2020 was a tough year for US taxpayers, and nothing will make filing your return completely painless. Still, our top tax services can help you file accurately and quickly, maximizing your refund and getting it into your bank account faster.
2020 was a year we’re all happy to put behind us. The global COVID-19 pandemic triggered business shutdowns last March and put millions out of work. The economic impact on taxpayers was significant enough that the IRS extended 2019’s filing deadline to July 15. As of this March, the IRS has changed the 2020 tax filing deadline to May 17, with e-filing having opened on February 12. If you intend to wait as long as possible to file your taxes, check out our tax tips for last-minute e-filers. But the tax filing services are open for business now, so you might as well get started! There’s Never Been a Better Time to E-File Your Taxes To their credit, tax preparation services are ready, despite the enormous challenges this year brought. In addition to having many employees suddenly switch to working from home, these companies have had to handle increased business from taxpayers who were used to walking into an office or retail location to get their 1040s completed and filed in person. Some will file manually using mailed-in paper forms they filled out themselves, but many are switching to paying their taxes with an online service such as those reviewed here. If you’ve never tried an online DIY tax solution, this is a good year to start, for three reasons. First, many changes to US tax laws haven’t made the news because of more pressing topics. Second, preparing and filing online might even get you a bigger refund, since these sites are trained to dig deep for deductions to help you get a bigger refund. Finally, tax website developers continue to offer more ways to connect to tax professionals virtually so they can help you complete and file your return—or even take on the entire task for you. We’ve all learned how to do things differently in 2020. So, if you’re still preparing your taxes manually, this might be a good year to move that operation online—especially if you’ve had to turn to self-employment or gig work to deal with a job loss. Every tax website company has at least one version that allows you to complete and file a complex Schedule C. In fact, the 2020 editions support all but the most obscure tax topics. So you can report on your 1099s in addition to W-2s, your unemployment, your new work expenses—practically any tax-related situation you faced this year. If you did do gig work last year, you should read our story, Did You Work for Uber, Lyft, or DoorDash Last Year? Here’s What It Means for Your Taxes. Another development over the past few years is the growing popularity of Bitcoin and other cryptocurrencies. If you’ve used, sold, or exchanged these digital coins in the past tax year, all those activities need to be reported. For more details on how the IRS handles digital currency transactions, check out our guide: Cryptocurrency and Taxes: What You Need to Know. If you’ve felt lost using a web-based tax solution in the past, consider giving it another try this year. Online personal tax preparation websites just keep getting better. The Tax Code Has Changed Significantly As we said earlier, tax law changes have gotten lost in the shuffle this year. But you should know about them since they may well affect you. Tax website developers have built all of these modifications into their online solutions. For instance, standard deduction amounts are different for the 2020 tax year. They’ve actually been increased a bit. If you’re a married couple, the standard deduction is now $24,800. In addition, each spouse 65 or older gets a $1,300 deduction. If you’re single, you can claim a $12,400 standard deduction. You get an $18,650 deduction as head of household plus $1,650 at age 65 or older. Income tax brackets themselves didn’t change for 2020, but the brackets include a broader range of income due to inflation. Long-term capital gains rates stayed the same for 2020, but their income thresholds increased. For example, you now qualify for the 20% rate if you earned more than $441,550 as a single filer. For couples filing jointly, the income threshold is $496,600, and heads of household, $469,050. Most taxpayers will fall into the 0% or 15% range. Some high-income taxpayers will be hit with an additional 3.8% net investment income surtax for both short- and long-term gains. If you don’t itemize deductions on a Schedule A, you can still deduct up to $300 in cash contributions to qualified organizations. Some tax breaks that were slated to expire were extended late last year, including the mortgage insurance premium deduction (with some caveats) and energy-saving credits. At we right this writing, it seems fairly certain that most Americans will be the recipients of another round of stimulus checks. But you still have to account for the payments received earlier in 2020 under the CARES Act. Tax website developers have built in the reporting required. You’ll be asked whether you received an Economic Impact Payment (EIP), which would have been based on your 2018 or 2019 tax return, and what the amount was. If you received less than you qualified for because of a change in your situation in 2020 (such as different filing status or an income increase or decrease), you will receive a Recovery Rebate Credit on your tax return. If you received more, you’re not expected to repay it. There are many other changes, including modifications to the rules concerning retirement plans. Personal tax preparation websites have built these alterations to the tax code into their online products. And to varying degrees, they also explain how you can expect to be affected. Filing Your Taxes Online Is Easier Than Ever Considering the changes that have occurred, what will you find when you log into H&R Block, TaxAct, TurboTax, or any of the other websites whose developers have been planning for the end of January 2021 for many months? If you’ve used a personal tax preparation website 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 this year has made improvements, some more than others. But they’re the usual modifications—user interface tweaks and enhancements to support resources and changes to prices and product lineups. For the most part, this year’s crop of contenders look and work much as they did for the 2019 tax year. What’s going on in the background as your tax data is calculated and rerouted to accommodate the new laws and forms, though, is different.
