Though many small business owners turn to tax professionals to fulfill their yearly IRS obligations, others are turning to increasingly efficient tax preparation software. Though there are numerous options available, TaxAct and TurboTax remain two of the most popular options.
Both of these programs offer the basic tools you’ll need to complete your taxes. There are, however, a few significant differences between the two, the nature of which may make one more suitable than the other.
TaxAct offers four specific products, each based on the needs of a specific business entity: S Corps, C Corps, Partnerships, and Sole Proprietorships. By selecting the correct entity, you’ll gain access to the basic filing forms required for that business structure: 1120, 1120S, 1040, Schedule C, and 1965. For example, if you own a single-member LLC, you can select the Sole Proprietor option, which will allow you to file the Schedule C and 1040 tax return forms.
Regardless of which product you choose, you can expect to pay a base price of $59.99 for your federal forms. If you choose to file your state taxes through TaxAct, you will need to pay an additional $39.99. If choosing the basic, online filing options, you will not need to pay until it’s time to file.
Software bundles are also available for business owners who need to file 1065, 1120S, or 1120 forms. These bundles $200 and include both business and individual tax software. However, at this time, software downloads are not compatible with iOS, which can be problematic for Mac users.
By using TaxAct, you’ll receive the following:
- Step-by-step guidance
- Free IRS e-filing (Up t 5 returns with the purchase of a bundle)
- The ability to import the prior year’s tax returns
- Access to the Answer Center
- One-on-one support from a tax specialist or technical expert (only after payment)
- Ability to important some accounting software reports via CSV format
- 100% accuracy guarantee
- Access your returns for up to 7 years
- 100% satisfaction guarantee
TurboTax has long been recognized as one of the top tax software providers, and they offer both basic and more advance tax solutions for small business owners. Though the company provides tax solutions for various business entities, your structure will determine which product is best.
If you are self-employed, a contractor, or a freelancer, then you can take advantage of TurboTax Self Employed, which is specifically designed for small business owners who file 1099-MISC and Schedule C forms. The online version retails for $119.99 but is currently on sale for $89.99. If you want to file your state taxes, it will run you an additional $39.99.
If, however, you are an S Corp, C Corp, or Partnership, then you will need to purchase TurboTax Business. This version is available as a download or CD and includes up to five free federal e-files. Though TurboTax Business typically retails for $169.99, it is currently on sale for $159.99. If you want to use it to file state taxes, you will need to add an addition $49.99 per state.
Unfortunately, like TaxAct, TurboTax Business software is not available for Mac users.
If you purchase TurboTax Business, you’ll receive the following benefits:
- Free federal e-filing for up to five returns
- Option to import information directly from QuickBooks Desktop.
- Guidance while entering income and expenses; new businesses can access extra guidance.
- Option to import last year’s TurboTax return
- Error checks throughout each step of the process
- Ability to create unlimited W-2, 1099-MISC, 1099-INT, and 1099-DIV employee forms
- Prepare income tax returns for multiple businesses
- Real estate rental property activities guidance
- 100% accuracy guarantee
TaxAct vs TurboTax: Which should you choose?
Both of these tax preparation options can help you complete your taxes and maximize deductions, and side-by-side, they share a lot of similarities. Both allow you to submit at least one federal e-file for free, provide a 100% accuracy guarantee, and offer the option to upload accounting information to improve efficiency.
At a $59.99 price point regardless of business structure, TaxAct is the more affordable options. This is particularly true if you are filing taxes for an S Corp, C Corp, or Partnership since filing with TurboTax will require the purchase of TurboTax Business at $159.99. And, while it’s true that the TaxAct Bundle will run $200, it also includes personal federal tax filing options
Why pay more if both products provide the same basic info? TurboTax has been long regarded as the more user-friendly option, with customers consistently note an easy-to-use and intuitive experience. Similarly, TurboTax is also credited as offer a higher level of customer support when compared to TaxAct. While TaxAct does provide basic support, the CPAs and enrolled agents (EA) at TurboTax often provide more in-depth guidance.
If you’re looking step-by-step hand holding, which isn’t always a bad thing when it comes to the complexity of taxes, then TurboTax may be your better option. If, on the other hand, you don’t have a lot of questions and just want an affordable tax preparation option with a few frills, then you may want to consider TaxAct.