Preparing and filing your taxes isn’t usually a pleasant experience — unless you’re expecting to receive a large tax refund. On top of paying a large portion of your income to the government, you’ll most likely have to pay tax preparation fees. If you’re not sure how to prepare your taxes, there are tax services to help you this tax season.
As long as your tax returns are simple ones that don’t include itemized deductions, there’s a good chance you can tackle them on your own, for free. Two of the largest tax-filing software programs, TaxAct and TurboTax, offer free federal returns. Whether you’re going solo for the first time or have some experience under your belt, both programs can walk you step by step through the tax preparation process.
Here’s a comparison of TaxAct versus TurboTax to help you decide which free tax-filing service is best for you.
|Item||Tax Act Free||TurboTax Free Edition|
|Price||• $0 federal, $34.95 to file state return
• Prices for other TaxAct products start at $24.95
|• $0 federal and state
• Prices for other TurboTax products start at $39
|Best for Filers with||• Standard deduction
• W-2 and/or unemployment income
• Retirement income
• Earned income credit
• Child tax credit
• Stimulus tax credit
• Dependent- and student-related expenses
• No state return to file
|• W-2 and unemployment income
• Limited interest and dividend income reported on a 1099-INT or 1099-DIV
• The standard deduction
• Earned income tax credit
• Child tax credits
• Stimulus credits
|Features||• Switch from another online tax provider by uploading a PDF of a prior-year return
• Free Xpert Assist from CPAs and other tax experts
• Access PDFs of 2017 and later returns completed using TaxAct Online
• Import info from last year’s TaxAct Online return or PDFs of returns prepared using other software
|• Audit support guarantee
• Import last year’s info from TurboTax or upload PDF of prior-year return from other software
• 24/7 access to an online community of TurboTax specialists and users
• Keeps returns on file for seven years
• Free Live Basic support for simple returns filed by March 31.
• Free TurboTax Live Full Service Basic for simple returns filed by Feb. 15.
TaxAct Free and TurboTax Free Edition Features
Although both platforms do essentially the same thing — help you prepare and file your tax returns — each has unique features and ways to support you as you work.
TaxAct Free is for individuals to file the most basic federal return using Form 1040. Although you can also use TaxAct Free to prepare your state return for free, you’ll pay $34.95 for each state return you print or file.
The program includes TaxAct Alerts that let you know if you’ve made a mistake that could trigger an audit or cause you to pay more tax than you need to.
Another useful feature is assistance with your Free Application for Federal Student Aid. TaxAct Free lets you compete and print a worksheet containing the information you’ll need when you fill out the FASFA.
In addition, TaxAct Free guarantees that you’ll receive the maximum refund available and that its software is 100% accurate.
In the event you encounter a problem with your account, username and password or account preferences, customer service is available by phone, with extended support hours during tax season.
TurboTax Free Edition
Like TaxAct Free, TurboTax Free Edition is a free program to file basic federal and state tax returns. It provides a CompleteCheck review of your return to alert you to errors and omissions. And TurboTax guarantees that its calculations are accurate. If you incur a penalty because TurboTax Free made an error, TurboTax will pay it.
You have a couple of ways to get help if you need it. Once you’re signed in, you’ll see a Contact link at the top of your screen that will connect you with assistance. If the issue is about your tax return itself rather than the program or your account, you can upgrade to TurboTax Live Basic at any time to get help from a tax professional. However, Live Basic is free for standard returns filed by March 31, and you can have an expert do your simple return for free if you file before Feb. 15.
Who Can Use TaxAct Free and TurboTax Free Edition?
TaxAct and TurboTax both promise free tax preparation for filers with simple returns. “Simple” generally means that you earned your 2021 income as a W-2 employee or through unemployment.
When it comes to deductions, your return is a simple one if you take the standard deduction rather than itemize deductions. Note that for tax years 2020 and 2021 only, you will not need to itemize deductions to claim up to $300 ($600 for married joint filers) in cash donations to qualified charitable organizations. That rule has been lifted temporarily to encourage donations during the pandemic.
Beyond that, the platforms have slightly different limitations.
In addition to W-2 and unemployment income, TaxAct Free supports retirement income as well as child and earned income credits and coronavirus stimulus credits.
Expenses allowed by TaxAct free are limited to dependent credits and credits for current students.
If you have a more complicated situation, such as investment income, adoption credits or deductions for child or dependent care, or you contributed to a health savings account, you’ll need to upgrade to a paid version.
TurboTax Free Edition
In addition to the income TaxAct Free supports, TurboTax lets you report interest and dividend income from forms 1099-INT and 1099-DIV.
Expenses allowed using the free version include child and earned income credits as well as Recovery Rebate Credits.
For situations not included on this list, you’ll need to upgrade to a paid version. Compare the different TurboTax filing options.
How To File Your Taxes Online for Free
Both platforms aim to simplify tax preparation, so they’ve eliminated most of the guesswork. Completing your returns is a matter of entering the information the program asks for as you navigate through the interview screens.
Once you’ve created an account and logged in, you can get to work on your federal return. Just click on Start for Free, and TaxAct will walk you through the rest. The screens show you how much you owe or are due at each stage, so you always know where you stand. If you used TaxAct last year, you can speed things along by importing information from that return. Or, if you used TurboTax or H&R Block, just upload a PDF of your 1040.
TaxAct Free will also help you prepare your state return, but you’ll pay a $34.95 fee to print or file it.
After you’ve finished your returns, you can file them electronically. Have your prior-year adjusted gross income on hand before you start. The IRS will use that to authenticate your return. If you’ve filed electronically in the past, you’ll also need your self-selected PIN.
TurboTax Free Edition
TurboTax Free Edition is very similar to TaxAct Free, but you can take a photo of your W-2 with a smartphone and upload it to the program. You can import information from last year’s return and, if you file before Feb. 15, get free help or free tax preparation. Filing your state return is also free.
As with filing with TaxAct, you’ll need your last year’s adjusted gross income and self-selected PIN, if you have one, to file your TurboTax Free Edition returns electronically.
TaxAct Free vs. TurboTax Free Edition: Which Tax Software Should You Choose?
TaxAct Free and TurboTax Free Edition offer similar free services, although TurboTax Free throws in some extras, like free tax preparation for early filers and free state filing, plus the ability to report 1099-INT and 1099-DIV income. However, the real differences start to appear when you compare the paid upgrades.
TaxAct offers multiple package options that build on TaxAct Free. Packages range from $24.95 for the Deluxe service — ideal for taxpayers with dependents and college expenses — to the Premier for $34.95 for filers with investments and rental property. Self-employed individuals can use the $64.95 version that supports 1099 income and business deductions and calculates depreciation. These prices do not include the extra fee to add state taxes.
TurboTax offers a variety of paid options that range from $39 as of Jan. 13 (regularly $59) for the Deluxe package for itemizers, to $69 (regularly $89) for Premier, which handles investments and rental property, to $89 (regularly $119) for the Self-Employed version. Prices vary based on if you want to include state returns, for which all versions except the Free Edition charge a fee, or speak to an enrolled agent or certified public accountant who will answer questions and complete a final check prior to filing.
TaxAct and TurboTax offer similar services. TurboTax’s free edition is a bit more robust in the forms it handles and includes more advice and hands-on assistance, but upgrades are more expensive. If you file more complex returns but are still looking to save some money, TaxAct might be the better tax program for you.
Last updated: Jan. 13, 2022.
Editorial Note: This content is not provided by TaxAct or TurboTax. Any opinions, analyses, reviews, ratings or recommendations expressed in this article are those of the author alone and have not been reviewed, approved or otherwise endorsed by TaxAct or TurboTax.