Tax Form. Photo by Nataliya Vaitkevich.

We’ve verified that TaxAct’s downloadable 2020 tax preparation software ($20) won't allow a very basic return to be printed or filed if it contains a 1099-G form, and instead insists on a $30 upcharge to proceed. The 1099-G form is primarily used for reporting unemployment income and many family and medical leave payments.

The TaxAct online website product seems to allow unemployment income within its free tier. It’s not clear why the downloadable software does not offer something similar, especially since there is no free tier for the downloadable software. This brings the total filing cost to $50 – a 150% increase – for an otherwise basic return. TaxAct did not respond to email questions sent earlier this week asking about this discrepancy.

Okanogan County has many rural residents that have poor or even no internet access at all at their home. Having a downloadable tax preparation product that such residents can download onto a thumb-drive at a public library or work and then take home to complete on their own computer seems to be a good option to still have available.

Due to many state governors implementing pandemic shutdowns in 2020, many more people fell into the unemployed category at some point last year. If these filers received unemployment benefits, they would be further penalized if they chose TaxAct’s downloadable software to prepare and file their taxes. How many felt forced into just paying the surprise upgrade fee, instead of trying to redo their return with some other method of preparation?

TaxAct is not in good company with such consumer tax software pricing decisions. Intuit, maker of TurboTax software, has been caught directing and pushing low-income users who qualify for free tax filing into their commercial software and springing upgrade fees on them. ProPublica looked at their behavior in some depth in their article “Here’s How TurboTax Just Tricked You Into Paying to File Your Taxes”.

Further, Intuit was also widely criticized in 2015 for “repositioning” its TurboTax Deluxe and Premium software tiers, removing support for many schedules which had been historically included, resulting in surprise upgrade charges for customers who needed those schedules.

It appears that H&R Block’s Basic downloadable tax preparation software (currently $15 for download at Amazon) is an alternative that won’t cost filers extra for unemployment status.

The IRS 2020 filing deadline for individuals has been automatically extended to May 17th, without penalties and interest, regardless of the amount owed.

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