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Free vs. paid tax services: When to plan on paying for an upgrade

Filing your taxes on your own can be free or cost you upwards of $100. Here's an analysis on whether it's worthwhile to pay for a premium plan or not.

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Filing taxes on your own can save you time and money compared to the back-and-forth of working with an accountant. However, you may still need to pay a fee to file both your federal and state tax returns.

There are free filing options, but those are typically limited to simple tax returns and lack the added benefits of a paid plan.

Consumers who have more complex tax situations, like income from self-employment or earnings from investments, will need to pay to use a tax filing program that supports those forms. And even if you don't have a detailed tax situation, you may want to upgrade to include live support from tax experts.

Before you pay for a premium tax software program, consider what free and paid options have to offer. Then decide which option fits your needs.

Free tax software

Free tax filing programs allow you to submit simple returns at no cost. You need to meet certain requirements in order to qualify for free filing. Each tax software defines simple tax returns differently, but a simple return is a basic 1040 form, which generally includes W-2 and unemployment income, limited interest and dividend income and standard deductions.

Check out if you qualify for a simple tax return.

All of CNBC Select’s best tax software programs allow eligible users to file a simple tax return for free. The one exception is TaxAct, which costs $39.95 per state return, but nothing for a simple federal tax return.

Here are your free tax filing options:

Paid tax software

If you’re self-employed or a freelancer, you won't receive a W-2 and will need to upgrade to a paid plan that supports more tax forms and schedules beyond a basic 1040. For example, self-employed people need a plan that supports Schedule SE. Freelancers need to file a Schedule C, which accounts for freelance income and expenses found on a 1099 form (which acts like a freelancer's W-2).

And even if you earn W-2 income, you may still need to upgrade to a paid plan that includes certain schedules, like Schedule B, interest and ordinary dividends, or Schedule D, capital gains and losses, for earnings from the sale of your home, car, stocks and bonds.

Overall, paid tax software may be less of a choice and more of a requirement for your tax situation. However, you may also want to pay extra to benefit from enhanced features that can include help from a tax professional.

We reviewed deluxe, premium and self-employed tax filing plans and found that costs are as low as $11.05 for federal filing, plus a minimum of $4.95 per state.

Here are the tax filing options for paid plans (click View More to see the price breakdown by plan):

TurboTax

On TurboTax's secure site
  • Cost

    Costs may vary depending on the plan selected - see breakdown by plan in the description below

  • Free version

    Yes

  • Mobile app

    Yes

  • Live support

    Yes, costs extra

  • Better Business Bureau rating

    A+

Terms apply, see below for our methodology.

Pros

  • Step-by-step guidance with a Q&A format that is easy to follow
  • TurboTax Live provides on-demand advice and a final review from a tax expert or CPA
  • Live Full Service has a tax expert prepare, sign, and file your return
  • Accuracy and maximum refund guaranteed*
  • Audit support, which provides free assistance if you get an IRS or other tax notice

Cons

  • More costly than other software programs
  • Live expert assistance plans have additional costs

Cost breakdown by plan:

  • Free (for simple returns** only): $0 federal, $0 per state
  • Deluxe (helps you maximize credits and deductions): $39* federal, $39* per state
  • Premier (includes returns with investments and expenses): $69* federal, $39* per state
  • Self-employed (for personal and business income and expenses): $89* federal, $39* per state
  • Live Basic (includes help from tax experts): for a limited time, $0* federal, state included - simple tax returns only; must file by 3/31
  • Live Deluxe (includes help from tax experts): $119* federal, $49* per state
  • Live Premier (includes help from tax experts): $169* federal, $49* per state
  • Live self-employed (includes help from tax experts): $199* federal, $49* per state
  • Full Service Live Basic (includes help from tax experts): for a limited time, $0* federal, state included - simple tax returns only; must file by 2/15
  • Full Service Live Deluxe (includes help from tax experts): $249* federal, $49* per state
  • Full Service Live Premier (includes help from tax experts): $359* federal, $49* per state
  • Full Service Live self-employed (includes help from tax experts): $389* federal, $49* per state

*Click here for TurboTax offer details and disclosures

**A simple tax return is Form 1040 only.

H&R Block

On H&R Block's secure site
  • Cost

    $0 to $194.99 federal, $0 to $49.99 per state (see breakdown by plan below)

  • Free version

    Yes

  • Mobile app

    Yes

  • Live support

    Yes, costs extra

  • Better Business Bureau rating

    A+

Terms apply, see below for our methodology.

Pros

  • Simple step-by-step guidance that's easy to follow
  • Unlimited on-demand chat or video support with Online Assist plans
  • Ability to speak to a tax expert who has an average of 10 years experience (costs extra)
  • Over 11,000 physical locations so you can meet with a tax expert in-person
  • Maximum refund guarantee, or H&R Block will refund the plan fees you paid
  • Audit support guarantee, which provides free assistance if you get an IRS or other tax notice
  • 100% accuracy, or H&R Block will reimburse you for any penalties or interest up to $10,000

Cons

  • Plans that include speaking with a live tax expert start at $69.99 for federal, plus additional state fee
  • One of the more costly software programs

Cost breakdown by plan:

  • Free (for simple returns): $0 federal, $0 per state
  • Deluxe (helps you maximize credits and deductions): $39.99 federal, $44.99 per state
  • Premium (includes returns with investments and expenses): $55.99 federal, $44.99 per state
  • Self-employed (for personal and business income and expenses): $87.99 federal, $44.99 per state
  • Online Assist Basic (includes help from tax experts): $69.99 federal, $39.99 per state
  • Online Assist Deluxe (includes help from tax experts): $109.99 federal, $49.99 per state
  • Online Assist Premium (includes help from tax experts): $159.99 federal, $49.99 per state
  • Online Assist Self-employed (includes help from tax experts): $194.99 federal, $49.99 per state

TaxSlayer

On TaxSlayer's secure site
  • Cost

    Costs may vary depending on the plan selected - see breakdown by plan in the description below

  • Free version

    Yes

  • Mobile app

    Yes

  • Tax expert support

    Yes, costs extra

  • Better Business Bureau rating

    A+

Terms apply, see below for our methodology.

Pros

  • Cheaper plans, making this a more affordable choice if you don't have a simple return and need to upgrade
  • Low state filing fees
  • One-on-one support from real tax experts with Ask a Tax Pro (select plans only)
  • 100% accuracy, or TaxSlayer will reimburse you for any penalties or interest charges
  • Maximum refund guarantee, or TaxSlayer will refund the plan fees you paid
  • IRS inquiry and audit support guarantee with select plans

Cons

  • Experts are only available on Premium and Self-Employed plans

Cost breakdown by plan:

For a limited time, use code SLAYIT35 for 35% off your federal e-file.*

Simply Free (for simple returns): $0 federal, $0 per state

Classic (for any tax situation):

35% off Classic - Was: $17.95 Now: $11.67. Includes all forms + free phone & email support

Premium (includes priority phone and email support, live chat and help from a tax expert):

35% off Premium - Was: $37.95 Now: $24.67. Includes all forms + live chat support, Ask a Tax Pro, front-of-the-line assistance

Self-employed (for personal and business income and expenses):

35% off Self-Employed - Was: $47.95 Now: $31.17. Includes all forms + access to a tax pro with self-employed expertise

*Offer is valid on federal tax returns only, e-filed by April 18th, 2022, at 11:59 p.m. EST. Offer not applicable to state tax return or additional products. Promotion code must be entered at checkout. Offer may not be combined with any other promotions, discounts, or offers. Offer is non-transferable and is not applicable to previous purchases.

TaxAct

On TaxAct's secure site
  • Cost

    $0 to $160.96 federal, $39.95 to $54.95 per state (see breakdown by plan below)

  • Free version

    Yes

  • Mobile app

    Yes

  • Tax expert support

    Yes, costs extra

  • Better Business Bureau rating

    A+

Terms apply, see below for our methodology.

Pros

  • Up to $100,000 accuracy guarantee, which reimburses you for IRS/state penalty or interest if the TaxAct software causes a calculation error in your return
  • More affordable than other paid software
  • One-on-one support from real tax experts (costs extra)
  • Maximum refund and 100% accuracy guarantee, or TaxAct will refund the plan fees you paid and pay any difference in the refund or tax liability, plus cover any legal or audit costs up to $100,000

Cons

  • Free plan charges per state return
  • Xpert help plans cost at least $35 more for federal

Cost breakdown by plan:

  • Free (only covers simple returns): $0 federal, $39.95 per state
  • Deluxe (helps you maximize credits and deductions): $38.36 federal, $54.95 per state
  • Premier (includes returns with investments and expenses): $57.56 federal, $54.95 per state
  • Self-employed (for personal and business income and expenses): $75.96 federal, $54.95 per state
  • Xpert Help Free (includes help from tax experts): $70.00 federal, $39.95 per state
  • Xpert Help Deluxe (includes help from tax experts): $93.36 federal, $54.95 per state
  • Xpert Help Premier (includes help from tax experts): $127.56 federal, $54.95 per state
  • Xpert Help Self-employed (includes help from tax experts): $160.96 federal, $54.95 per state

Bottom line: Should you pay to file your taxes?

Ultimately, paying to file your taxes may not be entirely up to you. There are many situations, like income from freelancing or a home sale, that require you to upgrade to a premium plan. If you don’t qualify for a simple tax return, choose the most affordable plan that fits your filing needs.

And even if you qualify for a simple return, you may want to pay for a premium service, so you can maximize deductions, benefit from live support and maybe even have a tax professional review your return before you file.

Our methodology

To determine which tax software offers the best way to file your taxes online, CNBC Select analyzed 12 programs. We compared each program on a range of features, including:

  • Cost
  • User experience
  • Expert tax assistance
  • Accuracy and maximum refund guarantee
  • Better Business Bureau (BBB) rating
  • Customer reviews, when available

Cost was one of the most important factors. While many of these services offer free versions, many people have complicated finances that require them to pay to file their taxes. We evaluated the price per plan and weighed the features you receive, like the ability to maximize deductions and credits. The more bang for your buck, the higher a service ranked.

Whether you're new to filing taxes or a seasoned pro, user experience is crucial to filling out and submitting your return quickly and with little frustration. The services we chose had to be relatively user friendly.

The ability to speak with a tax expert or support representative was a big plus. Four out of five of the best tax software offered some form of support.

And if a service supported consumers with a generous accuracy and maximum refund guarantee, it was ranked higher.

We also considered the Better Business Bureau rating associated with the software. BBB ratings help determine whether a business is operating responsibly and if it helps to resolve customer complaints in a timely manner. Customer reviews were also taken into consideration.

After reviewing the above features, we sorted our recommendations by best for overall tax filing, runner-up, free tax software, most affordable and best accuracy guarantee.

The federal and state filing fees for the software programs mentioned above are subject to change without notice. Many programs don't charge you until you file, so there's a chance the fees can change from the time you start your return until you submit it.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.