Tax Software Review 2008
This tax season I wanted to compare the most popular online tax software companies and take a look at their most important features. While compiling this review I found something interesting. Doing it online is about 30% cheaper than buying the software at Office Max or some other place. TurboTax and TaxCut offer the same thing online for less.
Offering FREE federal tax return service
Before we get into the nitty gritty of the review lets talk about the FREE options. If you don’t have any kind of complications (e.g., kids, real estate, investments) the free service is great. Don’t worry about losing your work if you get halfway through the process and realize you need to upgrade. The free process is designed to help you upgrade, with a cost, of course. They will charge you for State taxes but the federal return with eFile is free.
Similarities Between Tax Preparation Software
As far as comparisons there isn’t a clear winner with online tax software. Instead of being better or worse the two big companies (TurboTax and TaxCut) have comparable differences. Before we discuss the differences lets talk about the common offerings between every company. Most companies market these things as something special to them but in reality they are not unique.
Standard Services in Every Company
- Instant eFile for fast returns
- Interview style questions
- Maximized deductions
- Filling out IRS forms
- Support of some kind
- Error checking
Company Reviews
Now for the individual company reviews. Those included in the review for 2008 are TurboTax, TaxCut, TaxAct, Rapid Tax, Complete Tax, ezTaxReturns, and TaxBrain. Trying to compare each company was difficult. Each company has a handful of packages that are priced differently and have different options. To simplify things I compared the service that was just under their most expensive offering. These packages usually cover investment income, real estate, and deduction maximization. You will find that the pricing on these packages will give you an indication of the pricing on smaller packages.
Cost: $49.95 Federal + $29.95 State
The market leader, and my company of choice, is TurboTax. They have invested a lot of resources into making their software very user friendly. Their online record keeping has saved me a few times. The ability to access every return I’ve ever filed with them is very convenient. While they are the most expensive I think it’s worth it.
Pros
- Done completely online, no software to install
- Save previous years’ returns online — forever.
- Great user interface
- Intuitive and easy
- Displays running total of refund (I love this feature)
- Audit Risk Meter
- Includes stock trading, investing, and real estate paperwork.
Cons
- Highest cost across the board
- High cost for State refunds
- Little contact with any tax experts. Instead they offer a way to interact with a community.
- No local branches
Summary
TurboTax is a great. If you don’t mind spending an extra $35 for state and federal returns it’s worth it.
Visit Turbo Tax or visit their comparison chart .
Cost: $44.95 for Federal & State combined
TaxCut by H&R Block has great pricing and offer a wide array of features. While they don’t have the user interface as polished as TurboTax they offer the best bang for the buck. Because of this it’s was hard to say TurboTax is the clear winner. TaxCut is a great tax prep solution. The only thing that’s holding me back from switching is the fact that TurboTax has all my past returns saved for safe keeping. TaxCut also requires a software download.
Pros
- Biggest bang for the buck
- Includes State filing – Turbo tax charges an extra $29.95
- Includes Self Employment questions as part of their Premium offering. TurboTax requires an upgrade to $74.95.
- Includes one session with tax adviser
- Worry Free Audit Support
- Phone, chat, and email support
- Includes stock trading, investing, and real estate
Cons
- Not as polished as TurboTax
- Requires installation of software
- Doesn’t save your return online
- There seems to be more emphasis on teaching you more about preparing your taxes instead of TurboTax’s ‘no brainer’ approach
Summary
Priced competitively especially for small business owners. TaxCut offers the small business package for $44.95 and TurboTax charges almost $110 for the same federal + state service.
Visit TaxCut’s comparison chart
The 2nd Tier Companies
Beyond TurboTax and TaxCut there isn’t anyone else that comes close. If you have sold real estate, had investment income, or operated a business these 2nd tier companies don’t have what you need. To be fair they do offer a third party solution for investment income. They provide a seamless way to integrate data from GainsKeeper. The cheapest package GainsKeeper offers is $69. That cost alone puts you well past TurboTax’s most robust package.
If you have a simple return and want to give the little guys a try go for it. They actually have some great services to offer.
Cost: $16.95 for Federal and State
Pros
-
Is the cheapest for State + Federal filings
Provides all the standard services (e.g., eFile, maximize deductions, fill out IRS forms)
-
Done completely online
Cons
- Added cost of GainsKeeper account for investment reporting
- No real estate or other investment support
- No capital gains tracking or Schedule D preparation
Summary
Great for a basic user. The price is absolutely unbeatable for a simple state and federal return. I would suggest this for any first time people wanting to do their taxes online.
Visit TaxAct
Cost: $49.99 Federal + $19.99 State
These guys have the same problems as TaxAct. They don’t cover investment income or real estate transactions. They do provide self employment paperwork.
Pros
- Professional Review is part of the standard package
- Option to have professionally bound copies of paperwork
- 3 year audit protection
Cons
- Require subscription to GainsKeeper for investment income
- Only $10 under TruboTax without the same services
Summary
RapidTax isn’t unique. The “rapid” part of their service is actually standard eFile option in the other companies. If having your paperwork professionally bound is important then these guys are great. Otherwise they aren’t competitive on price or service as compared to the top two companies.
Visit Rapidtax
Cost: $29.95 Federal + $14.95 State
Cost: $39.95 for Federal + State
Cost: $39.99 Federal + $29.99 State
After reviewing these three I concluded there isn’t much difference between the 2nd teir tax preparation companies and their 1st tier counterparts. Their prices aren’t competitive and they don’t offer any exclusive features. One good reason to go with one of these smaller guys is help the underdog. Beyond that you’ll get a better price with TaxAct or better service with TurboTax.
Do you have a tax service you use that isn’t listed here? Please leave a comment or any suggestions you might have.
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January 27th, 2008 at 3:34 pm
I found your site on technorati and read a few of your other posts. Keep up the good work. I just added your RSS feed to my Google News Reader. Looking forward to reading more from you.
Allen Taylor