tl;dr I have a love-hate relationship with TurboTax.
- Jessica
- Mar 29, 2024
- 3 min read
TurboTax is sleek and auto-imports forms, but be ready to pay. I suggest you try other websites like FreeTaxUSA or Cash App if you want to shop around your tax filing fee.
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A letter to TurboTax and anyone who uses online tax software,
I remember when you were on a CD. Every January during my formative years, my dad would wait until the coupons came out and we ventured to Office Max to buy our annual tax software. We even filled out the mail-in rebate forms, because that's what good taxpayers do. How else were we going to fund the Beanie Baby investment strategy I was pitching?
Fast forward, TurboTax is now a sleek website that tricks you for a moment into thinking taxes may be cool. After asking for an EIN and Document number from your annual tax statements, your 1099-B and 1099-DIV are automatically imported (including all those numbers in a tiny font like 199A Dividends or Foreign Tax Credit.)
Just like TurboTax grew up, your taxes just sprouted 3 more forms, and that's going to cost you in software fees. I'd be curious to run a poll: Did you pay any foreign tax this year? Most folks would be surprised to know that their answer is 'Yes' due to their investments in mutual funds or indexed investments.
All of a sudden, now your easy 1040 tax return needs to claim a foreign tax credit, and you feel like a CD in an Airdrop world.
TurboTax fees are a source of moral dilemma for me every tax season. I've seen returns that had 0.59 cents in foreign taxes trigger an $80 add-on to the TurboTax return fee. Also, I hope you didn't pick up that side hustle to crawl out of poverty; this adds a Schedule C and will cost you. TurboTax charges by type of form, and certain "extra" forms bring you to the next level of pricing. I especially find issue with this when the form is the Retirement Savings Credit, which is a tax credit for low-mid-income people who save for retirement via an IRA or 401k. If you are filing this form, chances are good your finances aren't in great shape. And here comes TurboTax, charging you extra.
I get it, I'm a for-profit corporate accountant. On paper, this is a great revenue strategy because you can advertise that a simple federal return is free. To be fair, if you are someone who has a 1040 and applies for the Earned Income Credit (tax credit for the poorest who have jobs), you can file for free (if you're lucky enough to get past all of TurboTax's tricks to get you to upgrade).
It feels like whack-a-mole trying to click through to file without accidentally upgrading. Every third page TurboTax asks, "ARE YOU SURE YOU DON'T WANT TO PAY MORE?" effectively negging you with the words 'audit defense' while filling out your tax return. As If my palms aren't sweating enough, bring up the idea of an IRS audit and see if I want 'protection'. It feels like I'm hiring TurboTax to be my heavy.
God forbid you make a mistake and upgrade; it's going to be a challenge to go back. TurboTax makes you delete your entire return if you want to downgrade.
So why the letter? Because taxes are intimidating, and you simultaneously make it much easier to complete them with your sleek, well-designed software, but then you add a layer of mind games with the constant pop-ups to upgrade.
What is the solution? TurboTax remains the sleekest tax software out there, but it comes at a high and misleading cost. I recommend trying some other websites to calculate your taxes. It may be an adjustment and take more time to input all of your personal details up front, but you may be saving money in the long run by switching software now.
Hot Tip: do your taxes in TurboTax anyway and see what their fee is. Then, do your taxes again in the second software. You know you're right if the tax due/refund on both is the same. Then you can feel confident filing in the cheaper program.
This is not tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction. This is a personal opinion only, and not one representative of any other party's opinions.