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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. Meoip says:

    I’ve always used Turbo Tax (always being 3 years) I plan on using it again. It boils down to familiarity, yes I’m being suckered into paying $5.00 more (turbo tax is more expensive in my market) because I’m familiar with the product. Most average people are foolish to pay someone to do their taxes. You’ve done all the leg work for some guy to do data entry using the same software you can buy.

  2. patty says:

    Pennsylvania also has free efile for their state taxes. Iw ould suggest everyone check their state’s site.

  3. Jace says:

    Last year I had help paper filing from a family member but that favor has been used up so this year I’m contemplating going TurboTax or hiring someone to help me. I have multiple 1099-MISC’s to file along with regular 1040 and I need to list my depreciating deductions that I claimed last year along with a number of new deductions for my home office. I’m fearful of trying to do this through a tax software and ending up in trouble. You think software is a good solution for my specific requirements?

    • Jim says:

      What sort of depreciating deductions?

      The 1099-MISC’s aren’t unusual but I’ve never done depreciating deductions. You could call up the software help lines to see, or search their help databases.

      I don’t think you’re in a situation where you need to go to some tax prep office.

      • Jace says:

        I bought a new computer in 2007 so I claimed it on my federal return as a deduction, according to my uncle, I can now claim a depreciated deduction for it in 2008, 2009, 2010 etc. The IRS allows a deduction to be claimed over multiple years at a set decay rate.

        • Amanda says:

          Your Uncle was wrong. Once you claim the deduction of the full amount of the computer, you can’t then go back and claim a deduction on the depreciation. That is an instant penalty if you get caught. You are basically double dipping.

          If you didn’t deduct the full amount of the computer in 2007, then you could deduct depreciation in the years following because you chose not to use the full deduction in the first year.

        • Fabiole says:

          I know this response is a year late but I just came across your statement today.

          You cannot claim the purchase of your PC as a deduction unless you have a business. Also, if you are a business person, the investment would be a depreciable expense. I believe straight line for 5 years.

    • Ken says:

      Hi Jace

      I have my 1099misc and W2 since 2006, and I never have problem to file my tax with the software. In fact, it is better to file it through the software. Taxcut which I have used, help me to some kind of set up as my business and deduct my car milage, home office space usage, computers and even my iPhone. You have multiple 1099misc forms which won’t make any different, just mean your company have different customers and different incomes. Step by step to follow the software and you will be alright.

  4. David C says:

    Businesses such as Vanguard and Regions Bank offer discounts on purchasing Turbotax so always check for a discount before paying full price :-) .

  5. Stacey says:

    I was using TaxCut’s free-file edition… but this year, Schedule C isn’t one of their free forms. I switched to TaxAct and didn’t see much of a difference – although TaxCut did have more instructions and explainations on each page.

    It’s a toss-up – but it makes me angry to hear about people spending $350 to do a simple return. If you’re eligible (AGI less than $56,000, like you said), TRY the free-file version. If you don’t like it, or can’t figure it out, make an appointment with a tax preparer. Nothing lost! :-)

  6. Asha says:

    I wish the benefits of TaxAct had also been highlighted in this article. It’s free for the Federal and then to file a basic State return is $13.95 ($15.95 deluxe). This is the third time I have used them and definitely no complaints thus far! They are so inexpensive and simple to use.

  7. bernz says:

    I have use both turbo and Tax Cut, and I am definitely voting for turbo Tax. In my opinion it was much easier to use and seemed more detailed.

  8. thomas says:

    I’ve used both this year (haven’t filed yet) and I will say TurboTax is the winner. I have used and filed with both in the past, but for me with itemized deductions, mortgage and other items, TurboTax is solid.

    Lots of discounts around the web for these products. Do a search on your favorite search engine to find one.

  9. Lowry says:

    I used TurboTax, mostly for the familiarity, and the ability to import last year’s data… it saves a bunch of typing. One other difference along those same lines is that TurboTax can electronically get your W-2s for a lot of providers. TaxCut doesn’t do this to my knowledge, or isn’t as extensive.

    • KP says:

      TaxCut does import data from the previous year. I’ve using it over 10 years with no problems.
      It’s cheaper, and the instructions are very clear.

  10. Alan says:

    I’ve used Turbo Tax for many years. This year Turbo Tax (initially) was going to charge for every return prepared, even if you printed it out and mailed it in. I was furious and switched to Tax Cut. While I prefer Turbo Tax, and they eventually changed their policy, I’m insulted at the levels they stooped to all in an effort to milk more money from us after we purchased the software. I will never go back to Turbo Tax because of this.

  11. Jeremy says:

    I’ve been using TaxCut for the past few years, primarily because they have all of my info and it’s easy to login and pull up stuff. I’m a creature of habit and don’t like change.

    That being said, I also don’t e-file. I just complete my taxes with the program and then print everything out and mail it all in. Screw the IRS. I want to make it as hard as possible on them, so I hope they like processing papers instead of having it magically appear in a computer system :D

    • Jace says:

      TaxPaperCut =D

    • Sam says:

      Um dipstick –

      Your tax dollars fund the IRS, so a less efficient IRS means higher taxes.

      • Dave says:

        First, lay off the name calling. Jeremy has a right to his view. Just because you don’t agree doesn’t mean you have to start acting like a child and call people names.

        Second, while your point may be true, it ignores the privacy factor that you disregard. Whether you believe it or not, every time you do anything on your computer connected with the government you are opening another door of access to your computer. Jeremy may have confidentiality conerns, too, that he hasn’t revealed here.

    • John says:

      Yeah, I never e-file either. I don’t trust computers with personal information. I use tax software with fake info (except for the financials) and then use the results to generate a paper form. I don’t like the idea of Intuit or H%R Block keeping a copy of my data for “convience”.

  12. The Travelin' Man says:

    I have always used TurboTax’s online edition. Is there a difference between the online version and the purchased software?

  13. Eddy says:

    I have used TaxCut many years now; it does fine if you are have filled taxes before. I usually efile IRS and print/mail State returns. Last year I used free online TurboTax and efiled IRS with it. But I also used TaxCut too, cross-checking between both, and printed/mailed State return. To me both programs have quirks/limitations that could be made easier for newer users. Do both TaxCut and TurboTax require registration on only a single PC??
    Who is Benefiting from Efiling?? I agree with Jeremy who wondered why we citizens are paying “corporations” more and more money for software, while all it does is make it easier for IRS/States to do their job?? It would be much better for citizens if IRS offered free filing software for all of us (not limited). But corporate lobbyists would never let Congress reduce the huge profits corporations get from software sales and add-on pitches. I think one Congressman suggested such free IRS software some years ago; guess he was never invited to any more Beltway Bandit parties!

  14. James says:

    Who cares? TaxAct is just as good and cheaper.

  15. Jon says:

    Just got done with my federal through Turbotax. I got a 30% discount by going through Scottrade. $20.95. Also, I let Turbotax do the calculations and plugged the numbers into Md iFile for free. :)

  16. KD says:

    I second James. TaxAct is neat and cheap.

    • DaveF says:

      I used TaxACT last year and was happy with the cost saving (we had happily used Turbo Tax for several years directly prior).

      This year (tax year 2009), I started down the same path of using TaxACT again — but ran into a snag (unfortunately after I had already spent $19 to download it). I had completely finished the return and was ready to print and file when it came up and said I couldn’t print the return because Form 8910 wasn’t final yet. (I thought to myself “what — it’s mid February now — that can’t be true”.) After several email exchanges with 2nd-Story tech support it seems like they somehow missed when the IRS actually finalized this form (but what bothers me more is they don’t seem very willing to take ownership of the problem).

      If you need Form 8910 (Alternative Motor Vehicle Credit) — don’t use TaxACT.

  17. Mike1423 says:

    What’s the difference between Turbo Tax Premier software and the online version?

  18. Jerry says:

    The biggest difference between filing your taxes online vs. software on your computer is who holds your data. Do you trust the big corporation with all of the details of your life and finances? If you think their IT departments are 100% safe from data theft, then go online. I prefer to keep everything on my computer.

    I use TaxAct, by the way. Their three levels of packages are standard (free), deluxe ($13) and ultimate (deluxe + state, $20). I used to use the standard or deluxe, but *ahem* made a mistake moving data to Maryland’s iFile one year. Until my taxes become simpler, the extra $7 is worth it for me.

    • Nancy says:

      I like to purchase the software for another reason. I always thought I might have to go back and look at a past year’s files someday…and sure enough, I got a California state question on my 2006 taxes last year. I was able to use the 2006 TurboTax disk to file amended federal and state tax returns. Worked great and I got almost $1000 federal refund check for my error!

    • Matt says:

      I think companies like Intuit and H&R Block probably have a better firewall than your PC at home. Keep telling yourself that your info is more secure at home and you may not join the countless victims who have their PCs invaded and info stolen every year.

  19. Mark says:

    I’ve used TurboTax online for about 5 years now. You can ‘always’ find a link to follow to get a discount on their online version. This year you can follow http://www.aaa.com/turbotax. Sure they ‘have’ you data, oh well, anyone can get it anyhow. And the good thing is you can always log back on to grab the .pdf of your tax reports from years past.
    I then always use Va i-File for free for the state portion just keying in the data.

    • Dave says:

      You may say that it’s no big deal if someone has your data, but in reality it is. Every time another person or company gets it you increase your chances of identity theft. Why not just put up a billboard with your social security number and other personal information while you’re at it. There’s nothing wrong with being careful to protect your information, even if it costs a little more.

  20. SP says:

    Help! I lived in two states, moving mid-year. Both states allow you to file ‘partial year resident’ status and prorate your taxes by the percent of income earned in that state.

    What tax software can support this? I hope I don’t have to do this by hand.

    Thanks.

  21. cindy says:

    I have been using Turbo Tax for 5 yrs.I think they suck, they have horrible customer service, (you are lucky if you can talk to someone in the USA. I do not feel they are user friendly at all. Every year I go thru the hassel of transferring my prior yr to the new year. I am sick of them, and this will be the last year for sure!

  22. Robert says:

    I need to download via Turbo Tax for tax year 2007 again my long 1099 from Charles Schwab, because the first time I did it about two years ago, the file was subsequently glitched (erased), and so I haven’t been able to actually file the overall 1040 for tax year 2007 yet

    Schwab has not helped, as so far they apparently can’t furnish it other than manually

    REMIND EVERYBODY TO ASAP MAKE BACK UPS OF TAX STUFF, BECAUSE A FINANCIAL INSTITUTION MAY BE NON HELPFUL IF A PREVIOUS DOWNLOAD WAS LOST BY CLIENT

  23. Koby says:

    H&R Block’s tax product this year isn’t called TaxCut anymore, and you also have to dig a little bit to get to the basic products of TurboTax and H&R Block’s At Home. Just a heads up for all of you who are filing your taxes early and wanted information of this regard.

  24. Stan says:

    F.Y.I –last year, and previous years, TURBOTAX had Stocks and Investments in the TURBOTAX DELUXE CD, whereas this year they have shifted them to TURBOTAX PREMIER CD, for which they get quite a bit more $$. I previously used TURBOTAX DELUXE in CD format, for quite a few years, but now I am considering changing to TAX CUT due to the increased cost of Intuit’s product

    Thanks

  25. Gil says:

    I am looking for value and functionality. I would gladly pay $5 or $10 more for a program that offers easier navigation and/or covers more of my specific tax situation. I am looking for a plus and minus comparison of each feature in the competing packages.
    The implicit message you give seems to be that Taxcut and Turbotax offerings are functionally equal no matter your tax situation.


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