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Online Tax Prep, Any Good?

The Annual Tax Prep Scramble

With tax season rapidly approaching, many Americans are getting their financial ducks in a row. The deadline for filing 2019 taxes was extended last year due to the COVID-19 pandemic, meaning some are working on their taxes only 9 months after completing their last round.

This time of year, you’re likely seeing many commercials and ads for free online tax filing.

How useful are these services? Are they any more convenient than working with a tax professional? And just how “free” are they?

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The Pitfalls of Online Tax Prep

You’ve certainly seen the advertisements: companies promise that you can file your taxes online, for free, entirely by yourself. But if you’ve ever tried to use one of these programs, you know they rarely work as advertised.

A 2019 article from ProPublica revealed how Intuit has misled consumers attempting to use their Free File option. Free File was created in partnership with the IRS as a way for taxpayers to file their taxes at no cost.

However, a similarly named product from Intuit, TurboTax’s “Free Edition,” is pushed on customers attempting to file at no-cost. And while the word “free” is in its title, it is nearly impossible to use this software without paying for something.

Intuit and other tax preparation companies will try to upsell customers as they fill-out their paperwork online. Additional fees are necessary for filing state returns, itemizing deductions, inputting 1099s, and more.

Even worse, these companies use design tricks called “dark patterns” to fool customers into choosing misleading prompts while they file. The landing page for Free File is hidden from search engines and cannot be accessed by Google search.

If you have multiple income streams, are a freelancer, work across multiple states, or wish to itemize your deductions, online tax preparation can prove to be as expensive as working with a professional.

Freelancers will likely find that attempting to file online is more trouble than it’s worth. Online tax prep software is not designed primarily for taxpayers who use multiple W-2s, 1099s, and deductions; it can be very easy to make errors in your filing without a tax specialist checking your work.

To avoid an audit, self-employed individuals and couples may be better-off having an expert compile their return. 

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The Pros of Online Tax Prep

If you work only one job and receive a W-2, online tax preparation could be the best answer for you and your family.

The benefit to online tax preparation is, theoretically, that it saves time. If you have relatively little information to submit in your return, you may be able to complete your tax return in only a few hours.

Individuals and families who have relatively straightforward finances may find that the cost of submitting online is reasonably low.

The IRS’s Free File program is only available to taxpayers who earn less than $66,000 annually. If your annual income is higher, you can use Free File Fillable Forms, the electronic version of a paper return. However, only federal returns can be submitted this way.

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Local San Rafael Tax Prep Services

If you live in the Bay Area and are tired of battling with online tax software, Books in Balance is here to help. Our office is in the Chase building on 4th Street in downtown San Rafael and we are seeing clients virtually.

Call our office right now at (415) 455-9455 to schedule your free consultation.

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