Taxes

FreeTaxUSA Review 2021 — Is it Really Free?

Overall Ranking

4.5/5

Overview

Software Usability

5/5

Audit Support

4.5/5

Cost Structure

4/5

Customer Service

3.5/5

A detailed review of FreeTaxUSA, a low cost tax preparation software for both federal and state tax returns. Is it really free? We have the answers.

Editor's Note

You can trust the integrity of our balanced, independent financial advice. We may, however, receive compensation from the issuers of some products mentioned in this article. Opinions are the author's alone. This content has not been provided by, reviewed, approved or endorsed by any advertiser, unless otherwise noted below.

FreeTaxUSA is an online tax preparation website that enables you to prepare, print, and e-file your taxes for free. At least that’s true in regards to filing your Federal income tax return. This appears to be a pretty solid, if not spectacular, online tax preparation software.

Let’s take a closer look in this FreeTaxUSA review.

Who and What is FreeTaxUSA?

The company is owned by TaxHawk, Inc. It started in 2001 and was founded by a CPA and a team of professional software developers. The company is an original member of the IRS Free File Alliance and an authorized IRS e-file provider. It has securely filed millions of federal tax returns with the IRS.

Each year a team of tax analysts update the software to incorporate the most recent changes in federal and state tax codes. When the software is updated, it goes through rigorous testing and an approval process with both the IRS and each state.

The site claims that it grows by promoting itself mostly by word-of-mouth. Filers keep coming back since there are no charges for the roll-over of prior year tax data. In addition, the pricing is straightforward and has no hidden fees.

Still another advantage is that FreeTaxUSA has only two versions—Free and Deluxe. This is in contrast to other popular tax preparation software companies that typically have four, five, or even more versions. Filers may find the higher number of versions and their associated add-on fees to be both confusing and intimidating. None of that exists with FreeTaxUSA.

FreeTaxUSA Advantages

Here are the basic benefits of using FreeTaxUSA to prepare and e-file your income tax returns.

Even Complicated Tax Situations Are Covered By Both Editions

With competing tax preparation tax software programs, you usually have to buy a premium version in order to handle self-employment (Schedule C), rental real estate (Schedule E), capital gains transactions (Schedule D), and the various types of K-1 related income sources. But FreeTaxUSA can handle all of those on both the Free and Deluxe editions.

Unlike with most of the other major players in the tax software game, the forms you can access with FreeTaxUSA don't vary by version. The upgraded version is all about additional support rather than additional forms. This means you can likely get all the tax forms you need filed through the free option.

Free Support

Based on my review, I would say that FreeTaxUSA provides limited direct customer support.

You can search for support topics on the Customer Support page or take advantage of the customer support email feature. If you pay for the Deluxe Edition, you can also get free support through chat or see if the answer to your question is in the Q&A database.

Accuracy Guaranteed

Like other online tax preparation software programs, FreeTaxUSA guarantees the accuracy of their tax calculations. They will pay the interest and penalties if you’re assessed by the IRS due to a calculation error in their software.

Audit Assist

The Deluxe version of FreeTaxUSA provides Audit Assist, which gives access to audit specialists who can answer your questions should you be subject to an IRS audit. It also lets you access the Audit Center, which is a database of information you might find helpful during the audit process.

The Audit Assist tool is much more limited than those provided by more expensive providers. According to FreeTaxUSA's disclaimer, Audit Assist doesn't cover state returns, and it doesn't give you a representative who will correspond directly with the IRS. You'll still have to do the work, but the experts will help you craft responses to the IRS, know what records to gather, and help you know what steps to take next.

FreeTaxUSA provides what I think would best be termed limited audit protection through their Audit Assist feature. This service is available only if you purchase the Deluxe Edition.

Related: I Was Audited By the IRS!

They give you access to the FreeTaxUSA Audit Center, as well as with audit specialists who can answer your specific questions. The Audit Center provides information such as to how to respond to the specific IRS notice that you receive, as well as information on how to respond to either an IRS letter or an IRS audit.

Other tax preparation softwares provide more audit representation, but for a much steeper price. If you go through an audit, you may still need to hire a representative. However, if you're at low risk for an audit, paying an extra $6.99 to access this feature could give you some peace of mind.

FreeTaxUSA Security

FreeTaxUSA is an authorized IRS e-file provider. They encrypt your personal information on their site. In addition, they conduct security and privacy verifications through Truste, Norton, and SecurityMetrics.

Online Backup and Account Rollover

FreeTaxUSA will back up your completed returns online, even with the free version. The free version will also automatically carry last year's information over to your current year's taxes if you use the software two years in a row.

Even if you didn't file with FreeTaxUSA last year, you may be able to import some of your tax information from another service. This year, the software rolled out a new feature that allows for a PDF import of your prior year's tax returns.

I tried the PDF import option when checking out this year's software. It was simple to use and smoothly uploaded my personal information and previous employer information. This definitely saves some time.

Cheap State Returns

As with many tax preparation software services, you'll have to pay extra to e-file your state tax return. This isn't uncommon. But the price of filing state returns with FreeTaxUSA is relatively low. You'll only have to pay $14.99 to file your state returns based on your federal tax return information and additional information you provide this year.

Interface and Ease of Use

The interface for FreeTaxUSA is less fancy than that of some other, more expensive softwares. It has the same basic features, though, including a tracker for your estimated refund as you go and tabs for the various portions of your return.

Unlike with some other software options, FreeTaxUSA won't allow you to bounce ahead of the process. You'll have to go in order, though once you enter some information in a section, you can go back to a previous section to make changes or additions. Notice from the screenshot above, I cannot select anything other than "Personal" until that section is completed.

This isn't a big deal as long as you plan to file your taxes all at once. If you're like me, though, you may prefer to put in each form as you receive it. You'd have a much harder time doing this efficiently with FreeTaxUSA. But at least you wouldn't miss any sections on your taxes.

FreeTaxUSA Disadvantages

FreeTaxUSA does not advertise itself as being all things to all people. Here is a list of the tax situations that they don’t support, taken directly from their website:

  • Foreign employment income (Form 2555)
  • Nonresident alien returns (Form 1040NR)
  • Customers or preparers living outside the United States when they file their taxes
  • At-risk limitations (Form 6198)
  • Archer MSAs (Form 8853)
  • Casualty or theft gain or loss for business or income producing property
  • Donations of high value property over $5,000 such as collectibles, equipment, or real estate*

For what it’s worth, I give the company a lot of credit for publishing a list of the tax situations that they don’t support.

Limited Customer Support

With the free version of this software, you can email support, or get your question answered in the online forum. If you upgrade to the Deluxe version, you'll get access to online chat support.

Pay to Amend

Many of FreeTaxUSA's additional services cost extra, though the costs are small. You'll have to pay extra to correct a mistake or omission on your tax return if you go through the Free version. In fact, you'll have to pay $14.99 for unlimited amendments if you file using the Free version. However, if you filed originally under the Deluxe version, you'll get unlimited amendments for free.

Pros and Cons

  • Free Federal / Cheap State Returns

  • Audit Assist Available

  • Quick and Easy Software


  • Not All Tax Situations Available

  • Limited Customer Service Options

Resource: What to Do If You Make a Mistake on Your Taxes

FreeTaxUSA Pricing

FreeTaxUSA comes in two editions, Free and Deluxe:

Free Edition

Like the free version of just about any service, free has its limits, even with FreeTaxUSA. Free extends to the following services:

  • Federal Tax Return
  • E-file Service
  • Account Information Roll Over
  • Printing of Tax Return
  • Online Backup of Completed Returns
  • Complex Tax Filing
  • Federal Tax Extension

There are, however, charges for certain functions. To start, there is a $14.99 charge for state filing and preparation. There is no additional charge for state e-filing, but the $14.99 fee is per state, so you can multiply that charge by the number of states you need to file taxes in.

Some other services that come with a fee on the free version:

  1. Amended Tax Return - $14.99
  2. Professionally Printed Tax Return -$6.99
  3. Printed & Bound Tax Return - $12.99

We can presume that the last two features might be desirable if you needed to present your tax returns for business or borrowing purposes. But it’s unlikely that they are anything you’d need to have in the normal course.

Related: The Most Common Tax Deductions—What You Need to Know

One more thing: the Audit Assist function is only available on the Deluxe Edition. If your return is fairly simple and straightforward, this feature may not be necessary. But if there is a reasonable likelihood of facing an audit, you may do well to spring for the extra $6.99 and trade up to the Deluxe Edition. (Though given the limited scope of this service, I'd take it a step farther and say that you'll be better off with a different online service entirely if this is the case.)

Deluxe Edition

The base price of the Deluxe Edition is $6.99, and it includes all of the services of the Free Edition, plus a few more. And just as is the case with the Free Edition, there is a charge of $14.99 per state return.

The Amended Tax Return—which you have to pay extra for with the Free Edition—is included in the Deluxe Edition. The Audit Assist feature and priority customer support are also included in the base fee with the Deluxe Edition.

Other than the per state charge, the only additional fees on the Deluxe Edition are the Professionally Printed Tax Return ($6.99) and the Printed & Bound Tax Return ($12.99) features. And again, you’ll probably only want these for presentation purposes, but probably don’t need them at all.

While the idea of getting tax software for free is always appealing, you’ll still be looking at a cost of $14.99 for the Free Edition if you have to file taxes in your state. The Deluxe Edition base price is only $6.99, and it includes the services you’d have to pay extra for with the Free Edition.

With a difference of just $6.99—which is more than reasonable for the services provided—I think you’d be much better off paying for the Deluxe Edition. That way, you can avoid add-ons for other services you may want or need.

Note: Prices are up-to-date as of April 29, 2020.

Bottom Line

Overall, FreeTaxUSA is a decent online tax preparation software package, and the price is certainly one of the best in the field. Just be aware of the programs limitations, such as the lack of phone support, the limited nature of audit assistance, and the tax situations that it doesn’t support.

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