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2009 Tax Software Shootout: TurboTax vs. TaxCut

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In the world of tax preparation software, the big players are Intuit’s TurboTax and H&R Block’s TaxCut. You have smaller players like TaxACT, but the two biggest in terms of branding and market share have to be TurboTax and TaxCut. They battle each other each year but when you really get down to the basics, both products offer the same thing – tax preparation that won’t cost you hundreds of dollars.

Don’t buy the commercials that say you have to go to a tax preparer because you can’t ask the box. A friend of mine once walked into a branch of H&R Block and had her fairly straightforward taxes prepared for $350. She didn’t have any special circumstances whatsoever! Her problem was that she didn’t know how owning a home would affect her taxes. She heard needed to itemize, had no idea what it meant, and that cost her $350. Fortunately for everyone else, you don’t have to know much to prepare your taxes with software because the software will do it for you. I don’t fault H&R Block, they’re a business and they need to keep the lights on, but she could’ve gone with software and saved herself some serious coin.

So, which company should you go with? Intuit’s TurboTax or H&R Block’s TaxCut?

TurboTax vs. TaxCut

Free “Simple Returns/1040EZ” Package:

According to their respective homepage, only TurboTax offers a free option for “Simple Returns/1040EZ,” TaxCut will charge you $19.95. The “Simple Returns/1040EZ” has nothing to do with income level, it refers more specifically to how complicated your taxes are and what additional schedules you’ll need to include. If you use the standard deduction and don’t need much help, then you can get your taxes done for free at TurboTax. If you need to itemize, you’re stepping up to TurboTax Deluxe, which costs $29.95. You can use TurboTax’s Package Chooser tool to find out which one you’ll have to use.

If your AGI is less than $56,000 a year, you qualify for the IRS’s Free File program.

Winner: TurboTax – Free is better than $19.95 (though their free doesn’t include step-by-step guidance).

Other Packages:

TaxCut has three basic packages – Basic, Premium, and Home & Business (then each has a version where you get state filing included). TurboTax has similar versions, a Deluxe, Premier, Home & Business. Here’s how they stack up price-wise head to head:

Package TurboTax Price TaxCut Price
Basic/Deluxe: $29.95 $19.95
Premier: $49.95 $34.95
Home & Business: $74.95 $79.95
Business: $109.95 N/A

It appears that if you have itemized deductions and investments, TaxCut’s Premium Federal E-file package is going to be the best for you because it’s $5 less than the equivalent TurboTax Premier product. If you plan on filing state through the software, TaxCut has a Federal & State package for only $15 more. If you use TurboTax Premier, adding a state package is an additional $34.95!

Winner: TaxCut – If you’re not going to be able to take advantage of TurboTax’s Free edition, you can save a few dollars by using TaxCut to prepare your taxes. If you plan on doing your state taxes and efile with the software, the difference in price begins to shrink. You can get state preparation through TaxCut for an additional $15 but you pay $19.95 to efile. With TurboTax, you pay an additional $34.95 but efiling is free. The original difference of $30 really comes out to be

Federal e-Filing:

With any of their respective tax preparation packages, you get at least one Federal e-file free; with TaxCut you get 5 Federal e-files free.
Before you get too excited, the IRS doesn’t charge you for E-filing through their Electronic Filing System either so the preparers aren’t paying the fee for you, they’re simply not charging you a fee.

Winner: Toss-Up – TaxCut’s 5 free Federal e-files is nice, only if you need them. I’d only need one.

State Tax Preparation:

To complete your state forms using TurboTax, it’s $25.95 per state if you used their Free Federal Edition; it’s $34.95 per state if you used any other one (Basic, Deluxe, Premier, Home & Business). Up to three State efilings are free though.

TaxCut offers Federal as well as Federal + State packages. On the Federal only packages, preparing a state return will be an additional $29.95 each. With any package, state e-filing will cost an additional $19.95. It’s important to find out whether or not your state charges for e-filing. For example, Maryland’s state iFile system is absolutely free. There’s no reason why I should pay $19.95

Winner: TurboTax – You might pay more up front for tax preparation but you get free Efiling.

Summary

Let’s take the most common scenario, John, who will use the Premier/Deluxe versions of the software because they have a fairly straightforward tax situation. John will prepare the taxes online and John will e-file both federal and state returns. This is how much John would expect to pay:

  • TurboTax: $29.95 Deluxe + $34.95 Deluxe State + $0 Efile = $64.90
  • TaxCut: $49.95 Premium Federal/State + $19.95 State Efile = $69.90

For what is likely the most common scenario outside of Free Edition, TurboTax is cheaper than TaxCut by $5. If you don’t plan to Efile your state return, then TaxCut wins by by $15.

Other Factors:

Both companies have been around for many many years, tweaking their products, and learning from their mistakes. I think one advantage they have over the other competitors is that they are huge brands with the backing of enormous companies willing to spend money to produce the product possible. You cannot go wrong picking one of these two products because they’ve gone through a lot of research, development, testing, etc.

That being said, people like a winner and PC Magazine Editor’s Choice was TurboTax 2009 because it had a better step-by-step system than TaxCut. I think the two products are similar but I also didn’t do an in-depth review like PC Magazine and their trained staff did.

Winner: TurboTax

Like I said before, you can’t go wrong with either product but TurboTax is $5 cheaper and they were selected as PC Magazine’s Editor’s Choice – that makes them inch ahead of TaxCut to take the trophy in this year’s tax software shootout.

What’s your vote? TurboTax or TaxCut? Or do you rock the dead tree 1040?

{ 82 comments, please add your thoughts now! }

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82 Responses to “2009 Tax Software Shootout: TurboTax vs. TaxCut”

  1. Sam Johnson says:

    I have been very disappointed with Turbo Tax. I forget from year to year the tax filing secenario. So recognizing a familiar name; I click on Turbo Tax free e-file. Before I start they have me up to $79.00 for the delux version, not including State Tax. I give them my personal information and make up a pass word etc.
    I click continue and I get an error message saying some one else is using my e-mail and pass word; then it hits. This happend last year and the year before. I now use anything else including mailing in a hand written 1040 A. I HAVE A VERY SIMPLE RETURN, Turbo Tax has a memory of where I lived three years ago and does not up date. Wow it is advertised so much cheaper every where else, these guys are con artist.

  2. jojo beans says:

    Go with TurboTax because its $5 cheaper? thats the most ridiculous advice I’ve ever heard. The cost of a cheap hamburger?…Really?, there’s no difference between the two? ha….what an insightful article…maybe there should have been more research done besides price!

  3. Wendy Lerner says:

    I have a fairly complex return in that I have K-1′s from publicly traded limited partnerships. I purchased the H & R Block product. It did not carry the figures from the input sheet to the 1040 itself. I ended up buying Turbo Tax Home and Business. So far it seems to be doing a respectable job of handling the entries shown on the K-1. Were I not an accounting I doubt that would have realized that these figures were not carried to the front page of the 1040.

    There is a note on the form that you will need to perform some special calculations that we don’t cover. Even with some tax knowledge I was not sure what they expected me to do.

    In the future I will buy Turbo Tax, among other reasons is that Tax Cut tech support was rude to me when I was using on line chat.

  4. mattmac says:

    I agree the comparison is weak. Pricing is comparable, is that all your recommendation is based on? I have had nightmares with Turbotax, and like Sam have purchased it just out of familiarity. The “help” function has decreased to the point of being ridiculous. Used to be able to jump to IRS publications on the field in question, was very helpful, now gone. How difficult was that to support? I’m trying tax cut because I wont tolerate turdotax’s declining functionality.

  5. Ken Geisinger says:

    I agree mattmac. I would have thought that if one would publish an article that compares software products, one would purchase the software and actually try them out, at least on a couple of representative hypothetical examples. I guess that’s too much to ask.

  6. Les says:

    First, I agree with jojo that the $5 difference isn’t enough to sway me either way.

    I’ve been a TaxCut user since it started many, many years ago as “Ask Dan”. I was basically happy with the product, but — like Wendy — noticed certain unusual items were missing or mis-connected (K-1s don’t flow quite automatically, and the R&D credit form is totally missing). No big deal to work around, but would have been nice to get right.

    So, a few years ago I bought TurboTax, figuring that I ought to try it. I have several PCs, including several desktops, a laptop and a backup laptop. I have never had any trouble installing TaxCut on all of those machines. I was dumbfounded when I tried to install TurboTax and discovered that it’s copy-protected, and will only allow one installation per copy.

    I use the software legally — only one user, don’t “sell” the service or “rent” it — but I insist on having it installed on more than one machine at a time. Turbo Tax simply won’t allow that. And, consider what will happen if next year you get a new laptop and want to move everything, including your old tax prep software, over to the new machine. Being able to reinstall the software without having to call the company and get them to give you some sort of authorization code — assuming they’ll do it — seems priceless to me.

    The year I bought TurboTax, I also bought TaxCut, and I’ve never swayed from that course since.


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