Tax software recommendations

I’m filing my taxes this year through a little-known company called FreeTaxUSA that I found out about through Bogleheads. It’s free to do federal filing (including itemized transactions, investments, and self employed income). Their business model is to give free federal returns and charge $13 for state. FreeTaxUSA properly handles backdoor Roth contributions (remember to enter IRA contributions first, then enter conversion info). I filled out my info at both FreeTaxUSA and TurboTax and got identical results.

My state offers a free e-file option if you fill it out directly on their website. It took me about 5-10 minutes to do so by extracting info directly from the 1040 produced by FreeTaxUSA. It probably wasn’t worth my time, but I like learning about the tax code so I actually enjoyed doing it. I got identical results at my state’s efile site as I did at FreeTaxUSA and TurboTax.

The above combination was easy enough that I see no reason to change it going forward in future years.

Had I not done backdoor Roth IRA Contributions this year, I probably would have simply filed my taxes at Credit Karma Tax, which does free federal + state in exchange for using your information to make targeted ads to you. Some people might be paranoid about the privacy here. Others may be skeptical of their ability to correctly calculate your tax liability. I think both fears are largely unjustified. The reason I avoided them is because I’ve read that they do not properly handle the backdoor roth transaction (at least in years past).

If you trust none of the above, I’d recommend purchasing a TurboTax CD at Costco or Amazon, which allows you to file up to 5 federal returns (the first state efile is free, though additional state efiles are separate). Then split the cost with friends/family.

If you happen to have moderate income or have a simple tax return, these two online versions of TurboTax are great:
https://turbotax.intuit.com/taxfreedom/ (must have < $33k AGI OR qualify for EITC)
https://turbotax.intuit.com/personal-taxes/online/free-edition.jsp (must make < $100k and have no investment income)

 

After all was said and done, my 2017 tax calculator ended up being $21 off from my final tax liability (in percentage terms, this is less than 0.1% off). Not too shabby for a spreadsheet monkey (who hates accounting) that reversed engineered the tax code for fun! As a reminder, the spreadsheet handles:
* AMT
* EITC
* CTC
* ACTC
* Investment income (dividends + cap gains)
* Mortgage interest
* Property tax
* Student loan interest
* Charitable contributions
* Medical expenses
* Standard vs itemized deductions

The spreadsheet does not handle:
* Saver’s credit
* Trad IRA deductibility phase out

10 thoughts on “Tax software recommendations

  1. Dang, wish I would’ve known this before midnight last night! I could have saved $82.30. Wahhhhh! On a good note we took advantage of the savers credit, which I think one of your posts may have highlighted. Thanks for sharing your work.

    • Sorry about the untimeliness of the post. But you should be able to mimic what I did going forward. I’m really impressed by FreeTaxUSA.

    • Not that I’ve noticed. To be honest, I don’t really understand the appeal. Entering in W2 information or dividend info from a form into tax software will take on the order of 30 seconds per form. I’ve used the automation before but been underwhelmed by the time savings. Perhaps I’m missing something?

      • I used to be at an expensive broker and they would perform a couple hundred transactions for the year. So that made entering all those lines intimidating. But since finding passive indexing, this of course has plummeted. Thank you for the suggestions and continued posts.

  2. Trying to use FreeTaxUSA and ran into a glitch—won’t accept a negative number on a SSA-1099—so waiting to hear back from customer service………..hopefully, before the 24 hour waiting period

  3. I’ll definitely have to check FreeTaxUSA out. For too long I’ve let inertia take over and been filing using Turbo Tax. It usually was because of investment income and an old LLC I had would disqualify me for the free options I could easily find. I closed out the LLC in 2016, so I think I should be good to go with them.

    Thanks for the recommendation. Probably saved me $60 this month.

    • Hopefully you like it okay. If not, (legally) sharing a turbotax CD with friends/family sounds like a pretty cheap plan B to me.

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