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Tax Preparation Services - The American Association of Individual

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					Comparison: Tax
Preparation Services                                                                   OnLine Exclusive
By Cara Scatizzi


  P     reparing taxes has become eas-
        ier in some ways and more dif-
 ficult in others over the years. There
                                             the exact same refund amount was
                                             generated.
                                               The grid on page 2 lists the price of
                                                                                       to use, the Web site has a “Help me
                                                                                       Choose” function that will assist
                                                                                       you in picking the correct program
 are numerous online and software            each product and the features avail-      for your needs. The Deluxe online
 products to help individuals file their     able as well as minimum computing         version is reviewed here and costs
 own taxes at a minimal cost. On the         requirements for using both the           $29.95.
 other hand, the tax code has seem-          online and software products.                The first step in using the program
 ingly become more complex, so mis-                                                    is to enter personal information. If
 takes are easy to make. Fortunately,              TurboTax Deluxe 2009                you have used TurboTax in the past,
 the following software and online tax                 While Intuit’s Web site seems   you can import data from last year’s
 preparation programs have systems in        to suggest that the Deluxe version        filing. TurboTax starts by asking:
 place to double-check deductions and        will not handle buying, selling or        “Tell us what changed for you in
 credits and flag anything that seems        ownership of investments (securities      2009.” The program then makes
 out of place. These same programs           and rental properties), we had no         adjustments to future prompts re-
 are also intuitive to use and can ease      problems using the Deluxe version         garding these changes (i.e., marriage,
 the burden of filing taxes.                 for just that.                            home ownership and job changes,
    This comparison covers three                                                                 self-employed, buying and
 well-known services: Tur-                                                                       selling of investments). It
 boTax, H&R Block At Home            “Tax preparation programs                                   also gives TurboTax a chance
 and TaxAct. The programs are                                                                    to up-sell you to the next
 similar in their step-by-step
 guidance and ability to find
                                     have systems in place to                                    program level.
                                                                                                    After you have entered
 appropriate deductions and                                                                      your information, the
 credits. Where the programs         double-check deductions and                                 program chooses the filing
 differ is in the presentation of                                                                status it deems appropriate
 information, the help avail-
 able and the price. Looking
                                     credits and flag anything that                              for you. You can change this
                                                                                                 if it is not correct. The next
 at each program individually,                                                                   step is to review and edit
 we discuss the process from             seems out of place.”                                    your information.
 start to finish using the online                                                                   For the rest of the return
 versions. The software versions                                                                 filing process, the program
 of these services are similar to the          The site also implies that only         can walk you through step-by-step,
 online versions, but cost more since        TurboTax Premier is for investors         prompting you with questions
 you can file multiple returns with a        with real estate as well as traditional   throughout the process. This is a
 one-time purchase of the software.          stock, bond and mutual fund securi-       great option for people who are new
 Online programs allow you to file           ties; however, Deluxe will handle         to the program or self-filing. Oth-
 only one return per account created.        these all as well. By calling customer    erwise, you can simply choose the
    Each of these programs offers a          service, we learned the main differ-      appropriate categories and enter data
 free online version for e-filing the        ence was the guidance provided: The       yourself.
 basic federal return (1040-EZ). For         Premier version offers step-by-step          The wages and income section is
 other return forms, you can use each        instruction for rental properties while   self-explanatory. You have the option
 program fully for free and pay only         the Deluxe does not.                      of importing information directly
 when you decide to file the return. In        There is a completely free version      from your employer, broker or bank.
 addition, each program offers the op-       of TurboTax for those filing federal      You can also import from Quicken.
 tion to file state returns for a fee. The   1040-EZs. We were able to use this        The program handles all investment-
 programs conveniently transfer your         for a simple return that included         related tax forms including interest
 data to the state forms. Keep in mind       interest earned from investments as       income, dividends, and capital gains
 that many states allow taxpayers to         well as interest paid on loans. How-      and losses.
 file their state returns online for free.   ever, the free version offers no step-       Many of the brokers commonly
    In testing the services, refund          by-step instruction. A Basic version      used by AAII members are included
 calculations were consistent among          for $14.95 does offer the step-by-step    on TurboTax’s import list. However,
 the programs: The same information          instruction for simple returns.           attempts to import stocks that were
 was entered into each program and             If you are unsure of which version      sold from accounts at both Scot-


 March Online Exclusive 2010                                                                                                  1
 OnLine Exclusive



COMPARISON: TAx PRePARATION PROgRAMS
                                                             TurboTax                       H&R Block At Home
                                                             Deluxe 2009                    Deluxe 2009                                TaxAct Deluxe 2009
 Web Site                                          www.turbotax.com                         www.hrblock.com                            www.taxact.com
 Online Cost                                       $29.95 (e-file one                       $29.95 (e-file one                         $9.95 (e-file one federal);
                                                   federal); $36.95 incl. state             federal); $59.90 incl. state               $17.95 incl. state
 Software Cost (download or CD-ROM)                $59.95 (state +                          $44.95 (e-file five federal);              $12.95 (e-file one federal);
                                                   e-file five federal)                     $59.90 including state                     $19.95 including state
 Cost of State E-File With Software                $19.95                                   $19.95                                     $7.95
 (after cost of state forms)
 Program             Free trial                    4                                        4                                          4
 Functionality       Import last year’s data       4                                        4                                          4
                     Import data from              4                                        4                                          4
                     financial institutions
                     Import W-2 Forms              4                                        4
                     Transfer data from federal    4                                        4                                          4
                     return to state return
                     Error check                   4                                        4                                          4
 Deductions &        Automatically checks for      4                                                                                   4
 Credits              applicable deductions
                     Deduction wizard              It’s Deductible (free)                   Deduction Pro ($19.95)                     Donation Assistant (free)
 Printing and        E-file option                 4 (free federal)                         4 (free federal)                           4 (free federal)
 Filing              Direct deposit/withdrawal     4                                        4                                          4
                     Check status of e-file        4                                        4                                          4
                     E-mail confirmations          4                                        4                                          4
                      of IRS receipt
 Technical/          Ask a tax professional        4 ($29.95)                               4 ($19.95)                                 4 (free)
 User Support        Phone/online chat             4 ($29.95)                               4 (free)                                   4 (free)
 Features            with company reps
                     E-mail questions              4                                                                                   4
                     Ask, answer and read          4                                        4
                     other user questions
 Guarantees          Audit support                 4                                        4                                          4
                     Maximum refund/deductions     4                                        4                                          4
                     Accurate calculations         4                                        4                                          4
                     Calculates audit risk         4
 Min System          Windows                       XP, Vista, 7                             XP, Vista, 7                               2000, XP, Vista, 7
 Requirements        Mac                           Mac OS X 10.4                            Mac OS X 10.4.11                           NA
 for Software
 Min System          Internet Explorer Version     XP (IE 6); Vista (IE 7); Wind 7 (IE 8)   XP (IE 6+); Vista (IE 7+); Wind 7 (IE 8)   IE 6
 Requirements        Mozilla FireFox Version       3                                        3                                          1.5
 for Online          Safari Version                3                                        4                                          4
                     Google Chrome                 4                                        4                                          4



trade and E*Trade were unsuccessful,              annuities and more. Throughout the                             tion by choosing the “update” link
possibly due to antivirus protection.             process, you can choose “explain                               next to each category.
Errors range from “unavailable”                   this” to get more information about                              Similar to the process of entering
brokerage forms to unrecognized                   each line on the forms. You can also                           income, the deductions and credits
login information. Other users have               account for self-employment income,                            section guides you step-by-step or
reported similar importing errors,                rental properties, gambling winnings                           lets you do it on your own. If you are
so be prepared to enter your broker               and alimony payments.                                          unsure about which deductions and
transactions manually.                              TurboTax tracks your refund or the                           credits you qualify for, the step-by-
  TurboTax’s wage and income sec-                 amount you owe as you add informa-                             step guide may be useful.
tion also accounts for Social Security            tion, and it provides a summary of                               Deductions and credits are broken
benefits received, retirement account             each section on one page. You can                              down by category (house, family,
distributions, pension payments,                  easily make changes to any informa-                            cars, education, medical, retirement


2
2                                                                                                           Computerized Investing
                                                                                              OnLine Exclusive

and other). Again, you will see the           TurboTax Deluxe 2009
impact the deductions and credits
have on the amount you owe or are
owed along with a summary page of
all your entered data.
  TurboTax checks your deductions
and credits to be sure you have not
missed anything. It gives you the op-
tion to add the information to claim
the credits and deductions. The It’s
Deductible program helps you decide
how much to claim for various chari-
table deductions, such as clothing
donations.
  The federal review page allows
you to see all of the information you
entered on one page along with the
results of the calculations. TurboTax
then runs an error check to be sure
there are no discrepancies that need
to be reconciled.
  The state return follows the same
process as the federal return.
  When you are finished, you can
e-file or print and mail your returns.        H&R Block At Home Deluxe 2009
TurboTax allows you to e-file for free
and set up a direct deposit of your re-
fund (or an automatic withdrawal, if
you owe taxes). Typically, your return
is verified within a few days and your
money is deposited or withdrawn
within two weeks.
  As far as help goes, TurboTax
includes a “live community” feature
that allows users to ask other users
questions. You can also call a tax ex-
pert for a fee. Throughout the entire
process, if you have questions, you
can choose the “learn more” link for
more detailed information.

H&R Block At Home Deluxe 2009
  H&R Block’s tax software has
a new name and design, but the
program itself has not changed much
since our last comparison. Formerly
TaxCut, H&R Block At Home offers          Filing a state return costs $29.95 no   Otherwise, the program walks you
a free online version for basic returns   matter which version you use. To go     through this first step, asking ques-
and allows for one free e-file for        the software route, you can purchase    tions along the way to determine if
federal returns. The online Deluxe        the Basic version for $19.95, the De-   you have special tax circumstances
version costs $29.95 and is appro-        luxe for $44.95 (which includes state   based on filing status, personal dis-
priate for most filers with invest-       filing) and the Premium for $59.95      abilities, disaster relief and more.
ments, various sources of income and      (state included).                         Next, the program moves to
homes. Those who are self-employed           To start online, you can import      income. A nice feature at the start
or own rental properties will want to     personal information from last year’s   of each section is a list of all the
use the Premium version for $49.95.       return even if you used TurboTax.       potential tax forms you may need


March Online Exclusive 2010                                                                                               3
 OnLine Exclusive

 TaxAct Deluxe 2009                                                                 ance…to ensure you get the most
                                                                                    deductions,” the other programs
                                                                                    have a specific section that checks
                                                                                    for missed deductions or credits.
                                                                                    The user assumes the program is
                                                                                    doing this throughout the process by
                                                                                    asking leading questions. The other
                                                                                    two programs have a separate check
                                                                                    before the final return is completed
                                                                                    that looks for missed deductions and
                                                                                    credits. However, in all three pro-
                                                                                    grams, the same missed property tax
                                                                                    deduction was caught.
                                                                                      Once you are finished filing, you
                                                                                    can e-file your federal and state
                                                                                    return or print your forms and mail
                                                                                    them in. You will receive confirma-
                                                                                    tion when your return has been
                                                                                    accepted by the IRS, and you can
                                                                                    choose to have the refund directly
                                                                                    deposited to, or the payment directly
                                                                                    withdrawn from, a bank account.
                                                                                      As for state returns, the Deluxe
                                                                                    software allows you to file one state
                                                                                    return for free and e-file additional
                                                                                    state returns for $19.95 each. The in-
                                                                                    formation is automatically transferred
                                                                                    to the state format and the program
                                                                                    asks a few additional questions be-
                                                                                    fore running the error check.
                                                                                      H&R Block offers a community on
in the section. The income section         At Home does not import bro-             its Web site that allows users to ask
is divided into categories that in-      kerage transactions but handles            questions of each other and to post
clude: common income (employment         numerous investment transactions           questions to professionals in a mes-
wages, interest earned and retirement    and types including interest income,       sage board setting.
income), investments (dividends, cap-    capital gains and losses, wash sales,
ital gains, etc.), business and rental   dividends and more.                        TaxAct Deluxe 2009
property income, and retirement and        Moving to adjustments and deduc-           TaxAct is a relative newcomer to
Social Security income. At Home          tions, you can again check the boxes       the tax preparation software scene.
allows you to check all the income       for the deductions that apply to you.      TaxAct offers the cheapest options
types that apply and then walks you      Deductions include retirement ac-          in our comparison, but the program
through entering the correct data.       count contributions, energy efficiency     relies on the taxpayer to understand
  At Home does allow you to import       home improvements, child care, and         which deductions and credits are ap-
your W-2 if your company is in its       charitable donations. The program’s        propriate for them.
database. Otherwise you can enter        Deduction Pro tool helps you calcu-          The free version differs from the
the information manually. At any         late appropriate values for charitable     pay version ($9.95 online) in that
time, you can choose “learn more” if     donations. This is an extra service        you do not get access to free profes-
you would like further information       that costs $19.95.                         sional help and cannot import data
about the form. You can also choose        The credits section is similar to the    from previous years. You can also
“income” from the top of the page to     rest, allowing you to choose the ap-       purchase the online Deluxe plus state
return to the index of income op-        propriate credits. The program asks        for $17.95.
tions.                                   questions to be sure you are making          A great feature of TaxAct is the
  The program keeps a running tally      the correct choices.                       ability to import your tax data from
of your refund or amount owed,             Finally, you can use At Home’s           a PDF. If you have last year’s return
which allows you to see the impact of    Error Check tool. While the Web            in PDF format, simply upload it to
each piece of information you input.     site says that At Home offers “guid-       the site and your personal informa-


4                                                                                  Computerized Investing
                                                                                                  OnLine Exclusive

tion is automatically entered. This        tool. In contrast, the other programs     decisions.
proved to be accurate. You can also        offer the option to walk you through
import the data from last year if you      each possible deduction or credit,        Conclusion
used TaxAct to file. If neither of these   asking questions to gauge which de-          In the end, the choice to file taxes
options work, simply enter your per-       ductions and credits you may qualify      on your own is based on time, ability,
sonal information manually and save        for.                                      confidence, complexity of your situa-
it for next year.                            TaxAct’s Donation Assistant lets        tion and cost. Each of these programs
   TaxAct first asks a few basic ques-     you track donations and provides          offers a reliable and accurate means
tions about special tax circumstances,     resale values for commonly donated        of filing your taxes. They all account
then moves to life events where you        items.                                    for typical deductions, credits and
choose from a list of appropriate            As you enter data, the amount           sources of income.
events that may have taken place           of your refund or the amount that            TaxAct is not as sophisticated as
over the year. You can choose to           you owe is tallied in the top right       the other two programs and does not
enter information such as Social           corner of the page. You can also view     offer as much step-by-step assistance.
Security and pension benefits now or       summaries of each section and your        If you are comfortable with tax filing
later in the income section.               overall return as you proceed.            and would like to save some money,
   The federal Q&A section is divided        After you have entered all the infor-   then TaxAct may be the right option
into categories: income, deductions,       mation, TaxAct will check your data       for you.
credits, miscellaneous and sum-            for mistakes or red flags, marking           TurboTax’s “guide me” option is
mary. You can either enter the data        alerts in red, yellow and green. Red      great for those new to tax filing or
by typing directly into the form or        alerts are mistakes that need to be       those who wish to be walked through
TaxAct will walk you through that          fixed, yellow alerts warn you of          the entire process. One issue with
process. Missing throughout is a link      potential problems (double-check          this option is that it will ask nu-
to learn more or a “what is this”          these to be sure you entered the data     merous questions to ensure you are
button that offers a quick description     correctly), and green alerts mark pos-    choosing the right options. Those
of the income, deduction or credit to      sible missed deductions and credits.      more experienced with filing may find
help see if it applies to you. However,      Once you have completed the error-      the “explore on my own” option a
you can always use the TaxTutor help       checking you can e-file one return        better fit.
function.                                  for free or print your information for       At Home is very similar to Tur-
   The program lists possible sources      mailing. You can have your refund         boTax but does not offer a guide-me
of income and relies on you to             or payment directly deposited to or       option. The program instead provides
choose the correct type. The program       withdrawn from a bank account. You        checklists to help you decide which
does list the appropriate form next        can check the status of your e-file at    sections apply.
to the income type as the other two        any time as well.                            All three programs offer form
programs do. TaxAct accounts for             The program can then transfer your      numbers and detailed instructions
the typical tax-related investment         information to a state form. You fill     on which information goes where,
issues but does not offer the ability to   out the remaining information in the      error-checking and deduction and
import from a broker.                      same process and TaxAct will check        credit finders as well as the ability to
   TaxAct also relies on you to know       for errors and missed deductions and      e-file federal and state returns. At any
what you are looking for in the way        credits. You can also e-file the state    point with all three programs (online
of deductions and credits. It provides     return.                                   and software versions), you can stop
a list of deductions and credits and         Overall, TaxAct is a cheaper            and save your work and return to
you must research each option to de-       alternative; however, it is more          it later. Each has an option to start
cide if it is appropriate for you. How-    suitable for those familiar with the      exactly where you left off.
ever, TaxAct does provide detailed         tax preparation process. With less           We’d like to hear what you have to
information about the deductions and       hand-holding and prompting, TaxAct        say. Please e-mail your experiences
credits within the program’s TaxTutor      relies on you to make many of the         using these products to CI@aaii.com
                                                                                     or post a message at the Comments
                                                                                     link.
       Cara Scatizzi is associate financial analyst at AAII.




March Online Exclusive 2010                                                                                               5

				
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