May 23, 2024

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TurboTax, H&R Block and other online tax prep companies in a price war

Do-it-yourself types who are looking for a deal for online tax preparation are seeing plenty of promotions.

It’s a marketing battle of the free online tax deals among some big names. But you’re going to need to review the restrictions and rules to figure out just what deal actually saves you money and what doesn’t.

Gig workers or self-employed workers, for example, often don’t qualify for free services and can be directed to higher-cost online options at places like TurboTax, H&R Block and the IRS, itself.

Meanwhile, Jackson Hewitt is throwing up its hands, dropping all the “free” offerings and charging one flat rate to everyone in the name of simplicity.

Jackson Hewitt’s $25 flat rate

Jackson Hewitt Tax Services is rolling out a $25 flat rate if you do your taxes — federal and state — online. The fee covers both state and federal, and as many state returns as needed.

A year ago, Jackson Hewitt charged $25 for federal returns plus another $24 for state returns. The $49 price tag covered as many state returns as necessary.

Given that inflation has many consumers fearing higher prices ahead, Jackson Hewitt Online is promoting a three-year, $25 price lock for customers who file their 2021 filing with the company.

Zach Cohen, head of digital products for Jackson Hewitt, said, “Really, the online tax preparation market has tried to gamify pricing.”

Anyone who does a quick internet search for online tax filing, Cohen said, will see that almost every single listing says “Free.”

“Yet only a very limited number of online filers actually get free tax prep,” Cohen told me in a phone interview.

TurboTax expands free offerings

TurboTax announced a new “$0 Any Way” offer, which the company said will apply to about 60 million filers with a simple tax return. There are no income restrictions.

Last tax season, the company said, more than 17 million people filed their taxes with TurboTax and paid nothing, which was more people than in any year in company history.

This year, TurboTax said it is expanding its free offer, allowing filers with simple returns to file completely free of charge using its different services.

TurboTax said it gives taxpayers with a simple return the choice to do their taxes themselves, get help from a tax expert along the way, or hand it off to a dedicated tax expert to do their taxes for them, for $0.

Filers have a Feb. 15 deadline to use the TurboTax Live Full Service Basic to file a simple return for free. This product allows you to hand over your return to a tax expert.

Tax filers using TurboTax Live Basic to file a simple return would pay nothing if they file through March 31. This product offers help from a tax expert along the way.

TurboTax Free Edition is available the entire season.

Who has a simple return? According to TurboTax, it’s a taxpayer who is filing only a Form 1040. TurboTax Free Edition, TurboTax Live Basic, and TurboTax Live Full Service Basic help tax filers whose tax situations can include W-2 income, limited interest and dividend income, opting to take the standard deduction, as well as those who claim the earned income tax credit, child tax credit, and report student loan interest.

Before you assume that you’d be able to file your tax return for free check out what restrictions apply online.

Many times, you’re not going to be able to use free tax software online if you’ve sold stock, sold your home, had mortgage interest, paid real estate taxes or have freelance income.

TurboTax says that situations not covered by TurboTax Free Edition, TurboTax Live Basic, and TurboTax Live Full Service Basic include returns that opt for itemized deductions, report unemployment income reported on a 1099-G, report business or 1099-NEC income, include stock sales, rental property income and credits, and report deductions and income reported on schedules 1-3.

Some offers might work better for one person than another.

H&R Block takes on TurboTax

H&R Block is advertising on TV this season that more people can file for free with them than TurboTax.

H&R Block said it offers some more forms under its free filing offerings than TurboTax, including Form 1099-G unemployment income, Form 8863 education credits, Form 1098-T tuition payment, Form 8615 involving the tax for children who have investment income of more than $1,900, the Schedule R credit for elderly or disabled filers, Form 1099-G for certain government payments, and Form 8915-F for the Qualified 2021 disaster retirement plan distribution and repayments.

Tax filers need to review their tax situations and forms, as they try to find the best fit.

Free File from the IRS

The “Free File” system at IRS.gov remains an option for many people. You’d have to pick a tax software provider that’s participating in the system and would offer services for those in your situation. The IRS said 70% of the nation’s filers are eligible for Free File.

If your adjusted gross income was $73,000 or less in 2021, you can use free tax software to prepare and e-file your tax return at IRS.gov.

Doing taxes is never really fun, but saving a bit more money along the way on tax prep can ease some of the pain.