Tax Preparation Software: Compare the Best Online Tax Preparation

Published 2/11/09 (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

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

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.