Filing state and federal income taxes is an annual chore many people dread, but 2020 brings at least one spark of good news: This year's federal tax-filing deadline has been extended to July 15, 2020, according to the Internal Revenue Service. The new date applies to all individual returns, trusts, and corporations and will apply automatically, so you don't have to do anything to take advantage of it. However, if you live in the District of Columbia or one of the 42 states that collects income tax, the original deadline may still apply for your state taxes. Check the Federation of Tax Administrators website to find out when your state income tax is due.
So now that you have more time to prepare your federal returns, you also have an extra grace period to find the best way to do so. Online tax filing software has gotten more popular over the years, according to a study done by technology firm Exponential. Among members of Gen X and Baby Boomers, 59.5 percent and 55.9 percent are likely to use it. But it's much more popular among Millennials and Gen Z. Filers aged 21-24 are 82.4 percent more likely to file online, followed by 24 percent of those aged 25–29.
But even if you've decided not to consult an accountant to get your taxes done, choosing the best method for your job situation can be daunting. We combed through the most popular options to give you some guidance, depending on the complexity of your forms.
Best for Simple Returns: H&R Block
If you claim the standard deductions using a W-2 tax form, the free version of H&R Block will work for you. You can also use it to report business income, alimony, deductible student loan interest, some retirement contributions, the alternative minimum tax, dependent care credit, the Saver's Credit, and Lifetime Learning Credit. H&R Block also has helpful explanations throughout the process and the site is easy to navigate and use.
However, if you need to make itemized deductions or report business income, you will need to upgrade to a paid version. You can also access live support via chat or by phone, but you'll need to pay for the privilege. If you don't want to go through the whole process by yourself, you can also upload your documents and pay to have an H&R Block pro do it for you, without leaving your house.
Another Great Option: Credit Karma
For those with simple tax returns who don't need a lot of help, Credit Karma Tax is totally free for both state and federal returns. You won't run into any sneaky added fees with Credit Karma, which can happen with other filing software. It can handle W-2 and 1099-INT forms, the 1099-DIV to report interest from your bank, as well as the 1098-E for reporting student-loan interest. Just like H&R Block, it will help guide you into the forms you'll need. It also comes with an audit defense guarantee, which offers nice peace of mind.
However, if you need to file in multiple states, have a lot of complex forms, or you want more hand-holding along the way, Credit Karma's basic system might not be for you.
Best Paid Software: TurboTax
Some things are just worth paying for. If you need to itemize your returns, have income from rental properties or investments, or want a more hands-off process, TurboTax is here for you. There's a free version that works with the IRS for active duty military with an adjusted gross income of less than $69,000, those who qualify for the Earned Income Tax credit, and those whose AGI is less than $36,000.
But if that's not you, TurboTax still offers robust support, with help from a real, live person along the way. It starts at $60, but guarantees you'll receive your maximum return. For many people, the cost is worth the knowledge that you've done your taxes correctly. And if they do make a mistake, TurboTax will pay the penalties to the IRS. Now that's service.
Best for New Circ*mstances: TaxAct
If you've undergone a major life event since the last time you filed, like losing or getting a new job, buying or selling a home, or having a baby, TaxAct will help you zero in on how those will impact your taxes. It will also help you pinpoint deductions if you're self-employed, a handy feature for those who might not know all of the little things they can get a break on. While TaxAct is also pretty no-frills, it makes a good budget-friendly option. You will pay extra to file state taxes with all but the most ground-level option, so be aware of that.
For those who felt burned by their tax filing choice last year, TaxAct can help with that too. It easily imports returns from other preparers, so you can switch without much of a headache.
Best for Budgeters: TaxSlayer
For tax filers on a budget, TaxSlayer offers several different levels tied to the amount of support you need, not the returns it can file. So if you feel pretty confident filing your taxes and don't want to pay for help you won't use, TaxSlayer should work well. It also offers a quick file option, in which you simply search for a keyword that matches your situation rather than hunting for what you need.
Because it's web-based, TaxSlayer also works on just about any device. So if you don't want to sit at a desktop to get your taxes done, this simple interface can help on the go. If you do need help though, you'll pay for it. TaxSlayer doesn't have the same sort of live chat that other services do, but a tax pro will get back to you within one business day.
When to Hire a CPA Instead
Some tax circ*mstances just call for a professional. If you're a small business owner, have a lot of investment engines or properties, or if you're a freelancer who needs to file in multiple states and circ*mstances, you may want to shell out for a pro. And if you've recently bought or sold a home or have other capital gains or losses, getting the returns you're owed may warrant consulting a professional, too.
Finally, if you don't feel comfortable inputting the information yourself, you're afraid you might miss deductions, or want the security of knowing it's in a pro's hands, take it to the experts. Some things are just better left to those in the know.
