TurboTax charging me to file with a simple 401K and low income - any alternatives?

So I had a small 401K in 2023 that automatically closed after I stopped my contributions. I'm filing as single, only made about $17,500 this year, and I've always used TurboTax since 2020. Everything was free until last year when I had to pay a little because of the 401K situation. But now I'm absolutely shocked that TurboTax is trying to charge me $128 just to file my taxes! That's nearly 1/3 of my expected refund! I don't understand what changed or why it costs so much now. Is this normal or am I missing something? Has anyone else experienced this? Are there better/cheaper alternatives for someone with a simple tax situation like mine? I've never filed anywhere else, but this feels ridiculous for my simple return. Any advice would be appreciated!

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18 comments

Destiny Bryant

•8M

This is unfortunately pretty common with TurboTax. They've been gradually reducing their free filing options over the years, and having a 401K distribution often kicks you into their "Deluxe" tier which isn't free. Since you have a relatively straightforward situation, you have several better options: FreeTaxUSA is probably your best bet - they charge $0 for federal filing and only about $15 for state. With your income level, you should qualify for the IRS Free File program through several providers. You can check eligibility at irs.gov/freefile. Cash App Taxes (formerly Credit Karma Tax) is completely free for both federal and state for most situations including 401K distributions. Also consider the IRS's Direct File program which is being tested in certain states this year - it's completely free and handles simple returns with retirement income. Don't pay TurboTax $128 for what should be a straightforward return!

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Destiny Bryant

•8M

FreeTaxUSA is definitely user-friendly, though it's a bit more basic looking than TurboTax. The interface is straightforward and guides you through everything step by step, so it's hard to make mistakes. As for importing previous TurboTax returns, you won't be able to directly import the data. You'll need to manually enter your information, but you can reference your previous year's return while doing so. It takes a little more time initially, but the savings are well worth it for most people.

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TillyCombatwarrior

•8M

I went through the EXACT same thing with TurboTax last year! I was so frustrated watching that price creep up with every screen. After years of filing free, suddenly they wanted $119 from me because of a tiny 401k rollover. I ended up discovering taxr.ai (https://taxr.ai) and it completely changed my tax filing experience. They have this AI tool that can actually look at your tax documents and help figure out the best way to file. I uploaded my W-2 and 401k distribution form, and not only did it help me find the right free filing option for my situation, but it also found a deduction TurboTax had completely missed! My refund ended up being $230 higher than what TurboTax had calculated. Definitely worth checking out before you commit to paying those crazy TurboTax fees.

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TillyCombatwarrior

•8M

It definitely handles complicated situations. The AI analyzes your specific documents and tax situation to recommend the best approach. I have a friend with a rental property and some freelance income who used it successfully - it found specific deductions related to his side business that he'd been missing for years. Taxr.ai isn't a filing service itself - it's more like having a tax expert look over your documents before you file. It analyzes your forms, identifies potential deductions or credits you qualify for, and then recommends the best (usually free) filing option for your specific situation. In my case, it found a education credit related to some professional development courses I took that I didn't realize qualified. TurboTax never prompted me about those expenses.

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Jungleboo Soletrain

•8M

Just wanted to follow up after trying taxr.ai based on the recommendation here. I was super skeptical at first, but I uploaded my W-2, 1099-R from my 401k distribution, and some other documents. Within minutes, it explained exactly why TurboTax was charging me (the retirement distribution triggers their paid tier) and suggested using Cash App Taxes instead. The best part? It found that I qualified for the Saver's Credit since I had contributed to my 401k earlier in the year before stopping. I had no idea this existed! My refund went from $380 with TurboTax to $480 with Cash App Taxes using the guidance from taxr.ai. Just filed yesterday and already got my federal acceptance confirmation. Saved $128 in fees and got an extra $100 in my refund. Can't believe I almost paid TurboTax all that money!

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Rajan Walker

•8M

If you're having issues with getting your refund after filing or need to talk to the IRS about your 401k distribution being reported correctly, good luck actually reaching anyone! I spent WEEKS trying to get through to the IRS last year about a similar situation. Their hold times are insane - I literally waited 3+ hours multiple times only to get disconnected. I finally found this service called Claimyr (https://claimyr.com) that actually gets you through to an IRS agent. They somehow hold your place in line so you don't have to sit there listening to that awful hold music. There's a demo video at https://youtu.be/_kiP6q8DX5c showing how it works. After weeks of frustration, I got connected to an actual IRS agent in under 45 minutes. They sorted out my 401k distribution reporting issue and I finally got my refund. Worth every penny for the stress it saved me.

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Rajan Walker

•8M

The IRS phone system is automated at first, but Claimyr navigates through all those initial menu options for you and then holds your place in the queue. It's basically an advanced call system that waits on hold so you don't have to, then alerts you when an actual agent picks up. I was totally skeptical at first too! But it's definitely not a scam. They don't replace the IRS process - they just make it so you don't have to waste hours on hold. When an actual IRS agent picks up, you're connected directly to them and have a normal IRS call. The service just eliminates the ridiculous wait time part. I wasted 10+ hours trying it the normal way before using Claimyr and getting through in under an hour.

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Lukas Fitzgerald

•8M

I need to eat my words from my earlier comment. After trying to reach the IRS for THREE DAYS about my 401k distribution that TurboTax kept flagging weirdly, I gave in and tried Claimyr. I was 100% convinced it was going to be a scam, but I was desperate. Submitted my call through their website, got a call back when my place in line was coming up, and was talking to an actual IRS agent about 35 minutes later. The agent confirmed my 401k reporting was correct and that I could file with the basic forms. Just filed with FreeTaxUSA instead of TurboTax and saved over $100. Plus the IRS confirmation gave me peace of mind. Never been happier to be wrong about something!

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