Free Tax Preparation Software – TurboTax Product Review – (A)

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As promised, I am going to review TurboTax and, perhaps unfairly, compare it against TaxAct. I believe TurboTax did a more thorough job than TaxAct and it asked me questions TaxAct didn’t. I also have to admit that I have more faith in TurboTax because of the Intuit name (I used the full product last year, free after rebate), but it seemed as though TurboTax asked more questions than TaxAct. The amount I owe remained the same (the result of my side business no doubt) though, so TaxAct wasn’t “wrong”.

TurboTax’s interface was cleaner and nicer. It was also web-based, which may be a turnoff for some of you, but I liked it. I have high-speed Internet so a dial-up user with a questionable connection might be hesitant to use this.

One feature that was absent in TaxAct was the ability to import W2 information straight from your payroll company. Mine happened to be ADP, which was supported. This won’t be available for all users but a vast majority of companies use ADP for payroll processing so you’ll find it very convenient. Unfortunately, it asked for some verification information (SSN, Box A and Box 1 from the W2) and I couldn’t find Box A for the life of me so I missed out.

A great feature missing from TaxAct was a comparison of deducting sales tax versus state income tax (read more about it here). I live in Maryland (5%), which apparently wasn’t high enough to make the state sales tax deduction worth it based on the spending tables.

Some more differences? TaxAct never asked about a Roth IRA, to my knowledge, TurboTax did. Again that thorough-ness gave me faith my return was complete and correct. The entire process took about fifteen minutes, about the same as with TaxAct, and ended with some useful survey information. It showed how other filers in my general income bracket compared, in terms of taxes paid and deductions taken. I was paying more tax and taking less deductions, troubling but expected as I don’t own a home.

TurboTax asked me only once (to my memory) to purchase an upgrade. ONCE. TaxAct asked me what seemed like four times before I even entered in a number for my W2’s. When I clicked “Yes” for side business income, TurboTax suggested I upgrade because it had more features. I politely declined and it never asked again.

TurboTax also seamlessly, after asking permission, transitioned into the Maryland State return, which wasn’t free. I can probably do that one by hand relatively easily so I’ll go with that option. It did tell me how much tax I should expect to pay, so I have a double-check whenever I do it by hand.

Overall? TurboTax scored much higher than TaxAct. The interface differences weren’t significant but because TurboTax did the income versus sales tax comparison was reason enough to go with TurboTax. It’s a significant change in the tax code and TaxAct was remiss in not including it in their product.

Have some experience with either product? I’d love to hear about it.

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One Response to “Free Tax Preparation Software – TurboTax Product Review – (A)”

  1. Jerry Chin says:

    You get what you pay for. Taxact takes the low end of the market. Turbotax is slightly more expensive and therefore provides a slightly better product. However if you think that software will actually do a satisfactory job in preparing your taxes, then you are highly mistaken. Of course I am a real live human tax preparer who earns his living by knowing the tax laws so I am biased. Although there is nothing inherently wrong with turbotax, or taxact for that matter, software does not have the power of human judgement and experience in interpreting tax laws and applying it to specific life situations. The major misconception people have regarding taxes is that it is accounting, 1+1=2, and therefore can be easily automated. Taxes is more law than accounting and there has yet to be any lawyer software on the marketplace because law is an art, just like taxes. Taxes is the largest expense for many Americans. Yes, that’s right. Add up all the Federal income, state and local income, social security and medicare taxes that are “paid” out of your paycheck every month and you will see just how much in taxes you actually pay. So are you really going to scrimp on $50 software to manage the largest expense in your life? Talk about being penny wise and pound foolish. Oh and one last fact. It is known in the profession that the majority of self prepared tax returns are not compliant. The IRS knows this but doesn’t pursue the software makers on this issue. Why? Because the inaccuracies are usually taxpayers OVERPAYING their taxes due to inaccurate use of tax prep software. When you are doing battle with the IRS, you might need a little better armament than what a $50 piece of software can provide.

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