed category.
What you need to keep in mind is that, while TaxSlayer’s self-employed filing is $10 more than TaxAct, you get a free state tax return with it. This makes the site’s federal and state filing $27 cheaper than if you use TaxAct’s Freelancer tier with the $37 state return.
As for the Premium tier, we believe that TaxAct offers even more value because you get pretty much any deduction you need as well as audit protection.
In our opinion, TaxAct is best for freelancers who live in a state without income tax because the site is the cheapest of the four we compared in our table.
Public Opinion About TaxAct
At the time of publishing, we read through 46 reviews of TaxAct on Yelp, where it had an average rating of 1.5 stars.
Complaints about the site noted that there were issues with importing W-2’s, unhelpful customer service calls with long wait times and charges for importing forms from 2016.
We can vouch for the long wait times. As preparation for this review, we called their customer service line to ask a question and were told our wait time was 1 hour, 59 minutes and 17 seconds. To their credit, they gave us the option of getting a callback. We chose that option but were out of the office when the call came and we missed it.
TurboTax and H&R Block provide live chat support, a very helpful feature if you need questions answered while you’re working on your return.
A Quick Word About TaxAct’s $100,000 Accuracy Guarantee
TaxAct’s site often mentions their $100,000 accuracy guarantee. If you get a smaller refund than you should as a result of an error in the site's software, they'll pay you the difference and cover up to $100,000 for costs related to an audit.
The fine print on this offer points out that the company is only liable for mistakes if they were the direct result of a software error. The guarantee doesn't cover errors you make, whether you enter the wrong information, change an amount that the software generates or you purposely enter false information.
» RELATED: 11 Most Common Tax-Filing Mistakes to Avoid
Based on what we read in the fine print, we think the $100,000 guarantee will rarely come into play as most mistakes are made by the user, thus invalidating the guarantee.
Final Thoughts About TaxAct: Pros and Cons
We believe TaxAct’s greatest strength is its pricing structure. The site’s Freelancer and Premium options provide tons of value.
If you’re a freelancer, we suggest signing up for TaxAct in January, as prices go up after that.
Taxpayers concerned about audits will benefit from the site’s Premium package; tax audit support is included in the $59.99 price.
TaxSlayer also includes audit protection in their premium package but their fine print says they don’t offer the service if you filed a Schedule C, which is a form most freelancers and small-business owners will file.
Another advantage is that their downloadable software presents a great year-to-year value, as we pointed out earlier.
As for the downsides of TaxAct, we can speak from experience when we say you probably won’t get a quick response from their customer service phone number. As we pointed out, the wait was almost two hours long. You have the option of getting a callback, but make sure you’re around your phone to pick it up.