TaxAct 2021 (Tax Year 2020)

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.

TaxAct retirementTurboTax 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. 

TaxAct traditional IRATaxSlayer 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.

TaxAct medical expensestwo-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. 

TaxAct in mobile browsermobile 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.

January 15, 2021
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