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Tax Preparation Software: Compare the Best Online Tax Preparation

Published 2/10/09 (Modified 6/17/11)
By MoneyBlueBook

Review Of TurboTax and TaxCut Online Tax Preparation Software

According to some news statistics, more than half of all Americans hire a professional tax preparer to file their taxes. In this day and age, those kinds of stats frankly surprise me. I would have thought by now that the vast majority of Americans would have finally embraced the benefits of online tax preparation and the added cost saving advantages of utilizing do-it-yourself tax software products. Chalk it up to the continuous complexity of our marginal tax bracket system with all of its intricate income tax deductions and tax credit varieties or blame it on the tendency of people in general to outsource their financial responsibilities - but many people still stubbornly prefer to depend on professional tax experts to take care of their annual income tax filing obligations instead of doing it themselves.

For many people, filing income taxes is a painful, expensive, and dreaded task - but it really doesn't have to be. While I'm not suggesting the filing of one's income taxes will ever become an enjoyable experience (that will never happen), there are mitigating ways to make the process much more bearable. In the past, when April 15 tax day drew near, the only way to avoid having to flip open the bulky U.S. tax code or pour over the volumes of tax regulations and detailed tax commentaries, was to go out and pay $200-300 for an overpaid accountant or professional tax preparer to fill out the appropriate tax forms for you. But now, with the availability of very affordable discount tax preparation packages from major tax software developers like Intuit and H&R Block, and the prevalence of user-friendly and comparatively lower cost online tax preparation solutions like TurboTax, TaxCut, and TaxAct - preparing and filing your own simple tax returns without the pricey services of an overrated accountant is a very realistic option. With the help of top of the line tax preparation websites and software, filing your own taxes can be an easy and affordable experience. For those that qualify, there are even ways to file taxes online for free.

File Your Own Taxes With The Help Of Online Tax Software and Save Money

The process of preparing one's own taxes, even with the assistance of highly automated tax software and online tax preparation programs, is a highly educational and financially empowering experience. In this age of advanced computer software and electronic E-filing via the Internet, there is little need to fiddle with paper income tax forms anymore. Unless your tax return involves complex business tax issues that require a tax lawyer's legal advice, most ordinary returns can be prepared by the taxpayer without professional supervision or assistance.

Those that insist on hiring a local third party tax preparation expert to do the brunt of their taxes for them may be surprised to learn that many of these so-called tax experts frequently rely on the same tax preparation software tools to do your taxes that are freely available to you as well. As someone who attended law school with subsequent experience working as a volunteer tax preparer for low income people, I've witnessed this first hand in many cases. Oftentimes, when you hire a tax professional to prepare your taxes for you, all you are doing is paying a lot of unnecessary money for some lowly entry level tax preparation agent to perform simple data entry into a completely automated tax software program.

So instead of shelling out $300-400 for what often amounts to nothing more than glorified data entry, why not strive to perform this simple task yourself? The reality is that the vast majority of income tax returns do not require the expensive services of an accountant or tax lawyer to prepare - most can be performed efficiently and accurately from the privacy of your own home.

Comparing The 2009 Online Tax Preparation Software Versions Of Intuit's TurboTax and H&R Block's TaxCut For Tax Year 2008

The tax preparation market is filled with hundreds of choices as competition for your business is very stiff. However, sitting at the very top are two of the most established and expertly developed online tax software products - online and desktop brands that have withstood the test of time and consumer review scrutiny - Intuit's Turbo Tax and H&R Block's TaxCut. Together, TurboTax and TaxCut enjoy the biggest market share among consumers looking for an affordable online and software driven tax preparation alternative to hiring an expensive tax professional. While TurboTax is the preferred choice for most people, with TaxCut being a close runner up second, they are very similar and both offer the same primary benefit - the ability to do your own taxes, conveniently, accurately, and affordably.

TurboTax and TaxCut are similar in so many ways that consumers frequently get the two confused and can't decide which of the two popular tax preparation software packages offers the best tax preparation deal. Overall, you can't go wrong with either one of the 2009 versions of Turbo Tax or TaxCut for tax year 2008 as both products have already gone through a tremendous amount of research and development, and subjected to numerous product testing upgrades. Both tax software products offer all of the tax filing features you'll need to generate accurate returns and file your taxes electronically without hassle. Both TurboTax and TaxCut also feature top notch user-friendly designs that walk you through the income tax preparation process, without requiring you to deal with the the complexity of income tax law. With the ability to automatically save your carryover tax information for future year's tax returns as needed, it's important to pick a favorite online tax preparation brand and stick with it as you'll likely end up going with the same online tax preparation company again year after year, due to brand familiarity.

While I highly advocate taking advantage of online TurboTax or online TaxCut for your tax preparation needs, there are still those who shun the Internet in favor of the less identity theft-prone traditional desktop software versions. The biggest difference between filing your taxes online vs. software used on your computer - is who holds your personal confidential data. Do you trust Intuit (the maker of TurboTax) and H&R Block (the maker of TaxCut) with all of the details of your life and personal finances? If you think their websites and databases are 100% safe from data theft, then stick with the more versatile and convenient online route - otherwise, buy the desktop software versions. Personally, I overwhelmingly prefer going with the online option as I have full confidence in the abilities of these reputable software makers to keep my online information safe and secure. Both products have been around for many years and both are run by legitimate companies with tremendous financial and professional backing. Besides, the ability to archive info online and import your prior year's tax data automatically onto the following year's tax forms as needed is an extremely convenient and invaluable bonus for me. Importing the previous year's tax data automatically cuts down on data entry mistakes and gives a tax reference point during the interview questions for the current year's tax return. Both TurboTax and TaxCut also offer support for importing data from other financial software packages such as Quicken 2009, QuickBooks, as well as Microsoft Money.

In terms of features, both TurboTax and TaxCut were designed with tax newbies in mind as both software tools provide a significant amount of hand holding and pre-chewing. For the benefit of tax beginners, both programs walk you through the various tax topics using a very easy to understand interview process, breaking complicated tax topics such as tax deductions, sole proprietor income, and capital gains income into more manageable bite-size steps. Having used both TurboTax and TaxCut before, the experience with filing your online taxes with either one can be likened to an actual question and answer interview with a live tax preparation expert. As the online program moves you along subject by subject, your various answers to its direct questions will cause relevant numbers to be automatically dropped into the correct fields on your tax form as required. Both Turbo Tax and Tax Cut also feature a handy federal and state income tax refund counter display that cycles up and down as you proceed along the tax interview process, updating you on where you stand refund-wise at all times. Stumped by a particular tax issue or want to get into the nitty gritty about a particular tax subject? Both TaxCut and TurboTax feature helpful tax explanation tabs throughout the entire tax preparation process for those that want to learn more about the relevant tax regulations behind the interview questions.

When you've completed the step by step consumer friendly tax interview, both Turbo Tax and Tax Cut offer a free error checking feature that scans your completed tax return for potential tax errors or possible accounting issues that may trigger a tax audit flag (such as clerical mistakes like indicating a stock purchase or sale on a government holiday when the stock markets were closed). Having an automated system effortlessly scan your tax return for mathematical and preparation errors beats having to double check your own tax numbers manually if you were doing things by hand. Both tax software programs also offer audit risk assessments and provide a comparison of your tax numbers to the U.S. averages, an interesting feature for those who like to know where they stand in relation to the population at large.

The bottom line is that both Tax Cut and Turbo Tax crunched out the same exact tax refunds when supplied with identical information, based on my own tests of both programs. Both tax preparation software algorithms proved to be highly accurate and very user friendly. Most of the slight differences between the two programs are primarily graphically based and center around how the respective websites lay out their tax interview content. TurboTax gets a slight edge in this department as it's a bit easier to get started with and get going for the first time user of online tax preparation software, but the differences in comparison to TaxCut are rather minimal.

Both TaxCut and Turbo Tax come in separate online basic and premium business editions, with TurboTax differentiating its editions by taxpayer-type, and TaxCut differentiating its editions by the level of tax advisor support desired. Cost-wise, TurboTax is the more expensive tax application between the two top choices, but in my opinion, its online program is a bit more well put together and performs sleeker than its biggest competitor, TaxCut.��If you are a new beginner to online tax preparation programs, I'd recommend trying out online TurboTax over HnR Block's online TaxCut software due to TurboTax's slightly more user friendly and more graphically intuitive website interface. However, both are equally capable of helping you prepare and file your taxes accurately without breaking the bank.

Review Of Intuit TurboTax Online 2008

TurboTax Online Edition
Price
TurboTax Free Edition (Federal Only) Free
TurboTax Free Edition (Federal + State) $25.95
TurboTax Deluxe (Federal Only) $29.95
TurboTax Deluxe (Federal + State) $64.90
TurboTax Premier (Federal Only) $49.95
TurboTax Premier (Federal + State) $84.90
TurboTax Home & Business (Federal Only) $74.95
TurboTax Home & Business (Federal + State) $109.90
TurboTax Business (Federal Only) $109.95
TurboTax Business (Federal + State) $159.90

Compared to H&R Block's TaxCut, Intuit's TurboTax program offers a slightly more graphically pleasing and informatively complete tax preparation experience. TurboTax also offers greater in depth tax explanations and extra hand-holding guidance as you work your way through its tax interview process. Where TurboTax really shines however is in the area of automated data importation. Unlike HR Block TaxCut, TurboTax allows you to import tax data and payroll information directly from employers who use ADP, PayChex, or ProBusiness, which according to software maker Intuit, covers more than half of all U.S. employers. This is not a feature that is currently supported by TaxCut. While not an absolute deal breaker for those who like TaxCut, it is a pretty significant bonus in favor of TurboTax, at least in my opinion. A search through web reviews will also review a nearly unanimous agreement that TurboTax is indeed an overall better online product than TaxCut, if only by the slimmest of margins. At least one reviewer, PC Magazine, has selected TurboTax 2008 as its editor's choice as the number one online tax service provider for 2009.

TurboTax 2008 comes in a multitude of editions including the free edition, the deluxe edition, the premier edition, the home & business edition, and the feature-filled business edition for corporations, partnerships, and limited liability companies (LLC). I recommend taking a look at the provided TurboTax price comparison chart to find the right tax package for you.

  • TurboTax 2008 Free Edition - Intuit's free online tax preparation package is appropriate for those with simple 1040 EZ tax returns. While the federal edition is indeed free, the state portion will cost extra.
  • TurboTax 2008 Deluxe - Most popular version - used by the vast majority of people. It's targeted at those in the middle ground with some degree of tax complexity, such as those who own a home, have made donations, or have some medical expenses to deduct. Best of all for returning customers, this version permits data transfer from the prior year's return.
  • TurboTax 2008 Premier - This TurboTax version helps you with maximizing deductions and is specially suited for those who own stocks, bonds, mutual funds, and most notably, rental properties.
  • Turbo Tax 2008 Home & Business - Specially geared towards the income tax and deduction complexities of sole proprietors, consultants, independent contractors, and single owner LLC businesses.
  • TurboTax 2008 Business - This package is the most full service complete version, designed for those who run a corporation, a partnership, or a multi-member LLC business.

Price-wise, TurboTax is more expensive than TaxCut, but I think the higher quality cost is worth the higher comparative price - which is why I use TurboTax to handle the bulk of my online tax preparation needs. As a heavy user of Quicken 2009 and Quicken Online products, I prefer sticking by the same software maker who designed these products as I anticipate greater future cross compatibility some day.

Review Of H&R Block TaxCut Online 2008

H&R Block TaxCut Online Edition
Price
TaxCut Free Edition + E-file (Federal Only) Free
TaxCut Free Edition + E-file (Federal + State) $29.95
TaxCut Basic + E-file (Federal Only) $19.95
TaxCut Basic + E-file (Federal + State) $49.90
TaxCut Premium + E-file (Federal Only) $39.95
TaxCut Premium + E-file (Federal + State) $69.90
TaxCut Signature + E-file (Federal Only) $79.95
TaxCut Signature + E-file (Federal + State) $109.90
TaxCut Online Office + E-file (Federal Only) $99.95
TaxCut Online Office + E-file (Federal + State) $129.90

Brought to us by the popular U.S. tax preparation chain, H&R Block's TaxCut is a worthy online tax preparation alternative to TurboTax. TaxCut offers a highly similar user-friendly tax preparation experience as TurboTax with the same hand holding help and customer friendly explanations during the entire tax preparation process. However, TaxCut's biggest selling point perhaps is its lower product cost and online editions geared towards providing extra live tax adviser support. Tax Cut product editions are generally a bit cheaper compared to their TurboTax edition counterparts but they offer nearly the same features, including data importation functions and the ability to automatically download data from prior tax returns into the current year's tax forms. One of the only significant features offered by TurboTax that's not provided in TaxCut is the ability to import 1099, 1098, or W-2 tax data automatically from a database of employers without resorting to manual data entry. This is certainly a very convenient feature offered by TurboTax not available in TaxCut, but one has to wonder if this online perk is worth TurboTax's much higher comparative price.

While on the whole, TaxCut's online interface, online tax descriptions, and help search features are not as aesthetically pretty or extensive as that offered by TurboTax, these rather mild and slight drawbacks do not detract from the fact that H&R Block's TaxCut program is a very user-friendly and accurate online tax preparation tool. Those wanting more extensive live tax advisor support from a real person may want to consider H&R Block's TaxCut program over TurboTax, as TaxCut is backed by a greater network of actual brick and mortar tax preparation branches.

TaxCut's various editions are broken down based on the level of customer and live tax advisor support desired - ranging from 1 free included session of tax advice, to unlimited support from a live tax professional agent from one of H&R Block's many tax preparation offices.

  • TaxCut 2008 Free Edition - The Free edition is the most basic online TaxCut package - best suited for those with simple 1080EZ tax returns. While this product supports most income tax forms, you will get very little guidance or assistance in filling them out.
  • TaxCut 2008 Basic - The Basic version supports the same tax forms as the Free edition but with this edition, you can transfer data from past TaxCut tax returns and even import data from rival TurboTax.
  • TaxCut 2008 Premium - The Premium TaxCut version offers the same features as the Basic level edition, except it also throws in an "Ask a Tax Adviser" session with a live H&R Block tax preparation professional. This edition is recommended for most taxpayers as it offers the option to ask a live agent a more complex tax question for free should the need arise.
  • TaxCut 2008 Signature - With the nearly full service TaxCut Signature edition, you will get all of the tax preparation assistance you'll need in the form of unlimited tax advice from an actual H&R Block professional who will not only personally review and edit, but also sign and e-file your return for you.
  • TaxCut 2008 Online Office - With this complete full-service tax preparation edition from H&R Block, the company will do all of the tax preparation work for you. If your income tax return or financial situation is pretty complex, this edition may be recommended.

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22 Responses to “Tax Preparation Software | Online Tax Preparation | Money Blue Book” 

  1. Wise Finish says:

    This is a great review, thanks for posting it!

    I was a huge TurboTax fan, but there are some things that surprised me with this year's edition, specifically with the state portion. I just wrote a pretty lengthy review of TurboTax 2008 on my site, so I won't repeat it all here.

    As always, caveat emptor!

  2. Jim W says:

    Good Review of TurboTax and TaxCut Raymond. I personally use TurboTax - while pricier a bit compared to TaxCut, it's a prettier online tax software program and more polished. TaxCut isn't bad, but it's just not as well put together...but only by a slim margin

  3. Screwed by Turbotax says:

    They made mistakes with Total payments & the Refund which was fixed by IRS
    Turbotax made a $708.00 BuBu

  4. Daniel says:

    TurboTax jumped prices in the middle of my filing. They quoted me $75.99 for the Home and Business Edition, but then charged me $99.95 at checkout, AFTER I DID ALL THE WORK!!! I called customer service and they said I had gotten an email notice of the price increase. Apparently it's seasonal (as if the tax season isn't season enough, apparently March 28 is the date of the price increase.)

    I don't know about the rest of you, but I get over 300 emails a day, 280 of which is spam. If they were going to go up on prices, the least they could do was make a notice on the website stating as much, with a little warning.

  5. nolosoft says:

    Do you mind have a look at TradeMax? A full featured tax software specifically designed for active investors or traders who have multiple accounts to manage their trade data, maximize their gain/loss strategy, prepare their Schedule D.
    TradeMax® debuts innovative new tools that enable active investors or traders to effortlessly manage all their trades across various accounts.With customizable Vista® style "Views". TradeMax® delivers important investment account information right to the desktop, without the need to access Internet. Users can manage their trade data, maximize their gain/loss strategy, prepare their Schedule D. It can import trade data from all kinds of formats files, monitor realized/unrealized gains &losses for current positions, adjust wash sales events, report capital gains/losses in printed Schedule D format or export to popular tax software such as TaxCut®, TurboTax®. All TradeMax® products are available today at nolosoft.com.

  6. Richard says:

    I think it's BS that you have to pay to import last years' data. I did my taxes online last year using TaxCut and they want me to pay them $20 just to import the data. What a scam.

  7. Raymond says:

    Richard,

    It's all about the art of the upsell. Tax preparation and tax filing companies offer free tax services in the hopes of leading customers towards the path of paid services. It's not really a scam...more of a promotional tactic. They offer you an irresistible tasty carrot and eventually gently nudge you towards the more expensive tax packages.

    But regardless, I think the major tax software programs of Turbo Tax and H&R Block TaxCut are pretty top notch and this is not even a real sales pitch. I really don't know how I'd be filing my taxes cheaply and efficienty without programs that these. I still remember the horrendous and mistake prone days of filling out tax forms by hand....the horror...

  8. Roger says:

    Seems that Turbo began to divide up portions that were previously part of the deluxe package and offer them as upgrades for $40.. Even though more polished and prettier, it doesn't seem to work as seamlessly as "Tax Edge" back in the 80's before Go-Daddy's founder sold to Intuit....
    I will switch to another program that offers as much as the Turbo "home and business" at half the price with unlimited preparations and pay extra to efile as soon as someone puts it on the market....instant mega-business, anyone?

  9. Michelle says:

    I wish I'd come here 1st...or not waited until the last possible minute to do my taxes. I just dropped $100 at the TurboTax website for the pleasure of using their "free" software. So mad I could spit.

  10. Raymond says:

    Early bird gets the early worm deals....I have a habit of always searching only for promotional codes and discount coupons before I sign up for any online service. Search for TurboTax codes or TaxCut deals online and you'll find lots of money saving offers. Never pay full price is my life motto.

  11. amol paithankar says:

    hi this is amol.i have work in USA in march-may 2008 in the mc donalds corporation.my social security number is 771-70-8562.thanks,give the imediete reply...

  12. Reply to Amol says:

    amol - if that's who you are - if your message was supposed to be a joke it wasn't funny! if it wasn't supposed to be a joke, i'm speechless.

  13. Koby says:

    Thanks for providing grids that detail federal pricing and then federal + state pricing. It helps consumers compare the products of TurboTax and H&R Block more appropriately.

  14. MaryK says:

    Turbotax online is not giving me the option of importing my data from 2009 desktop version. Does anyone know why?

  15. Yoni says:

    Does anyone know if you might get a bigger refund if they went to a pro tax preparer rather than doing it themseves with turbotax?

  16. Tess says:

    Yoni,
    I have experienced 'professional' preparers, who made errors and caused a back payment notice from the IRS.
    So I went with an accounting firm. They never made errors. They told me about tax savings. BUT every year they seemed to increase their prep fee by $100. I realized all they were doing was plugging in the financial figures into their computer. I was doing the bulk of the work, busting my butt to compile those figures.
    So I bought turbotax. The program had many of the same tax savings ideas as the accountant, was hundreds of dollars cheaper than the accountant's fees, and I could work on it at my leisure (no stress over whether the accountant would finish my taxes if I didn't get stuff to him early).
    Downside: tech support is not helpful (they don't know the program any better than you do), the windows are not easy to navigate, and last year the program crashed as I was saving the file. The program wrote over the file with a blank one, and I had to file an extension and redo my taxes. It took a long time to use the first year, but the second year I figured would be easier. NO. They changed the program--was like learning it all over again.
    Bottom line: if you have complicated taxes (tons of investments, unusual income, property purchase/sale, own a business, etc.) an accountant can give advise, and manage how the items affect your taxes years later to save you money. You can read up and do this yourself from the IRS. It takes time.
    If you don't fall in the category above, do it yourself. Accountant probably won't save you enough.

  17. Stan says:

    I'd like to add TaxAct to the list...the online version is easy and has always been accurate.

  18. tommy says:

    TURBO TAX...i dont understand why they say free efile ...in reality...i had to pay..65 for turbo tax software ....and 35 to file fed...and anothe 20 to file state....dont understand why the say its free efile...how...do you do this......why can we only prepare 5 returns...what happens when you prepare and file ..6 or 7 returns...anyone

  19. chip says:

    Neither H&R bor intuit can handle more than the basic that you could without them. case in point, 2,000,000 plus tax payers in the GOZ (mostly Katrina) have individual NOL caryovers (eg. http://www.missouribusiness.net/irs/taxmap/pubs/p536-002.htm). Defy you to find a way to input these carryovers into their systems. These carryovers represent huge tax savings for applicable taxpayers.

  20. Gary says:

    I believe I have found an error in calculation by H&R Block's tax program, which is not a math error, but more a logic/method of calculation error. It pertains to Colorado Income Tax, Pension-Annuity Subtraction Line on the Colorado 104.

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