Which tax-prep service is right for you?

A correction was made to this story. Read below for details.

The prices for Intuit TurboTax and H&R Block TaxCut have shifted significantly, making it tough to tell how much you'll actually pay to file 2008 returns using their software or online services.

Among the good news is that both brands now offer free federal electronic filing, which has cost up to an additional $20 in the past. But some users of the market-leading TurboTax desktop software are venting bitterly on online forums about Intuit's new charge of $9.95 for each federal return prepared beyond the first user, whether those returns are filed via Web browser or snail mail. Some are threatening to migrate to H&R Block TaxCut, which on Monday introduced federal e-filing for up to five users with each purchase of its desktop product.

But bargain shoppers shouldn't assume that makes TaxCut the better deal of the two. After scrutinizing the tax-prep prices, we've reached a more complicated verdict. TaxCut's sticker prices are cheaper all around. However, once you add fees for state returns, TurboTax online looks like the winner in terms of affordability, as it's slightly less expensive for the majority of users, who file only for themselves. TaxCut for the desktop, on the other hand, is cheaper than most editions of the desktop TurboTax.

Due to Intuit's new charge for federal returns beyond the first user, it might seem that the desktop editions of H&R Block TaxCut would be cheaper for those filing for two or more people. It gets more complicated if you have to wrangle with returns in multiple states.

What you'll pay ultimately for do-it-yourself tax preparation depends on your specific needs. To find the right product for your situation, scroll down for the charts below, which show the hidden fees in both the online and desktop editions of both brands' tax-prep tools.

We tallied the totals for one user filing federal and state returns electronically. Click chart for larger version.

(Credit: Elsa Wenzel/CNET Networks)

Simple tax prep for one user
The entry-level price gaps are modest if you're filing alone, or jointly, say, as a married couple. But keep in mind that the supposedly "free" online editions of both services aren't so if you need state filing, which costs close to $30. Once you add state prep and e-filing to the entry-level Intuit TurboTax "free" edition, it's $4 less than its H&R Block TaxCut counterpart. The stepped-up TurboTax costs the same as H&R Block TaxCut Basic + e-file, with state filing included. Drop the state feature, and TaxCut is still just $5 more than TurboTax. And for the Basic desktop products, TaxCut also costs roughly $4 more than TurboTax.

Therefore, if you're a longtime, solo user of an entry-level TaxCut tool, there's little compelling financial reason, or none, to switch to TurboTax. But the difference of $5 or less could make or break the deal for some users. The online options are also the best bet in this case, since they're designed to serve one return.

At the same time, don't rule out a third option: services from small-fry brands. In particular, we've found the Web-based TaxAct from 2nd Story Software excellent for the past several years. It costs as much as $13 less than its bigger-name rivals: $16.95 maximum with all e-filing included. Plus, TaxAct could be a great option for college students because it bundles help for FAFSA loan forms.

Tax prep for one user with investments
Graduate to the more sophisticated desktop options, and TaxCut is more attractive for the pocketbook. The Premium editions of the desktop TaxCut run from $34.95 to $84.85 and are roughly equivalent to the desktop TurboTax Deluxe at $59.95, or Premier at $107.90.

The brand comparisons become uneven as the prices climb for either the desktop or online applications, so read their product descriptions to find the features you need. For example, both of TaxCut's Premium editions offer help with investments and rental property, which are absent in TurboTax Deluxe but included in its Premier editions.

Tax prep for more than one user
The online tax-prep services are built for one user, so buying software in a box or via download will likely be more convenient for those who manage taxes in-house for the whole family. In this case, H&R Block TaxCut for the desktop could be the budget deal because it includes federal e-filing for five returns, the government limit.

However, fees for state filing lurk beyond the prices on the box. That's obviously not an issue for residents of Nevada, Florida, or other states that don't require returns. But if you've worked in more than one state in 2008, the filing fees can pile up.

For example, TaxCut charges $29.95 to prepare a federal return for each state, plus $19.95 for state e-filing. What if you need to file in, say, New York and New Jersey? If you're using H&R Block's $19.95 TaxCut Basic for the desktop, in the end you could pay close to $120.

Intuit TurboTax Basic for the desktop, on the other hand, would cost roughly $136 for the same scenario. It charges $34.95 for preparing and $17.95 for electronically filing each state return. Some editions of TurboTax, however, include preparation for one state.

In either brand's case, if two unmarried people use the same tax-prep service to file individually in the same state, then they only pay for one state return. TaxCut may ask for another $19.95 per person for state electronic filing, and TurboTax would request another $17.95.

The hotly-contested $9.95 fee for additional federal returns from TurboTax, by the way, does not apply to married couples filing jointly, since they're dealing with one return. Similarly, people filing jointly with TurboTax or TaxCut need not pay an additional fee for state filing as long as they work in the same state.

The highlighted totals show how much one person would pay to prepare taxes using these Web-based services, including state and federal electronic filing. Click chart for larger version.

(Credit: Elsa Wenzel/CNET Networks)

Desktop or Webtop?
Web-based tax apps continue to attract more users each year, while sales of their boxed counterparts are virtually flat. But tax software in a box isn't disappearing from the aisles of Wal-Mart anytime soon. Many users still prefer the seeming security of storing private data on a local hard drive rather than a vendor's servers.

Among the benefits of online tax-prep options, however, is that you can start with a more basic edition and easily upgrade at any time if your return becomes more complex as you work through it. If you buy the software on a disc, you're stuck with the one you bought.

Service and support
Both Intuit and H&R Block guarantee that you'll get the maximum possible IRS refund. If you're unhappy with their products, you can demand a refund from them.

Should you need personalized assistance, H&R Block costs less. From box, TaxCut includes a live consultation with a tax professional for one topic--free in all products but the desktop Federal with e-file--then $19.95 for help beyond that. The people on the line include some 1,500 of the 120,000 agents at H&R Block's streetside offices. For similar support, Intuit charges $34.95 for the first 20 minutes and another $15.95 per 20 minutes beyond that time.

H&R Block also touts its free, live audit support, for which Intuit asks $34.95. Yet, Intuit provides a help-yourself audit support center and continues to expand peer support through its Live Community. It's similar to a question-and-answer service such as Yahoo Answers. If you trust the wisdom of the crowd--which may include fellow users with similar issues as well as bona fide experts who happen to be users--that should be good enough.

CNET reviews
The features of TurboTax and H&R Block TaxCut are so similar that anointing one as superior is a close call when we review them each year. In our tests, each tool has calculated identical refunds for our tax returns. And the look and feel of the online and boxed applications become increasingly similar with each release.

Each product--whether accessed online or installed from a disc--walks you through the filing process with relatively straightforward questions, and tallies an estimated refund as you work. TurboTax tends to have more natural-sounding queries, although TaxCut does a decent job of skirting around the jargon.

Intuit tends to be the industry leader, claiming 80 percent of the desktop tax-prep market. That's likely helped by its ecosystem of finance applications including Quicken and QuickBooks. H&R Block, however, does import data from Quicken, TurboTax, and Microsoft Money.

We'll formally review the tax-preparation tools once our 2008 paperwork is in order. Check back early in 2009 for our final verdict, which will appear on the CNET Tax Guide page.

Correction: This story initially gave an incorrect total for TurboTax Basic with e-file. The total price is $49.90. Also, the charts misidentified the number of e-filings included with the Intuit pricing listed. They have been corrected.

[henebry]

Or you could break out Excel and file your taxes the manly way. The way the old frontiersmen did it.

[marsdta]

I'm a coordinator for the Volunteer Income Tax Assistance here at CSUN. We have over 200 volunteers who have been trained in preparing tax returns. we have various locations around the San Fernando valley. I know other schools like USC and UCLA have similar programs so that is an option.

Note: depending on the school they will have limits as to income, and what kind of deductions they can and cannot do(Rules put on us by the IRS). For my program our limit is basically anyone with an income under 50,000.

Another option is to use the free versions of turbo tax and tax cut, granted its very limited but if your going to prepare basic tax return as many do its more than enough.

[jpmays]

I've been using TaxAct from 2nd-Story Software since 1999. It only costs me $12.95 for the Deluxe Edition (Desktop), and it provides both federal and state returns, and for each additional e-file beyond the initial first one, the cost is only seven dollars.

I highly recommend it!

/jp/

[protagonistic]

I second that opinion. I have used TaxAct for years now and they allow you to do your family returns with the program. You will pay for the extra E-File if you choose to do it that way.

And what a lot of people may not realize is that Second Story Software which puts out TaxAct was founded by the same people who did Parsons Tax Edge software. Parsons was bought out by Intuit which kept it for about a year and then sold to Broderbund minus Tax Edge and Money counts. Those two programs were killed off to get rid of a competitor.

Intuit subscribes to the "If you can't really compete on merits and price then buy them out and get rid of them" business model.

Oh, and you can actually fill out your Federal return online with for free at Second Story.

[jkos3839]

Hello jpmays, Im Jake from Florida, do the B&m stores, Staples etc have TaxAct or do I have to get it online???

[swrobel]

I'd like to recommend TaxAct. I've been using it for the past few years. I'm young and single thus and my return is simple, so I can't speak for people with complicated returns, but I'd highly recommend it for anyone looking for a cheap and painless way to prep and e-file their returns.

[nouser]

I'd like to point out that TurboTax can be purchased at a 25% discount of you are a State Farm Insurance customer. They also offer a link to a free Turbotax for edition.

"Statefarm.com Visitors are invited to try a FREE copy of the TurboTax® Federal Free Edition for simple federal returns, or save up to 25% on other TurboTax products."

[khdo]

For the past couple of years, you could file for state and federal for free using the online version of Turbotax Deluxe.

I will be disappointed to say the least if that promotion doesn't continue.

[mojones]

I've used TurboTax's online "Free Edition" for Federal returns and it has worked well -- they state it's only for simple returns, but it walks you through all the "normal" forms (capital gains, itemized deductions, etc.), so it covers areas most would need.

As for state returns, many states provide free e-filing via their own websites, so that may be an option for many. I live in Virginia and their online system is great. Totally free tax return filing...

[REDBARRON]

Capital Gains/dividends data can be downloaded from your account with most large Brokerages with Turbo Tax and automaticly are entered in your return. TacCut has confirmed with me that they do not offer this service.For me this was the deciding factor.

[oldiescc]

i wounder if you woud get more If the forms where done by a profesonial or by doing them your self? that is of course filing single or married with no busniess or rentals.

[mgambalie]

If you are talking about a simple 1040 with W2 income only, it is pretty much straight forward entry if you have a traditional family, so there should be no difference if you enter it yourself or a professional does it for you. If that is not the case, IE you have various itemized deductions or you are living with a SO without being married, you might be surprised at the difference a professional will make. There are often multiple ways a single deduction can be used and/or calculated and recent regulations regarding EIC and the children you support can make a criminal out of an honest taxpayer--go figure, your *tax dollars* at work!

[davemeigs5]

Check your states website. I have for years and state and federal has always been free.

[aka_tripleB]

I used the free Tax Cut last year for federal, then used the free online filing on the Illinois tax site. It was fairly easy after I figured out what states I had to file taxes for. I worked for a company in Texas as a vender in Indiana, yet I only dealt with Illinois taxes.

[tech_crazy]

That would be because Texas has no individual state income tax

[mgambalie]

My wife and I have operated a small tax preparation business in Kentucky for 20 years and routinely offer full service including federal and state eFile with direct deposit for less than the prices listed here. I realize this can't be the case in large cities where the cost of office space can eat us alive, but for rural America, it may well be worth walking your fingers through the yellow pages this year, unless you *prefer* to do the entry yourself.

[khdo]

The author needs to check their math... for the online filing, Basic with e-file, Intuit Turbotax should be $10 higher.

$14.95 Basic + $34.95 State Prep = $50.90

Therefore, the author's argument about saving $9 is invalid in one of the preceding paragraphs, since the comparable Taxcut price point is $49.90.

[degrees_of_truth]

First, there appears to be an error in the table for desktop software. In the row for TaxCut Premium with State, you show $19.95 extra for state "paper" return; I assume that's for state "e-file".

This is an admirable attempt to make sense out of pricing structures that have gone berserk. One point of possible confusion is that while Intuit implies that TurboTax Premium is the product to buy if you have investments or rental property, TurboTax Deluxe is sufficient (unless things have changed this year). I have used TurboTax Deluxe in the past with no problems for both areas. There is apparently added hand-holding in the Premium version. I don't know how the features in this area compare to TaxCut, which I have not used.

But I probably will switch to TaxCut this year, because of Intuit's new policy of charging $9.95 for extra printed returns. Last year I started doing taxes for my senior-citizen mother-in-law, as well as a joint return for myself. And two corresponding state returns. (Is that $9.95 extra or $19.90?) I don't e-file: e-filing is of little or negative value if a balance is due instead of a refund. I have been a TurboTax customer for many years, but Intuit has turned up the heat enough that quite a few slow-boiled frogs like me may jump out of the pot.

[hatailor]

The table is very good but it assumes that people will e-file. Why do that? You can send the paper copy and just wait for the return if you are not starved for cash.
I have used turbotax since 1986. I was about to push the button and buy turbotax from the intuit site, when I saw a comment about printing. Had I not seen it, I would have been caught unable to print next April!
So, I am going to taxcut. Glad that it has shaped up, a few years ago I could only open one form at a time.

[MadLyb]

As a user of TurboTax since 1997, I have been extremely pleased with the product, and unlike many people, I only use it for one filing, so the change doesn't really impact me, but I do have a concern that these fees will continue to propagate, so the message needs to be sent loud and clear that is unacceptable.

So, with that in mind, did you test the ability of one tool to import data from the competitor for the previous year's return? If I am going to change, I don't want to end having to manually transfer all the information over.

[BigGuns149]

I have historically found that Turbotax is a good utility, but I frankly don't like the way that Intuit goes out of their way to ensure that the government doesn't allow average joe's to file taxes electronically without going through a middle man (eg. Intuit) to do it. Intuit lobbied CA to eliminate their free file program.

While we can't reasonably expect that we could ever make the entire tax preparation industry obsolete (eg. the corporate tax code is so massive that most corporations would still hire tax attorneys even if the tax code were half as complicated) I really think that the vast majority of Americans should be able to file their state and federal taxes in <1 hour for free. It would be nice if we could dramatically cut back on the involvement of the tax preparation industry into most average people's lives. Tax preparation attorney's don't produce anything that benefits society in an obvious fashion other than the fact that it gives these people an occupation. I would hope that we could find these people some other line of work.

[mikewpaul]

The last couple of years, Office Depot has had TaxCut on some sort of discount/rebate, enough where I didn't mind at all buying the eFile version last time. I suggest not buying early (like their renewal offer), and look around for a deal...

I have prepared taxes professional since 1970. It seems to me that a taxpayer filing their own taxes using a software package deserves the results. How long will it be before we issue software to take out your own appendix, or do it yourself software for an angioplasty. How about a software package to tune up your own car? I pay a doctor, nurse, or medical establishment for medical services. I go to a professional mechanic to service my vehicles. Why in the name of common sense would you rely on an amateur (yourself) to prepare your tax returns? You don't know enough about taxes to know if you need a professional or not! Having a professional prepare your taxes is much like buying insurance. It does not guarantee you wont suffer a loss, but it certainly helps to reduce the pain and the odds of experiencing that pain.

[degrees_of_truth]

I have been doing my own taxes since 1970. I mentioned in an earlier post that I began preparing my mother-in-law's taxes last year. I discovered that since her spouse died a few years ago, the accounting firm (not H&R Block or equivalent) that she used has been charging her more than $800 each year to do her taxes. Her income is pension, social security, and a modest amount of interest and dividends. (A possible justification for the high accounting charges is that some stocks have been involved in spin-offs and mergers requiring some fairly hairy basis calculations, even if the monetary amounts are tiny, but I can do the research at no cost to her.) I would agree "having a professional prepare your taxes is much like buying insurance": sometimes I buy insurance and sometimes I self-insure, depending on the risk and the cost of insurance.

"Why in the name of common sense would you rely on an amateur (yourself) to prepare your tax returns?" Because the consequences of mistakes are less than in the examples you give. Some people should use a professional, but I suspect there are huge numbers of people who pay professionals when all they need to do is copy numbers from their W2's and 1099's into tax prep software and be done in minutes.

[kmuschal]

You liken preparing your own taxes to taking out your own appendix or performing your own angioplasty? Oh, come on. Why would you actually bother to type your posting--why not have a professional secretary do it? Do you ever make your own meals? How dangerous--perhaps you should hire a professional chef.

Okay, my point, buried as it is in sarcasm, is that intelligent people are perfectly capable of reading the IRS instructions and completing their own taxes. Sheesh.

[yanchineseguy]

Very nice article and comparison information. This will be very helpful to many of us. Thanks!

I want to thank you for your candid comments here about TurboTax. I realize that some of you are long-time customers and TurboTax fell short of your expectations. For all TurboTax customers, we regret we caused you such angst.

A number of factors, including your feedback, have prompted us to now enable TurboTax customers to prepare and print multiple returns at no additional cost. Plus, as we?ve previously communicated, free e-filing is included with every federal return. These changes will be reflected in a TurboTax One-click Update scheduled for release around December 20. As you may know, the IRS limits the number of e-filed returns to five.

We believe these changes make TurboTax the best value for consumers. Including free e-filing with every federal return means a savings of nearly $75 for some of our customers versus last year and a savings of up to $40 compared to our original pricing this year. I believe this now truly reflects our commitment to helping our customers keep more money in their pockets.

We have over 17 million loyal, passionate customers who genuinely care about what we do and who take the time to tell us. Our decision recognizes that your opinions really do count.

Let the tax season begin.

Bob Meighan
VP, TurboTax

[harryhood]

Turbotax is a great product and I have been using it for years. I am glad to hear you opened up multiple returns at no cost. I was surprised to hear this was the case when it first launched, but am happy you listen to feedback and fixed it quickly.

The things I really like about turbotax is that every year it installs, updates, and works flawlessly on all my computers over the years. I like how the new version has done a better job of sectioning the major steps of filing with each section in a list of things to do and follow up on. It makes it much easier to jump around and not get caught in wizard loops just to change one or two things. Helps me know where I am much better.

The other thing I really like is the help search. I usually have a complex search query and the iseek search does a real good job of combing through the tax documentation. This feature helps me get answers fast and easy. In other applications I usually avoid searching the help files because the search is so bad.

I also like how you added a human side to help with the live community. It was nice to know I have access to people when filing.

Turbotax is great product and I recommend it to all my friends and family and has been fun to see it evolve over the years.

[sshtdifferentday]

I use taxslayer.com 9.95 for federal and any/all state filings for a basic person, 19.95 to use itemized deducations and again any/all state filings.

[otm-2]

I've used both TaxCut & TurboTax in the past, TurboTax for the past few years. Let's see now, to use TurboTax Deluxe web for both federal & state with efile would total $64.90, and to use TaxAct for the same thing would total $16.95 ... hmmmm ... I think I'll try TaxAct this year.

Oh yeah, in response to the "Why in the name of common sense would you rely on an amateur ..." comment. You cannot realistically compare preparing your own taxes with performing surgery yourself. It's also true that many people, including me, service their own cars, do their own plumbing, electrical work, etc. self reliance is a virtue as well as a way to save money!