The first time I used Freetaxusa, I also filled out TurboTax as usual, and found that with TurboTax I made a mistake that would have cost me well over a thousand dollars in overpayment. I then realized that I had made the same mistake the previous year with TurboTax, so I filed an amended return and was able to get back well over a thousand dollars. Thanks Freetaxusa!
The mistake was user error in entering a backdoor Roth IRA contribution. Freetaxusa makes it easy to enter correctly, and turbotax makes it easy to screw up.
I had a similar experience! At first I thought freetaxusa was too good to be true so I filled out TurboTax as well. When I finished, my freetaxusa refund was larger! Like you, I had made a mistake when using TurboTax.
On form 1040, under “IRA distributions - taxable amount” (box 4b), TurboTax filled in the amount of my IRA conversion. It should have been left blank.
This caused my taxable income to be increased by the amount of the conversion. Not good. My biggest mistake was not being more diligent about looking over form 1040. I feel like it should have been a pretty obvious error.
I despise that “minor clerical error in massively complex tax system with multiple forms causes significant money losing tax implications for your average end user” is even a thing in the first place.
The IRS has actually caught some that I've made, the only time they've ever complained to me has been to send me a larger check. First they send you a scary looking notice that they detected a discrepancy, and you have to agree, but each time it was an error that when fixed improved my refund.
I mean, I obviously agree that the complication in the US tax system is crazy, and also think that every country should do what the UK does in allowing PAYE income taxation (Pay As You Earn - most people in standard jobs have their company take the correct amount of tax from each salary payment and pass it direct to the government, the employee then doesn't even have to file taxes at the end of the year unless they have special circumstances).
But in this specific case of "minor error [...] leads to significant money losing tax implications" - it is really an error that would be possible in absolutely any "fill in your tax info situation", since the mistake they made was writing the wrong number into a "taxable income" field. That mistake can still be made even in a country whose tax system is as simple as "everyone pays X% of their income as tax, and fills in a one-field form where the only question is "what was your income for the year?". (But yeah, a simpler system would mean less opportunity for making simple mistakes, and easier to check if any have been made, for sure.)
I think you just made the point for me, if you have a system like PAYE there’s no room for minor clerical errors for the vast majority of people since there is no opportunity to even make the clerical error in the first place. You just look at the taxes and verify they are right and off to the races. This is how most civilized nations work, except the USA
This mistake was a consequence of the complicated tax system. It involved a complex maneuver (the backdoor Roth) that TurboTax supports but has a bad UX for. Presumably a less complicated tax system would eliminate these kinds of complex maneuvers
I wouldn’t be surprised if I made the same mistakes :S Been so far always using TurboTax, and I distinctly remember the backdoor Roth IRA gave me so much headache.
I used to use TurboTax Free Edition, constantly frustrated with all the dark patterns used to try to trick you into switching to non-free. Eventually I started making too much to use Free Edition, which is right around the time Credit Karma started offering free tax filing, but I hated CK's UI/UX. It made it easy to miss a deduction, and it did once. I used TT to basically "prepare" my taxes, but not actually file so I don't get charged, then prepared with CK and found a discrepancy. I was able to find and fix it and get my full refund.
But then some years ago, someone recommended FreeTaxUSA, and it's great. UI/UX is fine, federal filing is free, and state filing is only $15.
I've been using FreeTaxUSA for a few years now. 10/10 would recommend.
Yeah, but for almost everyone on this forum who makes enough to even file taxes, the time that would be spent re-entering everything is probably more valuable than the $15 charge.
This seems much like an "illusion of choice" situation. Credit Karma and Turbo Tax are both owned by Intuit. (Not that you were fooled by the illusion, just that it stuck out to me.)
These guys are the punchline of the joke that is the 'Intuit lobbies the federal government to make taxes hard' narrative. Free for most people, super cheap for everyone else, and the process is a breeze. It is a direct improvement on all axes compared to mainstream tax software for like 95% of the population.
It's not just a narrative, it was a discrete reality for years and years. Intuit stopped actively lobbying the federal government relatively recently. They did this for a few reasons, not just the smoke and bad PR it was getting them, but also because you can't grow a market that you have essentially captured.
Source: my company got acquired by intu and their new CEO was very and frequently open about their past bad behavior and how it was no longer relevant in today's market.
That is the subtext, yup. They bought us at the height of the pandemic, and I did not leave for another year or so (due to societal instability). They seemed fine to work for but the writing was on the wall.
Allowing the creation of a federal site to do free tax returns seems like it can only lead to the evaporation of their current customers. Who would pay them $150+ when you can just go to irs.gov/taxreturn (or whatever it is) and do it for free?
The lobbying was the only thing preventing that, so the stopping of lobbying seems like it is entirely giving up on the market.
> Allowing the creation of a federal site to do free tax returns seems like it can only lead to the evaporation of their current customers. Who would pay them $150+ when you can just go to irs.gov/taxreturn (or whatever it is) and do it for free?
Again, you keep saying "allow", like they have a choice. They kinda don't. Congress got really pissed at them as did the public.
> The lobbying was the only thing preventing that, so the stopping of lobbying seems like it is entirely giving up on the market.
Honestly, I would say it's not the only thing preventing it. And they're not giving up on the market.
This provides exactly the same service as every $150+ overpriced tax filing product you've ever paid (ie been scammed) for. Highly recommend. Hopefully the new IRS software will make even this obsolete.
I am not sure how to evaluate security of my data across Saas tax web apps, but I am warier of smaller scrapier players on that front having worked at startups.
Their website is not reassuring to a web/database developer like myself who is aware of some of the loopholes, threats (insiders, developers) and protection options (separating db admin from masking admin, etc). They do/claim the very basics and that's about it.
I do appreciate their claim to not resell access to mydata at all. I have no confidence with Intuit when I have repeatedly evaluated their language/claims on that topic.
Can you put in your logins for all your brokerages and investment accounts and it pulls in the tax data automatically? This is hugely important for me since I make a bunch of trades (not enough to be a day trader, but enough to be annoying for tax purposes).
No, but you can enter a few numbers off your 1099-B and mail your trade history to the IRS. It took me about 30 minutes to enter a W-2, a few 1099-INTs, and 3 brokerage statements (plus 1099-DIV, futures, and 1256 contracts).
That’s too complicated and not immediate enough. Manual entering? Printing out and making a packet of trade histories for all my accounts, figuring out what address to send it to, manually going to the post office, waiting for confirmation of receipt weeks down the line, extra scrutiny because an agent has to manually review your paper copies etc. Yeah no thanks, that’s the opposite of super quick and simple. Super quick and simple is entering a couple of logins and clicking next and being done with federal and state taxes in 10 mins.
This is why you can’t take reviews of contentious software at face value. People are so sick of TurboTax (I am too) and their lobbying shenanigans that they will give glowing reviews to deficient competitors.
Yeah, that $150 is totally worth it for me because until the free software automatically integrates with external portals, TT is actually providing a valued service.
You don't have to submit a printout of every single trade... just totals. Like the parent said, it's like 3-4 boxes you fill out/copy-paste from your exchange paperwork.
You do need to be able to provide substantiated figures if you are audited. Which is easy, you print out the paperwork from your exchange...
Not exactly worth paying for that convenience. You can still eFile too.
I am a (fairly) close relative of an employee and a happy user.
Feel free to ask me questions, and I'll pass them onto her!
Also, FreeTaxUSA is not only great for users, but they are fantastic to employees. My relative got to go on a cruise this summer, and she claims their pay has more than kept up with inflation.
I used TT for years and even as a student it was always a hassle and difficult to just use the free service without ending up on a screen that made me pay or redo everything.
Edit: actually, a question. Can we add better 2FA? I know it is a once a year thing, but I'd prefer something better than email or phone number.
It might be too late to change the name, but the name is misleading. As cheap as it is, it is not completely free. I understand needing to make money, but the first thought I had when I saw that it was not in fact free, was, what else are they misleading about.
Please please please support expats. I've never lived in the US, and although I don't technically pay taxes, filling is so expensive that that in of itself is a tax for me.
My relative and I have asked about a name change. They can't see the problem. :( Their marketing is so bad.
I have asked about expats before (I thought about living abroad). She says it is on the roadmap, but it isn't very lucrative, so it is low priority. They do implement new stuff every year, but they only have so much time to fo so.
I barely know anything about taxes but I've heard restructuring an LLC into an S corp can help specific tax situations but you have to have a firm handle it so you can pay out taxes every month instead of only once a year. Is that something FTU can do?
For my part, I have an LLC that is not an S Corp. The reason is that you have to pay yourself a wage, and programmer wages are R&D. I think the rules were changed recently such that R&D can't be fully expensed.
i'm curious: the first time i heard the name FreeTaxUSA.com i thought "it must be a scam", slightly because of the name, until someone else i trust mentioned it and said they used it and i finally looked into it
I wish they shared more info about what the deluxe version includes. I have a small business with very simple operations, but that often precludes me from using other tax filing software. They don't seem to have any info on whether they cover that in any of their versions.
As far as filing and forms, FreeTaxUSA supports EVERYTHING for federal taxes, for free. The $8 deluxe upgrade just gives you live chat and priority support. Pro gives you personal phone support to a tax pro.
I found this out one year because they don't fully support Form 8283, which I needed in order to handle a deduction of a cryptocurrency donation to charity.
But apart from that, they've been great. And your main point is correct in that they don't upcharge for any of their supported forms.
As far as I understand it the deluxe version is basically the “the online help isn’t answering my question and I want to talk to a real person” / “I may need to file amended returns” option. But none of the actual filing functionality is locked behind it. I know none of the simple 1099 self sole proprietor stuff needed deluxe in previous years.
Used FreeTaxUSA for the first time last year and the 1099-B related stuff was even easier than TurboTax. I saved about $120 as well. So glad to be done with TurboTax
Honest question: Why don't more people (especially high earners) go with a CPA firm to take care of their taxes? With the amount of money involved, and the potential legal trouble for getting it wrong, the cost/benefit calculation seems to strongly favor hiring a professional to guide you.
CPAs aren't cheap, and most people's tax situations really aren't that complicated. Even for high earners with lots of investments, it mostly comes down to collecting a bunch of forms and either doing manual data entry or sending the forms to the CPA to do a bunch of data entry. It's not particularly clear that the CPA's work will be more accurate.
In a situation where there's some complex tax issue, absolutely, go with the professional, but for most people, the CPA is mainly there to provide peace of mind.
Also, if you make a good faith effort to pay your taxes correctly, the potential legal trouble for getting it wrong is pretty minimal. You'll need to pay the correct amount plus interest and penalties, but "interest and penalties" are pretty light (effectively 14% simple interest on the amount of the underpayment). And since the IRS doesn't usually take more than a couple of months to say, "hey, you screwed up," interest and penalties usually add up to like 3% of your underpayment.
I went to a tax preparer once in my life. All she did was read the questions from the "Turbo Tax for Professional Tax Preparers" software on her computer. Whenever there was a subject that I wasn't clear about, her "help" was to simply tell me option A and option B and ask me what I wanted to do.
Yeah, I know. That's why I specifically said a preparer and not CPA despite the thread topic.
I just searched the site of the person I used (it's a private family company, not one of those cubicles set up in Walmart) and there's no mention of "CPA" anywhere on their site.
I was happily paying a CPA to do my taxes for maybe 6-7 years. He charged me something like $400/yr, which I thought was very reasonable.
He decided it was time to retire, recommended another accounting firm in my area, and they charged me $750, and all it was was an Intuit frontend where I had to fill everything out myself. I did that one year, then I switched to FreeTaxUSA and was super happy with it.
I probably would go back to an individual CPA if I could find one like the guy I had, but I've been burned by the first CPA and this most recent one. 1/3 isn't a good prior.
Having used four different CPAs in the past to file taxes, I spent far more money to spend about the same time working on it. I was audited three times, have never been audited since using FTU.
If you only have W-2 or 1099 income, taxes are relatively easy if you are comfortable reading forms. It might take 2 hours the first year, but after that it should be a breeze.
For federal income tax, there is also this spreadsheet that is very handy:
If you're in a typical situation (salary, investments), doing your own taxes isn't particularly hard. If you're a freelancer or business owner or you have a lot of weird sources of income, sure, paying an accountant is probably worth it.
It's unlikely the CPA provides any additional liability protection as usually it all flows back to you as being responsible.
If it makes you feel better you can use a CPA once, and then mimic what they did in the years later. The best service they can do is recommend things that may minimize tax or reduce complexity. Note that minimizing tax may not be the best goal, however, especially with investments.
Or you can pay a CPA to do your taxes to feel like a "big boy".
I think the main reason is that most people have very straightforward tax situations, regardless of the amount of money involved. A high earner at a W2 job doesn't necessarily have anything more to report than someone working at a fast food restaurant. The tax brackets are higher but it's really all the same.
Different story if you're self-employed, own a business, or are involved in various types of investments.
The legal trouble for getting it wrong is only if you don't pay what you owe after the IRS sends a correction. Most high income people are sufficiently liquid that this isn't an issue. It's only an issue if you are heavily leveraged and micromanaging cash flow, in which case any large unplanned cost is potentially ruinous.
I contacted a real live accountant a few years ago and was not impressed. I needed help implementing nanny tax for the first time. I wanted a one stop shop that would reduce it to just signatures for me. Instead it was more work than doing it myself and I wasn’t confident in the end result.
For me, I don't always go with a CPA because I've had bad experiences where they've made mistakes or didn't know about some basic things and I still ended up doing a lot of work to gather and pass along the information.
Because single/join income W2s with some retirement accounts, other investments here or there, a mortgage interest deduction and some charitable donations is still low complexity. Bigger number on your W2 is still just a W2.
Cash app let's you file both federal and state taxes for free. It was formally Credit Karma's free tax filing program that was divested after they were acquired by Intuit.
State is $14.99 but each year I find a coupon online for a couple dollars off. Using them for years almost no complaints except for a couple UI tweaks that are relatively minor. Great interface overall.
I've used turbotax for the last decade.
They lure you in with free services for enlisted military or other discounts, then make it feel as annoying as possible to switch.
Realizing how much I've been ripped off now I think this is the year I'm finally going to switch.
Not just that you're ripped off, but they heavily lobby to keep taxes as frustrating as possible so their existence isn't irrelevant. I hate hearing about late stage capitalism, but this is essentially that.
I used to love FreeTaxUSA, but switched because of integrations, specifically Robinhood and such. Does anyone know if they've made that integration or otherwise easier to import said data in the last few years?
Best way to file taxes. I'll usually do this and one or two of the more expensive services just to make sure my numbers line up, and then file with FreeTaxUSA.
Does anyone have a comparison between this and turbotax?
I know there are some ethical issues w/ turbotax but the price relative to
peace of mind is not that big of an issue and the guide-through UI does provide a lot of time savings relative to say filling out the raw forms.
e.g. part of me believes that due to the lobbying etc, returns that come through turbotax have a lower rate of auditing or sth.
You can run your taxes in both (or redo last year's in FTU) and compare.
I think the wording on some of the questions it asks you are slightly different, so it may get a bit of a different answer on some things. Would have to compare to the IRS documents itself to see which is "right".
great and cheap product, I remember using this when I realized I was paying so much for H&R. I don't remember the exact amount but I remember being shocked at seeing how cheap it was (low 2 digits if I recall). pretty easy to use as well. highly recommend for anyone who has just a couple of w2s and maybe a trading account or two.
Weird, it wasn't working in Safari a few days ago - or chrome. Had to login via Firefox.
Now it's working in Safari again.
Seems performant and usable, can't really say TurboTax did much more except be flashy. And now that they closed the sharing loophole, I guess it's time to try a switch.
I might even file state with these guys, usually I would print and mail.
I will probably try to go this route this year. Previous years I was using CreditKarma/Cash, and then before that TurboTax of course. I should probably get an actual accountant.
Does anyone else find this process a little fun? Finding all the opportunities for deductions?
Filling out taxes is kinda fun, but there's really no "finding opportunities" unless your situation changed majorly from the year before. The most useful part I find is digging around a bit and trying to notice things for the year(s) to come.
I've used TurboTax, H&R Block, and TaxAct software in the past, before switching to freetaxusa a few years ago. The major difference is that Freetaxusa isn't constantly trying to upsell you into different products, or starting you out on a "free" tier and then 80% of the way through saying actually, you need the paid version, or you need to pay extra to efile, or something like that.
The dirty secret is TurboTax will tell you to upgrade to Deluxe Professional Premium, but you can just access the forms directly and enter the numbers if you need to.
The mistake was user error in entering a backdoor Roth IRA contribution. Freetaxusa makes it easy to enter correctly, and turbotax makes it easy to screw up.