Tech Support: Best software for tax prep

Yahoo Finance's Dan Howley breaks down the best software for tax prep in this week's Tech Support.

Video transcript

AKIKO FUJITA: We've got just over a month to go until the tax deadline. And if you've been procrastinating your filings, like I have, there's plenty of help on the way. Let's bring in Yahoo Finance's Dan Howley, who is here to walk us through the best software to use for your tax filings. I guess if you don't have an accountant, you're probably scrambling right now to find the best way.

DAN HOWLEY: Yeah, Akiko, I've done my taxes. I'm very proud to say that. And I did it using tax software. Now, I tried originally two years ago doing all of this by hand, and I was off by tens of thousands of dollars. So unless you have some kind of incredibly difficult tax situation, your best bet is to just go ahead and skip any professionals, go for some of these free software offerings. And these are the few that I think really are the best.

We have, first, H&R Block. Now obviously you probably know H&R Block through their commercials that you see run ad nauseum during this time of year. But they do have a good number of offerings in their free software version. So you'll be able to get free individual federal and state filings. You can file for earned income tax credit. And importantly, if you're a student, it does include student loan deductions. Now, not every piece of tax software includes that for free.

The downside, though, is that if you're a homeowner, you're not going to get any mortgage interest or property tax deductions. And you can't do itemized deductions. So, those are some of the downsides. And if you do need to do any of those, you're going to end up having to pay $49 for H&R Block Deluxe and then an additional $44 for each state that you add. So once you get out of this free range, that's when the prices start piling up.

Now, the one that I tend to use is TurboTax. And the free version of that offers your free individual federal and state filings. It includes filing for unemployment income. And you can file for earned income tax credit. The downside, though, is if you're a student, there's no student loan deductions. There's no mortgage interest or property tax deductions. And you can't do itemized deductions. And that's something that you'll see across the board with these free offerings. There's going to be no itemized deductions. And that's just kind of a pain in the way it really works.

If you do have to jump over to that paid tier, you're going to end up shelling out 60 bucks for the deluxe version. And then there's going to be $50 for each additional state. I just do the deluxe version because I'm terrified of going to prison. So I constantly want some kind of tax professional on the line to be able to help me out there. I don't have complicated taxes, but I fear going to jail for taxes for some ridiculous reason.

And then, finally, the free version that I want to talk about is TaxSlayer. You may not have heard of this. It's one of the more niche ones. But it does offer the same benefits of H&R Block with those free individual federal and state filings, the income-- sorry, the interest for student loan deductions, as well as the ability to file for unemployment income. You don't get property tax or mortgage interest. You can't use itemized deductions. And one of the interesting things here is if you earn more than $100,000 a year, you're not going to be able to use the free version. They're just going to knock you off that and make you pay the $24 for the classic version and then the $39 for each individual state that you put on there.

Finally, what none of these companies want you to know about is the fact that the IRS offers this for free as well. And they actually team up with these programs. What they do is they have an IRS free filing. You jump into the IRS website-- I'll have a link for that in my article-- and then you can choose which among the different programs that they offer that you want to use.

Now there are some limitations depending on how much you earn, your age, the states that you live in, but there are ways for lower earners to be able to get free tax filing without having to go through any of these other software options out there that tend to try to push you to pay for what they have to offer. So if you haven't filed yet, you still have a month. Today would normally be the 15th, tax day. But since you get that extra month, check out some of these software offerings. And hopefully filing your taxes is a lot easier this year.

ZACK GUZMAN: All right, Dan Howley bringing us the best tax tips there to avoid mistakes and jail time-- always important as well.