TaxAct Deluxe has roots that go back to the 1990s. It’s a reliable, thorough online tax preparation service with a large potential audience of taxpayers, primarily W-2 earners who want to itemize. Since we last reviewed it, the company has lowered its prices, enhanced its ability to find tax breaks, and added TaxAct Xpert Help. Another addition is the ability to snap a photo of a W-2 and upload its data to the form on the website. We found this service to be excellent last year, and it looks good again this year. You’ll have to wait a little bit longer for a rated review, however, as it’s not quite tax time yet. Here we take an early look at the service, and we’ll update this piece add a rating as soon as we have had a chance to look at final code for this service and all its competitors.
How Much Does TaxAct Cost?
TaxAct broke the price barrier when it introduced completely free online personal tax preparation and e-filing (both federal and state) several years ago. It no longer makes that offer. It doesn’t, for example, support schedules A-F these days. Its free product supports W-2 income, expenses for dependents and current students, the Child Tax Credit, and retirement income. State returns are no longer free; they cost $4.95 per state filed. Credit Karma Tax is now the only service that supports all the major forms and schedules (both federal and state) for free. FreeTaxUSA supports all major forms and schedules for free, with only a $12.95 charge for state returns. Of course, you get what you pay for, and what you’re not paying for (and don’t get) with these two is a deep and thorough help system.
The next step up from Free is TaxAct Deluxe, which I tested this year ($24.95 for federal filing, $5 cheaper than last year), which is designed for itemizers and W-2 earners. If you have to report on investments or rental property, you’ll have to pay $10 more (federal) for Premier. The top-of-the-line service and the only one to offer Schedules C and F is Self-Employed; federal returns at this level cost $64.95. State returns for all editions (with the exception of Free) are $44.95. These prices fall roughly in the middle of the tax website spectrum, whereas TaxAct used to be one of the least expensive options.
TaxAct no longer offers what it used to call the Price Lock Guarantee. No matter when you filed in the past, TaxAct would charge you the price the product was when you started your return. Tax preparation services tend to get more expensive the closer you get to the filing deadline, and competitors generally charge you whatever the rate is at the time you file. This is a disappointing development, as this was one of the things that set TaxAct apart.
TaxAct’s Wizard Wizardry
TaxAct, like its competitors, is an online version of all those paper documents you would otherwise need to assemble to do your tax preparation. If you have a complicated financial life and have ever tried to complete your return on paper, you know how frustrating and time-consuming it is to keep flipping back and forth between forms and schedules, doing all your calculations, and transferring the correct numbers to your 1040.
TaxAct makes this grueling process more organized and manageable. Like a human being in a tax preparer’s office would do, it interviews you to get all the information needed to complete your return, taking you through a lengthy step-by-step wizard. All you must do is answer the questions on each page before you advance to the next one. Sometimes you have to fill in a number or a few words, whereas other pages ask you to select responses from lists of options.
As you enter information, TaxAct does the necessary calculations and puts your answers onto the appropriate lines on the right forms or schedules. At almost every step of the way, it offers support of one kind or another. After you visit every topic applicable to your situation, TaxAct goes through your return and alerts you to potential problems before allowing you to e-file or print out paper returns to mail. You aren’t asked to pay until this point, as is typical with these services.
Early Tax Info
Your first steps in getting started are to create a username and password, enter a code sent by text or email, and choose security questions and answers. Once you’re in, you’re asked to click on icons representing life situations that can affect taxes, like having dependents and owning a home. The service then tells you what version you should use. It also asks if you want to import your tax data from last year (you can edit anything that’s changed). TaxAct Deluxe can also bring in that information if you have a PDF file of your 2019 return that was prepared by another service. This can save you a lot of time and improve the accuracy of your return, too—assuming your data was correct last year. Of course, this is a simple automated process if you used TaxAct Deluxe last year.
If you’re starting from scratch, TaxAct Deluxe has to get some basic information about you up front, such as names and addresses, birth dates, and Social Security numbers. Then, it’s on to questions about dependents and your filing status. It does all of this in a fairly straightforward, serious way. Other services, such as TurboTax and (to a lesser extent) H&R Block, try to be a little friendlier and even folksier here and throughout the interview process. This doesn’t affect the actual tax preparation, but some may find a chummier interview can make what can be a tedious experience a bit more pleasant.
Getting Around in TaxAct
Most personal tax preparation websites use similar navigation tools. In TaxAct Deluxe, the left vertical navigation tool is divided into the site’s main sections, including Basic Info, Federal, and Review. When you click on one of those headings, the toolbar changes to reflect the subsections found there. So, for example, you’ll see tabs for Income, Deductions, Credits, Taxes, Miscellaneous, and Summary under Federal—the same way it was set up last year. Below that are links to state, review, and filing tools, as well as a few housekeeping screens.
The easiest—and recommended—way to progress through TaxAct Deluxe is sequentially. Just keep completing screens and using the navigation buttons. I got tangled up more than once when I tried to work out of sequence, and TaxAct’s navigation tools aren’t good at showing you exactly where you are on the site at any given time. H&R Block Deluxe is better at this.
There are multiple ways to respond to the site’s queries. You fill in blanks, click in checkboxes or select from lists, click on Yes or No, and so on. If your employer or financial institution is supported (and many are, with additional employers added for the 2020 tax year), you can import data from forms like the W-2 and 1099s, minimizing the need for data entry and ensuring accuracy.
For software that automates a process as anxiety-producing as personal tax preparation, a compelling interface is essential. Skillful, creative design can make any user experience just a little less draining. TaxAct Deluxe does fine in this area. There’s nothing exceptional about its user interface, but it’s clean and attractive enough without going overboard on unnecessary graphics or other distractions. Other sites like TurboTax Deluxe have a more state-of-the-art look.
Reporting Income and Expenses
Once you’ve completed the personal information section, TaxAct asks you in a series of screens about tax issues like income types, interest/dividend income and IRAs, special family and education expenses, and your housing situation. You don’t have to provide specifics here; TaxAct just wants to know what topics it needs to cover (though you have the option to add to this list later) so it can maximize your deductions. Then, TaxAct begins the questioning. You can either select the topics you need to cover or let the site walk you step-by-step through its very lengthy interview.
If you opt to choose your own topics, TaxAct shows a navigation menu that lists all the site’s sections. Some have multiple subsections that drop down if you click on the arrow next to the main entry. Click on one, and the site walks you through the issues there, then returns you to the main page. TaxSlayer works similarly; you can see all supported topics at once or break it down into individual lists by type (such as income and deductions). This screen in TaxAct provides a good breakdown of the entire site, both main sections (like Other Income) and subsections (such as Alimony Received and Gambling Winnings). Taking this approach makes it more likely that you’ll miss some deductions or credits or income, but it’s good that it’s available.
Along the way, TaxAct occasionally gives you two options for entering your tax data. For example, when you need to record interest income, it will ask if you want to enter the details on a reproduction of the 1099-INT form or continue in Q&A style. If you choose to work directly on the form, you still have access to guidance. Unfortunately, this consists of a link to IRS instructions and another to a not particularly helpful screen in the site’s TaxTutor Guidance.
Once you finish the income screens, you see a summary of everything you’ve entered there. If you’re satisfied that you’ve reported all of your income, you go through a similar process for entering information about your deductions, then credits. Some of these screens display “ProTips” at the bottom. These are brief snippets of information about the current tax topic that users may not know about. For example, one talks about the new $300 charitable donation deduction for individuals who aren’t itemizing. Another provides a link to a list of allowable medical and dental expenses. TaxAct contains more of these this year than last.
After you complete all the federal screens and get a recap of the totals in each section (along with your refund or obligation), TaxAct transfers applicable information to any state return you must file and helps you complete it. Once you think you’ve taken care of all pertinent topics, the site runs its exceptional review tool, which looks for incomplete or inconsistent information and other problems that might lead to an inaccurate return. It also flags potential tax savings (the “Deduction Maximizer”). This has been enhanced for the 2020 tax year.
When it finds an error, the tool displays the error on the screen and provides fields for corrections and additions without forcing you to find your way back to the original page. TaxAct has also enhanced its tax-planning tool that provides targeted advice for the upcoming tax year.
Several Support Avenues
Excellent built-in help and support are critical components of effective tax preparation services. These applications can’t be expected to help extensively with every obscure and complicated tax topic (though they might surprise you in this regard). They should, however, at least pose questions in plain language and provide additional explanations on the screen that answer the most common questions.
You should also have the option to click on hyperlinked words, phrases, or buttons that take you to even clearer, simpler guidance for advanced topics. At the very least, these services should have a searchable database that puts the best-matched links at the top of the results list. Tax preparation services that do well in our rankings clarify complex IRS language.
TaxAct Deluxe has some points in its favor here. It used to display context-sensitive Q&As in the right vertical pane (along with more general FAQs). I always liked that feature. Now, there are a few general FAQs that never change, along with (often) some context-sensitive help topics that open in a window that overlaps the screen. There’s another set of links below these. They take you toTaxTutor Guidance (the Answer Center), IRS form instructions, a glossary, and form instructions.
This is good information, but in some cases, it requires another layer of searching and/or scrolling. The best way to get context-sensitive help is to enter a word or phrase in the search box. The Answer Center opens and displays multiple search results; these articles address their topics effectively and are sometimes quite lengthy. H&R Block has the edge here in terms of the simplicity and accessibility of its help content; it’s also much more context sensitive. The Answer Center also provides direct links to related forms and schedules.
I was told several times that I could read a specific IRS publication (which the site provided access to) for more information. These are, of course, by definition, accurate documents, but they can be difficult to decipher. The ability to avoid IRS documents altogether is a big reason for using a tax preparation website in the first place. TaxAct is not alone in this practice.
There are other support options. You can click the small circled “i” link where it appears to open a help window with an explanation of the concept. Like other help windows, this obscures your view of the working screen. H&R Block, by contrast, displays its help content in a vertical pane to the right, out of the way. Finally, phone and email help are free. Of course, you’re much more likely to get a quick response if you file early, before everyone else. That’s just one more reason not to be a last-minute e-filer.
TaxAct has also introduced TaxAct Xpert Help, which gives you unlimited access to a CPA or other tax specialist who can respond to tax-related issues, not just technical queries. Pricing will be available in mid-January.
How Secure Is TaxAct?
TaxAct works with the IRS and state authorities to comply with generally accepted procedures and practices for both physical and online security. It has implemented multiple safety features to ensure that you’re the verified account owner. Password requirements are complex, and your account is further protected through two-factor authentication, either using unique security codes sent to your mobile phone or email or through Google Authenticator.
Filing Your Taxes on a Mobile Device
I tested TaxAct’s Android app and iPhone app. Both versions look and work like the desktop version. Click a link in the upper-left corner, and the site outline opens. Click on Federal, for example, and a menu displays links to the Form 1040’s core sections. Working screens look and work like they do on the browser-based version. Click a link in the upper right corner, and you get access to the support and tools found in the upper part of the vertical pane in the full version.
Search for a phrase and click on one of the hits, and a menu is available that contains the content in the lower part pf the help pane. But I couldn’t back out of this screen to get back to the list of results. I had to pull the screen down with one thumb and click the X quickly with the other to shut the page. Other than that inconvenience, TaxAct reproduces the help resources you’d find if you were using it on your PC.
Tax preparation websites tout their solutions’ transportability. That is, you can start your return on one device and pick up where you left off on another by signing in. Having similar user interfaces on both desktop editions and the mobile tax apps makes this much easier.
A Safe, Affordable Choice
TaxAct Deluxe offers commendable tax form and schedule support and multiple levels of help (though they feel a bit scattered). If you’ve used it before, it looks so far like there’s no real reason to switch—unless your tax situation has changed and you anticipate needing extra guidance, or you simply want a better user experience. Take these early conclusions with a grain of salt, however—we’ll return and update our findings when we’ve seen the final version once tax time is here.
While you’re working on your own money, you should read our roundup of the best personal finance software, and if you have a small business you ought to take a look at our overview of the best accounting software.
