As if filing a tax return isn’t stressful enough, some taxpayers say they’re getting bombarded with pop-up notifications on tax preparation programs urging them to spend more, and getting hit with unexpected fees at the end of the process when they’re ready to hit the send button on their returns.
Tax Day is less than a month away (April 17), and some taxpayers have taken to online forums such as Reddit or tax software providers’ websites, to complain about being overcharged. Their biggest gripe? They don’t know all the fees they’re being charged until after they input all their data and are preparing to officially file.
TurboTax INTU, -2.84% users have complained on the review website Consumer Affairs that they racked up so many fees using TurboTax, their tax prep cost as much as it would have if they had used an accountant or other tax professional. One complaint, posted earlier this month, said the deluxe version he bought included one state return, but when he went to file he was charged an extra $39.99 for refund processing fees.
“If you put the purchase price and the hidden fee together, you may as well ask a pro to do your taxes for you for around $200 and not waste a Sunday afternoon,” he said. Another user pointed out that once you sign up for a paid product — like extra help with a tricky question on your return or itemizing your return even if you don’t need it — to your TurboTax account, you can’t opt out of it (unless you start the process over).
Numerous users have complained about being charged an additional $40 for taking the cost of the program out of their refund. “Practically every other page is an offer for an upgrade and is designed in such a way as to make you search around for the button that says ‘no I don’t want this,’” another user remarked.
See: The shocking things Americans don’t know about filing their taxes
The companies say the process is transparent. “TurboTax offers additional benefits that customers can choose to take advantage of as they prepare their taxes,” said Ashley McMahon, senior manager of corporate communications at TurboTax. “These are optional services which provide added value to those customers that want it.” The company declined to address the individual complaints.
Taxpayers have also complained about extra fees from other software providers, such as TaxAct and H&R Block. Some TaxAct users complained fees have risen dramatically, or that there are extra fees tacked on their bill for various tax forms, such as if the taxpayer has a Health Savings Account or if they file a Schedule C.
Some H&R Block users said they paid for services that included additional help from a professional, but couldn’t access it, as well as higher fees. TaxAct did not respond to a request for comment. A H&R Block spokeswoman said clients see line items of their expenses in their shopping cart before they pay.
Here are some tips to avoid upselling:
Is ‘audit defense’ worth it?
Tax preparation programs sometimes try to sell users audit defense support for an extra fee, but that’s only necessary in certain cases. The IRS likely won’t audit you for a simple tax return, and looks out for bigger cases and red flags (such as claiming a loss from a hobby and withdrawing from a retirement account early). “If you feel your tax situation makes an audit likelier, it’s probably best to consult with a professional than rely on the services provided by a tax preparation software service,” said Janet Alvarez, a personal finance expert at WiseBread.com.
Luckily, you can deduct these fees
Keep in mind, fees for tax preparation and tax filing are fully deductible, so keep track of those expenses, she said. It doesn’t necessarily mean you’ll see the money back, unless your itemized deductions overshadow the standard deduction.
Also see: Beware, the IRS is looking for these red flags this tax season
Be alert about state return fees
There are instances where taxpayers may have to pay an additional fee to submit their state returns, as well as for the service of using this software. Some software providers may say state filing is free, but that’s only for the program calculating the returns, and not for the actual processing that the state charges.
There are some programs that offer free state filing. TurboTax’s Freedom edition requires the taxpayer have an annual adjusted gross income of $33,000 or less). H&R Block has a similar service for those with an AGI of $66,000 or less and who are between 17 and 50 years old, were an active duty military member or qualified for the Earned Income Tax Credit. The Internal Revenue Service has FreeFile for filing federal taxes for free if income is below $66,000. Otherwise, people can send paper returns to the IRS for free.
Shop around for the best deal
Compare the additional features with each software package. “It’s important to understand your specific tax-filing requirements and shop around for software that meets — but doesn’t exceed — those needs,” Alvarez said. TurboTax Deluxe calculates mortgage and property tax deductions while TurboTax Premier also covers investment income and rental property deductions, for example. “For example, don’t choose a deluxe version of tax preparation software if the more basic version will suffice.”