The FBI is currently investigating the TurboTax hack but isn't saying much. In fact, considering the scope of the Anthem hack and the state tax refund thefts, together affecting tens of millions.
Bottom Line
TurboTax is the top-selling online tax preparation software suite in the U.S. The company offers a wide range of tax services, including the option to file federal and state returns for free, self-employment and business returns, and even the option to work one-on-one with a certified tax expert. With its best in class online products, TurboTax is an affordable place to file your own taxes.
Pros
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TurboTax is owned by Intuit, which is a massive accounting and tax services firm that employs over 9,000 people worldwide. Suffice to say that TurboTax is not your typical mom-and-pop tax accounting firm; Intuit generated nearly $7 billion in revenue in 2019.
This post is going to review everything that TurboTax has to offer, including its range of tax filing options, the pros, and cons of using these services, and more.
TurboTax is well known for advertising-free tax filing services. In fact, this feature is plastered all over their website.
As I’ll explain in this post, the “FREE Guaranteed” slogan is a little misleading. It turns out that there are several different ways that you might wind up having to pay to complete your returns.
But, it depends on your filing requirements and which product you use. Let’s dig in to each:
With the TurboTax Free Edition, simple tax returns can be filed for free. This means that, in theory, you’ll pay $0 to file federal and state taxes.
In reality, there should be a large asterisk next to the word free as you’ll soon see. With that in mind, in order to actually qualify for the free edition, your tax situation must meet the following conditions:
On the other hand, you won’t be able to file for free with TurboTax if your tax situation is affected by any of the following:
To get started on your taxes, click the Start for Free button at the top of the page. Well, wouldn’t you know it: After only one click, they’re already pushing the Deluxe Edition! (for a cool $59.99 to boot!).
Next, you’ll be asked some basic questions in an intuitive online sign-up flow. Then, it’s time to register your account.
TurboTax Deluxe seems to be the company’s top-selling service.
For a yearly $60 $40 fee, deluxe plan owners can take advantage of the following features:
Wait, you want to file your state taxes, too? You’ll have to fork over an extra $44.99 with the Deluxe product.
Customers that have more complicated tax situations—including income from investments, rental properties—may want to opt for the TurboTax Premier plan, which costs $90 $70. The premier plan, which includes all of the features of the Deluxe plan, also supports filing cryptocurrency transaction paperwork.
Once you’ve filed your federal return, it costs $50 $40 to file your state taxes.
If you’re self-employed, surprise! You’ll need to sign up for the TurboTaxSelf-Employed plan. This plan costs $120 $90 for federal returns and $50 $40 for state returns.
The self-employed plan includes easy integration with Quickbooks self-employed accounts and offers a wide range of business-specific tax deductions, including vehicle tax deductions, travel and entertainment expenses, and more. In fact, TurboTax will search for over 450 different types of business-specific deductions to whittle down your tax liability.
What’s more, self-employed tax filers will also enjoy the peace of mind of having their return analyzed for any glaring errors that might increase the risk of an audit.
If you’re an enlisted active duty member of the military or reservist, the TurboTax military discount offers free filing services with any of the TurboTax Online products (Free, Deluxe Premier and Self-Employed editions). This offer is not valid for officers or for any of the TurboTax Live, CD or Download products.
After you enter your W-2, verify your military rank when prompted and your discount will be applied when you’re ready to file.
TurboTax also offers three unique apps designed to help you manage your taxes more effectively.
Using the TurboTax Mobile app, you can process and file your taxes right on your mobile device.
This app has an impressive 4.7-star rating (out of 5) in the App Store, with over 240,000 reviews. Not too shabby!
TaxCaster is a nifty tax calculator app that forecasts your (potential) upcoming tax refund while on the go. The app has a 4.0-star rating (out of 5) on the App Store.
As I briefly mentioned earlier, TurboTax’s ItsDeductible app allows you to keep an accurate record of charitable contributions throughout the year. When it’s time to file your taxes, you can effortlessly import your contribution amounts into your return.
This reduces the chances that you’ll forget about certain donations or make errors on the amounts you’ve donated. ItsDeductible has a near-perfect 4.8-star rating (out of 5) on the App Store. Give it a whirl!
If you’d like the added peace of mind of working with a real tax expert—but without having to leave your home or office—you might want to look into TurboTax Live.
There are two versions of TurboTax Live, which we’ll explore next.
With the TurboTax Live Assist & Review plan, you’ll have unlimited on-screen access to a certified tax expert. That individual can answer any questions you might have and give your return a final review before it’s submitted.
TurboTax Live – Assist & Review pricing is as follows:
As the name suggests, with the TurboTax Live – Full-Service plan, a certified tax expert will prepare and file your taxes for you. Phew!
TurboTax Live – Full-Service pricing plans are as follows:
Intuit was offering CD and software-based tax preparation products long before the days of mobile app-based tax preparation. They still offer some of these services today.
With TurboTax Advantage, you can prepare your taxes on your computer (while not connected to the internet), using the software you’ve downloaded from Intuit.
TurboTax Advantage features are very similar to TurboTax Online, with Deluxe, Premier and Home & Business packages available.
If you’re a member of a business partnership, own a C corp or S corp, or are a part of a multi-member LLC, you may want to opt for TurboTax’s Business plan.
This service—which is only available with a CD or software download—costs $169.99 for federal filing and $54.99 for state filing.
Let’s review some of the most common questions that you might be asking.
For very simple tax situations, TurboTax’s Free Edition will let you file federal and state taxes for free. In many other situations, however, you’ll have to upgrade to a paid plan to file your returns.
Since you’re reading my blog, I hope that you already have some solid financial investments in place. If that’s the case, you probably won’t be able to use TurboTax Free Edition (for the reasons I explained above).
It depends on your personal tax situation. If you have one employer, limited investment income, and don’t have a need to itemize deductions, the Free Edition is probably going to be sufficient.
If you’d like to capitalize on itemized deductions, you may want to upgrade to the Deluxe edition. If you traded cryptocurrency within the last year or own a rental property you collect income from, you might want to upgrade to the Premier plan.
If you’re self-employed or are a member of a multi-member LLC, you may be interested in ponying up for the Self-Employed plan or the Business plan. And if you want to communicate with a certified tax expert, you’ll probably want to consider one of the TurboTax Live plans.
Yes. You have to pay to file your taxes with TurboTax each year—unless you have a simple tax situation and can use the free edition. Further, if you qualify for the Free File program (more on that in a bit), you won’t have to pay.
If you earn under $34,000 per year, you might qualify for the TurboTax Free File program. If you served as active duty military, are filing your taxes with a military-issued W-2 and earned under $66,000, you’ll most likely qualify for the free file program, too.
Finally, if you qualify for the Earned Income Tax Credit, you might qualify for TurboTax Free File.
A quick summary of the benefits and downsides to TurboTax are:
If you’re looking for a one-stop tax shop that can handle almost any type of tax situation, TurboTax is probably a good choice. If you’d like the ability to speak with a real customer support agent or would like the added peace of mind of working with a certified tax expert —and you don’t want to meet someone in person— TurboTax is still probably the right choice.
On the other hand, if you’re looking to save as much money as possible, you might want to look into one of the other free online tax preparation services, such as FreeTaxUSA. Further, if you want to itemize deductions or deduct mortgage interest or property taxes without paying for an online tax filing service, TurboTax likely isn’t for you.
The IRS tax filing deadline of April 15 always seems to sneak up on you. So it certainly makes sense to stay organized and stay ahead of the curve when it comes to filing your taxes online.
If you get things done right, you might be looking at a tax return of several thousand dollars. No matter where you are in your journey to financial independence, that’s a big slice of cash.
After the news of the Anthem hack, this report is really disturbing.
The Salt Lake Tribune:
Fraudsters are using stolen personal information to file fake tax returns for real Utahns, hoping to steal refund money, the Utah State Tax Commission said Thursday.
The commission has identified 28 fraudulent filings so far, but has flagged 8,000 others as potential frauds. It said 18 other states so far have identified similar problems.
[...]
Commission spokesman Charlie Roberts said it found that personal information has been stolen from previous returns filed through TurboTax. He said the commission is not yet sure if other programs and companies were affected, nor if the data was stolen from the cloud or some other means.
TurboTax is a huge enterprise serving millions of individual tax filers. Those most likely to be affected by something like this are the ones who don't have complicated tax returns and are eligible for the Earned Income Tax Credit or other tax refunds.
These security breaches point to the weakness of using Social Security numbers as identity confirmation. With millions of them in the wild, thanks to the hack on Anthem, it's hard to imagine how they serve as a reliable identifier anymore. It's possible that these hacks will serve to drive solutions to identity provenance that doesn't rely on a single number issued by the US government, but it's hard to imagine that happening fast enough to protect those whose identity is currently at risk.
In the meantime, here's some practical advice for you with regard to your tax returns.
I'll post more on this as details become available.
Update: I should have noted in my original post that TurboTax spends millions to lobby for complicated tax returns, because if they were simple, we could just file them directly with the government without the middleman. It appears that they're less diligent about how they guard the data they collect.