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Tax guide 2014: The best online services for tackling your 1040

Yardena Arar | March 18, 2014
Need help filing your federal and state income taxes? More than a dozen online services are vying for your business, promising to keep your refunds high and time investment low.

But even if you do qualify for free Federal filing through the IRS or a commercial vendor, be sure to check out the companion state offering (assuming you live in a state that taxes income). State returns are rarely free and in many cases actually cost more than the companion paid federal service. But if you opt to do your state tax return yourself, you might be unpleasantly surprised at how much of a hassle it is to fill out the forms using the info on the free federal return. Tax services make a lot of their money by charging for the convenience of handling your state return, which typically adds only a few minutes to the tax-prep process.

TurboTax casts a wide net

If your tax situation doesn't qualify you for a free service and you don't want to fill out federal forms yourself, a range of paid services are available. In general, if you're not a first-time filer, you'll find sticking with the vendor you used last year is easier than switching, because most can import data from last year's return.

Several promise support for importing PDFs of a previous year's return from other vendors (typically TurboTax, given its enormous market share), but in my tests neither H&R Block nor TaxAct were able to import my TurboTax PDF. (TaxAct coyly stated that it could not import my entire return when in fact I found no evidence that any information had been imported.)

TurboTax alone has four different paid service tiers, ranging in price from $19.99 to $49.99. State add-ons cost $36.99 apiece. It's actually no longer the most expensive service, because H&R Block's comparable high-end offering costs the same.

But TurboTax is also generally the slickest of them all, with extras such as a great community forum, free access to tax pros if you have a question, and the best data import support (for W-2 and 1099 forms). The latter can really save time and improve accuracy if TurboTax supports your financial institutions or payroll service: Simply enter a few data points to verify your identity, and TurboTax quickly populates the appropriate forms with data downloaded from your W-2's or 1099's.

TurboTax this year has updated its user interface and helps speed returning customers through its interview-style process by winnowing down the questionnaire up-front (you check off items that don't apply).

TurboTax's Amazon gift card refund program may appeal to people who frequently patronize the Web retail giant. If you've got a refund due, you can opt to receive it (in denominations of $100) on an Amazon gift card. Intuit will add an additional 5 percent (for free or Basic Edition filers) or 10 percent (for Deluxe, Premier, and Home & Business customers) of the refund amount to the card. So, for example, if you opt to channel $500 of a refund into a gift card, you'll get a card for $525 (if you file using the free or Basic edition) or $550 (all other editions).


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