We’ve tested and rated the top online tax services to help you find the best one for filing quickly and accurately, and receiving the largest possible return.
2021 is another year most people are happy to put behind them. The global COVID-19 pandemic is still with us—many of us are still working from home —though some parts of the US economy are recovering, thanks in part to the American Rescue Plan and 2020’s Consolidated Appropriations Act. These government programs resulted in numerous changes to the tax code in 2021. IRS personal tax deadlines have returned to normal—April 18 is the due date for tax filing this year—and tax services are open for business. Now’s the time to get started on your annual journey through form 1040. If you’ve used a personal tax preparation service or desktop software before and you go back to that same product this year, you’re not going to notice tremendous differences. Still, every site we reviewed has made improvements—some more than others. For the most part, the sites look and work much as they did for the 2020 tax year. What’s going on in the background as your tax data is calculated and rerouted to accommodate the new laws and forms—and hopefully get you a bigger refund —though, is different. The companies that make today’s leading tax services worked hard in 2021 to make fulfulling your tax obligations easier in 2022. Do I Have to Report Cryptocurrency on My Taxes? The online tax services available this year support all but the most obscure tax topics. You can report on: 1099s, W-2s, unemployment, mortgage interest, medical expenses, new self-employment income and expenses (Schedule C)—practically any tax-related situation you faced this year. One question more people are likely to be asking this year is whether tax software can help you figure out if you need to report activity related to Bitcoin and other cryptocurrencies. The short answer is that if you’ve used, sold, exchanged, received as payment, or mined cryptocurrency in the past tax year, all those activities need to be reported. TurboTax and H&R Block support reporting cryptocurrency transactions and have articles to help you with it. TurboTax in particular has a guide to cryptocurrency and your taxes. TurboTax has even announced it will disburse your return in cryptocurrency this year. Am I Eligible to Use Free Tax Filing Services? Most companies whose services we reviewed offer a version that costs nothing to prepare and file your federal taxes, although depending on what types of forms and schedules you need to file, you might not qualify for the free version. All the free options support form 1040 and assume you’ll take the standard deduction. You can record—or import, in some cases—your W-2 and some 1099 data in all of them. Two of the tax services we reviewed are free (or nearly free): Cash App Taxes (formerly Credit Karma Tax) and FreeTaxUSA. Both support all major IRS forms and schedules. Cash App Taxes is the only comprehensive personal tax preparation website that is totally free for both federal and state returns. FreeTaxUSA charges nothing unless you need to file a state return; that costs $14.99. You can also buy enhanced support for $6.99. Other sites have free options, too, but they’re limited in the forms and schedules they support. H&R Block, for example, is very generous in its free offerings among the normally paid services. It supports W-2 income, the Child Tax Credit (CTC), unemployment income, student expenses, and more for free. TaxAct allows retirement income, unemployment, and support for the Earned Income Tax Credit (EITC), in addition to the W-2 and the CTC, but you’ll pay $36.99 per state filed. TurboTax lets you report W-2 income, the EITC, the CTC, student loan interest, and limited interest and dividend income. Using TaxSlayer, you can enter your education expenses, in addition to the W-2 and other topics. Finally, if your income is below a certain threshold or if you’re in the military, you might qualify to use paid software for free. The IRS Free File program allows you to submit your federal (and maybe your state) taxes for free if you’re using one of the commercial tax prep websites supported. You can browse your options here or use the IRS’s Lookup Tool. You must go through the IRS portal to qualify. For more on qualifying to file for free, see E-Filing Your Taxes for Free: Are You Eligible? What About the Self-Employed and Filers With Side Gigs? Whether they were forced to or chose to, individuals continued to take on side gigs or start small businesses in 2021 because of the changing economic landscape. According to data from the US Census Bureau, summarized by Economic Innovation Group, nearly 5.4 million new business applications were filed in 2021, the highest of any year on record. That means a lot of taxpayers will face something they’ve never encountered on their 2021 taxes: the IRS Schedule C. Where do you turn for help with that? Professional tax preparation can be pricey. Online DIY personal tax solutions may be a good option for you, especially if you had a side hustle in 2021 and don’t have a whole lot of income and expenses to report. If you’ve never tried using online tax services, there are three reasons 2022 is a good year to start. First, many changes to US tax laws haven’t made much news because of more pressing topics. Tax websites build these modifications in so you don’t have to keep track of them all. Second, preparing and filing online might reduce your tax obligation, since these sites are trained to dig deep for deductions. Since the services are thorough and guarantee accuracy, they can help you avoid being audited by the IRS, too.
