Though many small business owners hire tax professionals to fulfill their annual income tax filing obligations, others turn to increasingly efficient tax filing software to file their own taxes for their business or personal tax returns. Though there are numerous tax software 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 that may make one more suitable for your business than the other.
TaxAct Pros and Cons for Small Business
TaxAct offers four specific products, each based on the needs of a specific business entity: Partnerships, S Corps, C Corps, and Sole Proprietorships.
You may notice that LLCs are not on that list. LLCs are either taxed as disregarded entities (the same as sole proprietorships), as corporations or as partnerships depending on the number of members and their elections.
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 1065. For example, if you select the Sole Proprietor option, it will allow you to file the Schedule C and 1040 tax return forms.
Regardless of which product you choose, the current base price is $124.95 for your federal forms, except for sole proprietorships that pay a base rate of $64.95. If you choose to file your state taxes through TaxAct, you will need to pay an additional $54.95 per state filed ($44.95 per state filing for sole proprietorships). If choosing the basic, online filing options, you will not need to pay until it’s time to file.
Not those prices are significantly less expensive than most accounting professionals charge.
Since TaxAct also offers tax software for personal taxes, you can choose a software bundle that includes Form 1040 (for personal returns) along with the appropriate federal tax form for the business such as 1065, 1120-S or 1120, and Form 1041 (for estates and trusts). These bundles currently cost $199.95 and include both business and individual tax software.
Sole proprietors also get TaxAct Xpert Assist included in their purchase of Tax Act Self Employed.
TaxAct also offers TaxAct Express, a mobile app available for iOS and Android that covers TaxAct Self Employed.
With TaxAct, you’ll receive the following:
- Step-by-step guidance for deductions and tax credits
- TaxTutor Guidance with expert tips and strategies
- Free IRS e-filing
- The ability to import the prior year’s tax returns
- Unlimited free support through the Answer Center, or customer support for account and technical support.
- One-on-one support from a tax specialist or technical expert (optional, for a fee)
- Ability to important some accounting software reports via CSV format
- 100% accuracy guarantee
- Access your returns for up to 7 years
- 100% satisfaction guarantee with a 30 day money-back guarantee (until return is accepted by IRS or state tax agency)
TaxAct may not be available in all states. You can check the status of TaxAct state filing capabilities here.
How to Get Started with TaxAct
TaxAct offers both online and downloadable versions of its tax preparation software. It’s free until you get ready to file your return.
Once you sign up you’ll be walked through the steps for setting up your account, including business name, address and phone number, Employer Identification Number (EIN) and date of incorporation (if applicable). If you get a bundle with your personal return, you’ll need to enter similar information for your personal return, including name, address, and Social Security number.
This is not bookkeeping software, so you’ll likely want to import that information from hte accounting software you use, such as Quickbooks, Wave, or Xero.
TaxAct will then walk you through questions to help prepare your federal then answer questions to help prepare your federal tax return. That information can be used to create a state return.
TurboTax Pros and Cons for Small Business
TurboTax has long been recognized as one of the top tax software providers for taxpayers filing personal tax returns. But it also offers both basic and more advanced tax solutions for small business owners. TurboTax is owned by Intuit, the company behind the popular accounting software Quickbooks.
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 use TurboTax Self Employed, which is specifically designed for small business owners who file 1099-MISC and Schedule C forms. It covers both personal and small business income and expenses. The online version currently retails for $119 but is currently on sale for $89.
Live Assisted Self Employed also includes unlimited advice from tax experts. That version is currently priced at $209 and discounted to $169.
If you also want to use TurboTax Self Employed to file state taxes, you’ll pay $54 for each additional state, currently discounted to $39. Live Assisted Self Employed state filings cost $59 per state, currently discounted to $49.
And if you want someone to do it for you, Live Full Service Self-Employed is currently available for $399, discounted to $359, plus $59 per state, currently discounted to $49.
If your business is taxed as an S Corp, C Corp, Partnership, multi-member LLC you will need to purchase TurboTax Business. This version is available as a download or CD and includes free federal e-filing. Though TurboTax Business currently retails for $190 on its website, it is currently on sale for $180. If you want to use it to file state taxes, you will need to add an additional $55 per state, currently discounted to $50.
You can also access TurboTax Live (where a CPA is available for questions) or TurboTax Live Full Service (a CPA does it for you) for additional fees.
You may have heard that TurboTax offers a free version. It does, but not for small businesses. Filers with a simple tax return are eligible for free filing for their federal return with TurboTax Free Edition.
Unfortunately, TurboTax Business is available for Windows only, and is not available for Mac.
If you purchase TurboTax Business, you’ll receive the following benefits:
- Free federal e-filing
- 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
- Maximize tax deductions with step-by-step guidance
- Real estate rental property activities guidance
- 100% accuracy guarantee
While TurboTax offers a maximum refund guarantee (or your money back), it does not apply to TurboTax Business products.
TurboTax offers audit support. If you used TurboTax individual, TurboTax Live Assisted Business, or TurboTax Full Service Business to prepare your 2022 return and you receive an audit letter, you can request one-on-one question-and-answer support with a tax professional. It doesn’t provide representation before the IRS but you will be able to request answers to your questions.
How to Get Started with TurboTax
To get started with TurboTax you’ll create an Intuit account if you don’t have one already.
You’ll then walk through the easy-to-use software to identify tax deductions and prepare for federal filing. If you also need to file a state return, the information from your federal return can be used to prepare the state return.
Note that if you want to import your data from Quickbooks, it only supports data import from QuickBooks Desktop 2020 and higher. (It’s surprising that it doesn’t easily integrate with Quickbooks Online.) And remember that TurboTax is available only for Windows.
TaxAct vs TurboTax: Which Should You Choose?
You may be wondering which of these companies offer the best tax software. Both can help you complete your taxes and maximize deductions, and side-by-side, they share a lot of similarities. And both of these tax prep software programs allow you to submit at least one free federal e-file, provide a 100% accuracy guarantee, and offer the option to upload (compatible) accounting information to improve efficiency.
TaxAct is less expensive than TurboTax, whether you are using the self employed or business versions of the product.
Why pay more if both products provide the same basic info? TurboTax has been long regarded as a very user-friendly option, with customers consistently giving it high reviews for ease of use. Similarly, TurboTax is also credited as offering a higher level of customer support when compared to TaxAct. While TaxAct does provide basic support, the CPAs and enrolled agents (EA) at TurboTax may provide more in-depth guidance.
If you’re looking for 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. You can purchase the Live Assisted or Assisted Full Service Business versions, which may be worth it to make tax season less stressful.
However, if you don’t want extra bells and whistles, understand that some users of TurboTax complain about frequent upsells for other products.
If, on the other hand, you have a relatively simple tax situation and want an affordable business and personal tax preparation software program, you may want to consider TaxAct. The personal and business bundle is more affordable than many options.
If you’re a Mac user, keep in mind that neither TaxAct or TurboTax offers a desktop version for Mac. However, you can use TaxAct’s online version on Mac. TurboTax Business is Windows only.