Is a free, online tax preparation service a good choice?
Posted by Caitlin on February 19th, 2009
The following post in our Reader Question series is an actual user submitted question. To maintain the integrity of the original question, we do not edit or change reader questions in any way.
Q: Is a free tax service online (TaxAct) just as good as buying a program like TurboTax?
A: TurboTax, H&R Block and TaxAct all offer various online packages, including a free, very basic option for filing a federal return, as well as physical software. (The reviews on NextAdvisor.com are for the online services only.) If you only need to file a 1040EZ, you can use any of the free options. If a 1040EZ is not adequate for your tax needs, but you would still like to file your federal return for free, TaxAct's online service is your best option. All of these services will charge you a fee if you also need to file a state return. If you would prefer physical software to an online service, you can download a tax program or order software on a CD-ROM from TurboTax, H&R Block or TurboTax. This software will be more or less the same as the equivalent online tax preparation package.
So, yes, an online service is just as good as a physical program. But no, a free service is not just as good as one that you pay for, because it will only include a very basic federal return, and not a state return. The tax preparation package that you choose should correspond to the complexity of your financial situation. If you own a home business, for example, there are tax preparation packages specifically tailored to your needs, but they will be more expensive.
To learn more about online tax preparation services, see our reviews and comparison chart.
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What is the best tax service for a home business?
Posted by Caitlin on February 11th, 2009
The following post in our Reader Question series is an actual user submitted question. To maintain the integrity of the original question, we do not edit or change reader questions in any way.
Q: What is the best tax program for a home based business to use? Always used my CPA? Thank you.
A: TurboTax offers a Home & Business tax preparation package, which is specifically designed to make it easy to handle your personal and business taxes. TurboTax Home & Business provides step by step guidance and identifies deductions that are specific to your business. TaxBrain also offers a package aimed at small business owners. And if you would feel more comfortable with assistance from a tax professional, you may wish to consider H&R Block's Signature or Online Office packages.
To learn more about TurboTax, H&R Block, TaxBrain or other online tax preparation services, see our reviews and comparison chart.
USA Today selects TurboTax as top online tax preparation service
Posted by Joe on March 1st, 2008
National newspaper USA Today published a head to head review of two of our top rated online tax preparation services in their Friday edition this week. Their testing gave TurboTax a slight edge over H&R Block's TaxCut, while they also gave honorable mention to TaxAct.
All three of the services mentioned in the USA Today article achieved five star rankings in our online tax preparation guide which launched in January 2008.
One important TurboTax feature discussed in the USA Today article which hadn't been available when we completed our original reviews of online tax preparation services was a detailed introduction and FAQ to the economic stimulus package recently passed into law by President Bush. While most tax payers won't have to do anything to earn their stimulus rebate it is helpful that TurboTax has added this feature since many consumers have questions about the program.
We are glad to see a national publication like USA Today focus on the many great options available to consumers who want to take advantage of the simplicity of preparing and filing their taxes online.
For more info check out our guide to online tax preparation services and our top ten reasons to preparing and efile your taxes in 2008.
Economic stimulus and your 2007 tax return
Posted by Joe on February 27th, 2008
Earlier this month President Bush signed the $168 million economic stimulus package into law. For those not familiar with the program it will mean that most tax payers will receive $300, $600 or $1200 rebates plus $300 per child. The goal of the program is to provide relief to tax payers and stimulate economic activity by putting some cash in the pockets of Americans.
There are some important tax implications and related questions that consumers may have about the stimulus package and Amy McAnarney, executive director for H&R Block's Tax Institute, recently provided some answers and insight for consumers.
Will this affect the tax return I have to file before April 15?
No. However, the amount of your rebate depends on how much money you earn this year and information from the 2007 tax return you'll file before April 15.
How soon can I get my rebate?
Checks should be distributed during a 10-week period starting in May.
If I file my taxes earlier, will that speed up when I receive my rebate?
Checks will not be distributed until May, regardless of when you file, but taxpayers who file for an extension might receive their rebates later than those who file by the April 15 deadline.
What if I don't have to file a tax return this year? Will I still get my rebate this year?
Taxpayers who want to receive their rebate this year should file a tax return this year. H&R Block is among the most affordable choices for Americans who want their rebate but who otherwise would not have to file, with discounted, professional tax preparation starting at $35 in our offices and do-it-yourself options, such as TaxCut Online, for as little as $14.95.
Will the rebate money I get be considered income, and will I be taxed on this next year?
No, and no. The rebate is an advance credit for tax year 2008, based on a tax cut in the economic stimulus bill.
Are there any limits on which taxpayers are eligible to receive a rebate? What are they?
To qualify for the rebate, the taxpayer must have earned income of at least $3,000, which can consist of income and benefits from Social Security or veterans' disability, and have a valid Social Security Number. The rebate is also phased out at adjusted gross incomes above $75,000, or $150,000 for married couples.
To learn more about preparing your taxes online and efiling for your 2007 tax return please visit our online tax preparation guide.
H&R Block offers tax refund loan to the military
Posted by Joe on February 18th, 2008
Many online tax preparation services offer so-called "refund anticipation loan" that payout a consumer's anticipated tax refund much more quickly than the IRS typically will. However, due to a 2006 law to help protect members of the military community, those loans are very difficult for military service people to find.
The law in question is meant to prevent companies from charging inflated APRs on loans to members of the military community and caps those rates at 36%. However, most tax refund loans have APRs in the range of 50% or more because they also cover processing and fees associated with providing the service. As a result, many companies that provide tax refund loans cannot afford to offer them to members of the military because their costs are potentially greater than the maximum allowable APR that can be offered.
H&R Block, one of our top rated online tax filing services, has begun offering a "military refund anticipation loan" that is capped at the allowable 36% APR. The loan charges a flat rate of $1.07 per $100. For example, the cost for a $3,000 loan would be $32.10.
In general, we believe that most consumers, whether in the military or not, would be better off waiting the approximately two weeks to receive their tax refund from the IRS because of the additional fees associated with tax refund loans. But, because we also believe choice and options are important, we applaud H&R Block's move to provide this loan option to members of the United States military.
Visit H&R Block's website to learn more about their military refund anticipation loans.
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$800 million in tax benefits go unclaimed
Posted by Joe on February 5th, 2008
H&R Block estimates that that nearly $1 billion dollars in potential consumer tax credits are overlooked each year by people that aren't aware of their eligibility for these benefits.
Alan Bennett, H&R Block's CEO stated:
Our research shows that three out of four taxpayers aren't aware of potential tax filing delays created by some last-minute changes in tax law. Other statistics show that about $800 million a year in tax benefits go unclaimed. People need us.
Bennett expects confusion to be compounded by recent changes to the alternative minimum taxes, or AMT, that were made by congress late in 2007. These changes are expected to impact 3 to 4 million households and are likely to make filing taxes on your own more confusing than ever this year.
We suggest that consumers use an online tax preparation and efile service such as H&R Block in order to simplify tax filing and making sure that they are benefiting from all possible deductions and credits. You can read more about online tax preparation in our free online tax prep and efile guide.
Job hunters may be eligible for bigger tax refunds then they are getting
Posted by Joe on January 23rd, 2008
According to the New York Times, a number of job hunting related expenses are actually tax deductible and could lead to higher tax refunds or lower tax bills.
The article states:
Job hunters may be eligible for can take the following deductions, says Jackie Perlman, a senior tax-research analyst at H&R Block, in Kansas City, Mo.:
• travel expenses
• employment-agency fees
• resume-preparation fees
• career-counseling expenses
• the cost of advertising your services
• newspapers and other periodicals purchased for their help-wanted ads and
• legal fees paid to an attorney to review an employment contract.
We recently published a free online guide that compares online tax services and found that many of these efiling services will actually help you identify even more tax deductions. Check out our online tax preparation guide at NextAdvisor.com.
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