Review: Tax Prep Software

The Marriage Penalty

Do a quick web search for tax filing software and you’ll get thousands of hits, one of them being is available to any consumer, but also through the Free File program lead by the Federal government. The purpose of the program is to give middle-income earners an opportunity to file their tax return at no cost.

If you’re under 70 years old with an adjusted gross income of $62,000 or less, you can qualify for Free File through this website, unless you live in Florida, New Hampshire, Nevada, South Dakota, Tennessee or Texas.

In this post, we’re going to go over how to file a tax return on from start to finish.

[Free Tax Filing Options for Every State]

The Tax Prep Process

The first step of this process is similar to most online tax software. You create an account and choose the tax form you want to fill out. The options on this website are the 1040EZ, 1040A and 1040.

For the purpose of this example, I used the 1040ez form. This is an express form for taxpayers who make under $100,000, don’t have dependents and are single (or married filing jointly). When using the 1040EZ form, the only credit you can take is the earned income credit. And you can’t claim any adjustments to income.

These are the fields you’re asked to fill out in the first section:


Next, you’ll answer questions about your filing status including whether you have dependents, if you’ll be using the earned income credit and if you’re exempt from health care coverage.


The final page of introductory questions are the birthdates of you and your spouse, if you’re filing jointly, and which state you need to file taxes for.

[7 Best Online Tax Prep Software for the Self-Employed]

Entering Taxable Income

Moving on to wages. In the income section, you enter the information from your W-2. Unlike other online tax software like TurboTax and H&R Block, your information doesn’t auto-populate when you put in the Employer ID. So, you’ll have to check and double check the W-2 page to make sure you’re reporting the right wages, tax withheld, etc.


State Tax Returns

From the W-2 section, takes you directly into a state questionnaire. There you answer questions to figure out how much you owe for State tax.

And that’s it for form 1040EZ. You move on to a page to calculate your tax return and it will tell you how much you’re going to get in a refund or how much you owe for Federal and State tax.


The Help Center

The website has a help area, but it’s antiquated. There’s a pull-down menu you can click through to find answers to your own questions. If you have questions not answered in the support center you can submit a message form on the “contact us” page. A customer service representative will get back to you within 24 hours.

1040tax5 Benefits and Costs guarantees security, has a 100% accuracy guarantee and no hidden charges. If you used the site in the past you can transfer information from your last return to help you answer questions for the current year.

According to, refunds will be in your account within 21 days of the IRS accepting your return. This site also provides federal tax return extensions for free which can come in handy if you can’t file your taxes before the April 18th deadline.

As mentioned, is free unless you live in Florida, New Hampshire, Nevada, South Dakota, Tennessee or Texas. If you live in any of these states the tax return will cost $9.95.

If you meet the requirements for free Federal filing and live in Arkansas, Iowa, Louisiana, Oklahoma or West Virginia, you can also file your State tax return for free. Otherwise, State tax returns cost $19.95.

[Best Tax Software for 2016]

Who Should Use

This site is for someone with a very simple tax return. The software is compatible with many tax forms including the Schedule C, 1099-INT, 1099-MISC and others (find a full list here), but the website loses points with user friendliness.

There isn’t a robust help center section you can turn to for guidance. There doesn’t appear to be a phone number on the site you can use to reach out to someone directly either. And when you’re finished with the tax return (at least for the 1040EZ form) there isn’t an audit process other than reviewing a .pdf of your tax return.

If you’re looking for a software that’s intuitive, this probably isn’t the one. And for those hoping to take advantage of the Free File program, there’s other easy-to-use online tax software available.

The post Review: Tax Prep Software appeared first on MagnifyMoney.

Easily Find Your Free File Options with the IRS Tool

Tax return check

If your household grossed under $62,000 in 2015, you’re eligible to file your taxes using Free File from the IRS. Free File is a conglomeration of different online tax filing software providers that have partnered with the IRS to make their product available for no charge for low- and middle-income households.

When you look at all of your Free File options, you’ll see something like this:

IRS pic 1

Those aren’t even all of your options. As if filing your taxes weren’t enough of an exercise in tedium, now you have to go through each program, determine if you qualify, and decide which software will best suit your needs.

Except that you don’t. If you click on the “Help Me Find Free File Software” link in the furthest left hand column, the IRS will provide you with an online tool to help you weed out some of your options.

The tool, which can be found here, will ask you for a few pieces of information:

  • Your age
  • Your estimated Adjusted Gross Income (AGI) for 2015
  • Your state of residence
  • Your eligibility status for the Earned Income Tax Credit
  • If you or your spouse received military income in 2015
  • Your state, if you want to file a free state return

If you don’t know if you qualify for the Earned Income Tax Credit, clicking on the embedded link will bring up income limits. The real issue we see is inputting AGI if you have a variable income. When you have a steady income, you can reliably assume a number similar to your previous year’s return. Variable-income households may have to run some of their numbers first in order to see if they qualify, which partially defeats the purpose of using tax software.

We ran a couple of fictional profiles to see how the tools work. The first one is for a 30-year-old Pennsylvanian with an AGI of $61,000. They do not qualify for the Earned Income Tax Credit, and did not receive military pay in 2015.

IRS pic 2

These were their filing options, as brought up by the tool:


The only two options, if they want to file their state return for free, are H&R Block and This makes the decision a lot easier. We know from research that H&R Block’s tools are more in depth than’s, so our filer will probably go with the former.

The next parameters we ran were for a 30-year old resident of New Hampshire who did not have any military income, but did qualify for the Earned Income Tax Credit with an income of $34,000, and one child. We were curious if free, state-filing options would be more limited, as New Hampshire’s unique tax laws often cause problems for online tax software providers.

Much to our surprise, we got more hits for our New Hampshire resident than the Pennsylvanian:


After some digging, we discovered that the two contributing factors were the lower income, and eligibility for the Earned Income Tax Credit. TaxACT’S Free File is only available to those with an income below $50,000, unless they meet a litany of alternative requirements, such as qualifying for the Earned Income Tax Credit. TaxACT,, and H&R Block all offer free state returns, even for the difficult state of New Hampshire; it was the Pennsylvanian’s income that kept them out of the TaxACT bracket.

IRS Tools Saves You Valuable Time

The point is that the selection process is arduous if you try to go it on your own. As long as you can reliably predict your AGI, using this IRS tool will save you valuable time and headaches when choosing your Free File software provider.

The post Easily Find Your Free File Options with the IRS Tool appeared first on MagnifyMoney.