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As I mentioned in the first post of this series where I dissected TurboTax, a great option for individuals without a business over filling out the tax forms directly is to employ one of the many low-cost online tax preparation platforms available on the market.
Because of the wide spread use of these three platforms, I think it’s important for people to have a good working knowledge about what they offer. However, in my experience helping people with their taxes, the primary thing that my friends get confused about is what these programs offer for free, and what is it you have to pay for. More specifically, I find that they often end up paying for one of the service upgrades being offered, when in fact, their taxes were actually simple enough that they could have just used the free versions.
So, the purpose of this post series is to dissect each of these 3 most popular programs one-by-one to determine what they offer, what is free, and what you need to pay for. Since we combed through TurboTax’s online program in the first post of the series, we will now focus on another key player, H&R Block.
H&R Block Online – Overview
H&R Block’s online tax preparation platform (sometimes referred to as H&R Block at Home) is a spin-off from H&R Block’s long-standing retail tax preparation business (11,000 offices throughout the US – wild!). Without a doubt, if you live in the United States, it’s hard to NOT see an H&R Block office in your town.
H&R Block Online Options and Pricing
Shown below is the overall pricing for the various options on offer by H&R Block that pops up when you first visit their website. In my opinion, as was the case with TurboTax, this table shows a nice overview of the options and is pretty self explanatory/clear for normal folks like us. There are four things that I want to make sure to point out though:
- You don’t actually pay for anything until you officially click “file taxes.” This means you can go through the system and fill in your tax information without worrying about accidentally paying for anything until the very end of the process.
- The prices in bold shown in the below screenshot are only the pricing for filing your federal tax return. What this means is that you will have to pay an extra fee on top of the ones shown in the chart below because you are required by law to file state taxes. Don’t be surprised by this!
- According to H&R Block’s State Tax filing pricing, it costs $28-$35 (price depends on current promos going on) per state to file your state taxes.
- What this means is that the state tax filing is perhaps where H&R Block makes most of its money…..?
- One of the nice little perks about the paid versions of H&R Block is that they will automatically save and import your previous year’s tax information to the current year. They will also auto-populate your employer details based on solely their EIN. Nice things to have, but maybe not necessarily worth paying for if you are pressed for money..
- Finally, it’s a little confusing in reading the chart below, but if you have a self-employment business/income (including farm business) to report, the only option available through H&R Block is the $50 Premium version (please note, this is not necessarily the same thing as merely having a 1099-MISC from some random side income you did – more on this will be discussed below in the Income section).
So, as I mentioned above, this chart is pretty straight-forward and easy to understand. However, the place where it gets confusing and people with simple taxes end up paying for un-needed service add-ons is DURING the process of filing out your tax information as you are going through the various steps in the system.
Because of this, I feel we need to spend some time discussing places where potential mistakes could occur, causing someone that started their tax filing using the Free Edition (far left above) to end up unnecessarily using the Deluxe (middle, “most popular”) version. This happens quite often, in my opinion, because at almost every step of the way, the questions prompt you to upgrade to one of the paid options.
First, right off the bat, if you are searching around the H&R Block website to determine more about which pricing package to choose, you see this screen:
Now, I’m not sure what your reaction to this screen above is, but at first glance to a person that doesn’t spend a lot of time critically evaluating personal finance programs, it seems like if you choose the Free Edition, you potentially won’t get ANY DEDUCTIONS ON YOUR TAXES.
However, this simply is not the case. You can still get many deductions owed to you by using the free edition. So, my suggestion would be that people simply ignore this table and click the “get started using the Free edition button” if that was what you think is right for you at this point.
What is Free and What Must You Pay for Regarding Income?
Having dodged that landmine, you then proceed to set up your H&R Block account, enter your identifying personal information, and the next section you will come to is where you enter any income you had for the relevant tax year.
I was very pleasantly surprised with H&R Block’s version of the income section of their tax preparation platform. On the main page of the income section (shown below), they very clearly spell out in catchy red text what types of income entries require you to upgrade to a paid version of their platform and was does not.
As can be seen in the screenshot above, below is a summary of what you must pay for and what is included in the Free Edition of H&R Block:
- Included in Free Edition
- Wages from regular employment (includes scholarship/fellowship income).
- 1099-INT and 1099-DIV.
- 1099-MISC income, provided that it is not regular/self employment income.
- If you have a 1099-B (sale of taxable securities), it does actually require you to upgrade to a paid version to continue with that section.
- If you have income from rental properties or self-employment, it does actually require you to upgrade to the $50 Premium version to continue with that section.
What is Free and What Must You Pay for Regarding Deductions?
In the deductions section of H&R Block, they also make it very clear to discern what is included in the Federal Free Edition and what you must pay for. In fact, it’s so simple because there ARE NO PAID UPGRADE REQUIREMENTS when it comes to deductions. Pretty sweet, right?!
That’s right, all of the deductions I inspected (shown on screenshots below) are actually included in the Federal Free Edition.
Just to drive this point home, all of the deductions listed below are in fact included in H&R Block’s Federal Free edition.
- Home loan interest paid.
- Car / property tax.
- Student loan interest paid.
- Medical/HSA contributions.
- Job-related moving expenses.
- Estimates taxes paid (as long as they are not for self employment income).
- Charity donations.
In my opinion, H&R Block offers a super-reliable, AMAZINGLY easy-to-use online tax preparation platform that is hard to go wrong with. Even if your tax situation dictates that you have to use one of their paid options, I would consider it money well spent, and likely, a significant tax savings over the use of live tax professional. I also like the fact that their platform does not try to “trick” you in to spending money that isn’t necessary with upgrades; they seem to legitimately want to help you get through your taxes effectively. They are also pretty inexpensive according to market prices for tax prep help.
I sincerely hope this post helps you to understand not only a little more about what features H&R Block offers, but to also help you determine what level of services/pricing you actually need to use in their platform to accommodate your personal tax situation.
In Part 3 of this series, we’ll take a look at Tax Act’s online tax preparation platform – on the way soon!
How about you all? How about you all? Have you ever used H&R Block’s online platform to do your taxes? If so, how did you like it? Did you ever find yourself paying for a upgrade to the online service when you really didn’t need it?
Share your experiences by commenting below!