TaxCut Premium vs. TurboTax Premier
Every year we are confronted with the inevitable—filing taxes. In the (seemingly) distant past, we hired a tax specialist to take care of this unpleasant task, or we set out to do it on our own, filling out each form by hand and mailing our return to the IRS before April 15. With the advent of computers, the Internet and a do-it-yourself attitude, our options for filing taxes have changed.
Many will still let tax professionals do the brunt of the tax work this year, but more and more people will file taxes themselves with the help of various on-line and software products. The most widely used are H&R Block’s TaxCut and TurboTax by Intuit. Each offers a variety of versions for different taxpayers with various investment, income and tax situations. The step-by-step format of these programs makes it simple for individuals to complete and file taxes, even those with more complex tax circumstances.
This review focuses mainly on the federal tax return, although both programs allow you to figure your state taxes as well.
In recent years, e-filing has become more popular. Because of the low cost of processing electronic filings, the federal government has partnered with various tax preparation services to offer e-filing for free: Qualified taxpayers (usually those filling out a 1040EZ or those with very simple tax returns) can e-file federal tax returns for free if they access the tax service’s Web site via the IRS Web site. The Free File program applies only to federal taxes, but many states offer free state tax e-filing as well.
The software and on-line versions of both programs discussed here all include the option to e-file. E-filing usually results in faster return processing, and any refund is directly deposited into a checking or savings account, as opposed to mailed out to you in check form.
Software vs. On-Line
Both TurboTax and TaxCut offer a variety of software and on-line versions of their respective programs. The on-line versions are exactly the same as the comparable software programs. You can use the Web-based program through your Web browser (which requires an Internet connection while using the product), download the software to your computer (and use it while not connected to the Internet) or order a CD-ROM of the program. All but one version allow you to import data from last year’s return, making filing your returns even faster.
For simple federal tax returns,TurboTax offers “free” on-line versions, for preparing and e-filing federal taxes using the 1040EZ form. Your information is not stored from year-to-year with this free program, so you will need to re-enter personal data each time you file. For those who don’t use the 1040EZ but still have simple taxes, TurboTax’s Basic on-line program costs $14.95. TaxCut offers a basic version for $14.95 that includes the ability to import data from last year’s return and e-filing.
TaxCut’s on-line Premium versions provide extra guidance for maximizing deductions and for navigating more complex tax situations like investments and rental properties, and they offer a one-time Ask a Tax Advisor session. The on-line Premium version for the federal return only, which includes e-filing, costs $19.95. You can prepare and e-file your state and federal taxes with the on-line Premium version for $44.95.
TaxCut’s Premium + State software program costs $39.95 and does not include e-filing. For $69.95, you can prepare and e-file federal and state taxes with the Premium + State + E-file software program.
All software and on-line versions include Worry-free Audit Support if you e-file. Other versions of TaxCut include Home and Business, Tango (which offers 24/7 tax help from a tax representative) and TaxCut State for state filing only.
TurboTax’s Deluxe programs (on-line and software) offer more deduction and tax guidance. The on-line Deluxe version includes free e-filing and costs $29.95 for federal filing only (state filing costs $29.95 extra). The Deluxe software version is $44.95, which includes both federal and state forms, but e-filing costs extra. The Premier versions include help with investments and rental properties. TurboTax Premier On-Line is $49.95 for federal filing only with e-filing included (state filing costs $29.95 extra). The software version of Premier costs $74.95 and includes federal and state forms; but, again, e-filing costs extra with the software. TurboTax also has a Home and Business version.
For the purposes of this review we looked at the programs that handle investments in securities and real estate as well as offer more in-depth options and assistance—TaxCut’s Premium and TurboTax’s Premier.
We used the on-line versions of both programs, which, according to company representatives, are exactly the same as the respective software programs. Both on-line versions allow you to use the program in its entirety for free, but will charge the fee for e-filing and printing reports.
Both programs can be downloaded on-line, installed using a CD-ROM or used on-line via the company Web site (www.turbotax.com and www.taxcut.com). Downloading software or installing the CD-ROM will allow you to use the program when you are not connected to the Internet and to store the data on your hard drive.
The Web-based versions are run within your Web browser and require a constant Internet connection. Data is encrypted and stored on a server in each company’s secured vault. Both on-line and software versions allow you to save data and retrieve it later. You can also import data from the prior year’s return from either TaxCut or TurboTax and from various other software programs.
If TurboTax is idle for 20 minutes, the program automatically logs you off. TaxCut on-line asks if you would like to be signed out after five minutes of idle time. While this is a nice feature, be aware that you can lose entered data if you are not careful. I lost some of the W-2 information I was entering after being idle for about 10 minutes with TaxCut. I chose the “save, but do not exit” option and was subsequently taken back to the start.
If you decide to stop work and continue completing your return later, you can save your information and log out. When ready, simply log back in and continue exactly where you left off. TaxCut offers a summary of what has been completed so far and an option to continue where you left off, to start over or review what you have already entered. TurboTax provides a “Continue Return” button, which takes you to the last section you accessed. You can also choose to go to a specific section.
The first step for both TurboTax and TaxCut is to create a user ID, so that you can store information for later use.
After agreeing to licensing terms, simply choose a user name and password, select and answer a security question, enter a valid E-mail address, and you are ready to start.
Importing Personal Information
After logging on to both TurboTax and TaxCut you can begin to enter your “Personal Info” in the identically named sections.
If you used TurboTax Online last year and you use the same user ID and password, the program will automatically transfer last year’s information and ask you if you want to use it. If you used the software program, you can import the saved data from your computer to the on-line version or the new desktop version. TurboTax gives step-by-step instructions for both imports. TaxCut also allows you to import information from last year’s tax return. You can import data from either TurboTax or TaxCut software or from one of TaxCut’s on-line versions. If you’ve never used either tax preparation program before, you will have to enter all of the data by hand.
Entering Personal Information
TurboTax starts by asking “What’s New for You in 2007”? A number of tax-affecting situations are divided into categories: My Home (buying, selling or refinancing your home), My Marriage (getting married, divorced, or a spouse who passed away), My Family (a new baby, kids in college, financially supporting a relative), My Jobs (changing jobs or retirement), My Rentals (buying or selling rental property), My Business (starting a business or becoming an independent consultant or contractor) and finally My Investments (buying or selling securities or participating in an employee stock plan).
After you check the appropriate boxes, TurboTax asks some more in-depth, but basic, questions related to the choices made above.
Next, TurboTax will give a brief summary of the possible tax implications for each scenario with links to more detailed information.
Finally, the program asks for personal information like your name, birthday, occupation, Social Security number, etc. It takes you through a few pages of questions about your marital status, dependents, military status and state of residency. Based on the answers to these questions, the program recommends a filing status. Finally, you can review your personal information and make changes before continuing.
TaxCut jumps right in and asks you to choose if you are filing as a single person, married and filing jointly, married and filing separately, head of household or if you are a widow or widower. If you are unsure which to choose, you can click “Guide Me” and TaxCut will ask a series of questions to help you pick the appropriate status.
Next, you will fill out personal information like Social Security number, address and birthday. After a few questions about military status and other basic issues that may add to the complexity of your return, the program asks for your current address and state (or states) of residency during the year and your residency status (full or part-time, or non-resident if you worked in one state and lived in another).
Finally, TaxCut asks about dependents. A list of paperwork you will need in order to file your return can be printed. A video of 2007 tax law changes is also included.
The Bottom Line
TurboTax’s set-up is simplistic and very easy to follow. Large, colorful pictures and prominent links to more information and help topics make this step of tax preparation very easy. TurboTax’s first questionnaire can help eliminate a few steps in the declaring income process we visit next.
TaxCut takes a more business-like approach and gets straight to the point. Questions are easy to understand and links to more information are available. Because the program did not ask more detailed questions in this section, slightly more work will have to be done when declaring income. A nice feature is a percent completion bar at the bottom of the screen that tracks how far along you are in completing your return.
For TurboTax, the first step in declaring income is to enter the data from your W-2 form(s). You may be able import your W-2 information from your employer using the Employer Identification Number (EIN). I was unable to import the data because W-2 data for 2007 was not yet available. Entering the information by hand is simple and straightforward. Along with a description of the information needed, TurboTax includes the corresponding number or letter from the boxes on your W-2 form, making it easy to locate the appropriate data for entry. Based on answers provided in the questionnaire in the Personal Information section, TurboTax offers a “Guide Me” option that asks questions and provides forms for the situations noted earlier. You can also enter or edit income information on your own by selecting from specific topics (wages and salaries, 1099-INT forms, investment income, etc.). If you did not denote a certain tax-related situation earlier, you can still add the appropriate information in this section.
If you choose to be guided through the process, TurboTax begins each income section with a summary of what you will be doing along with a list of the paperwork you will need. For your investments, TurboTax allows you to import transactions from Quicken and various financial institutions. Data from Forms 1099-B (sale of investments), 1099-INT (interest earned) and a 1099-Div (dividends received) can all be imported. Because this review was written before 1099 forms were available for 2007, I was unable to import transactions from my financial institutions, but entering the data by hand was very simple.
All data can be edited, deleted or reviewed at any time. While entering the data, you can see how much your tax refund or payment will be. This number is updated each time you make a change in your information.
TaxCut offers step-by-step instructions, but does not always use the question and answer style of TurboTax. The program first lists sources of income broken into categories including common income (W-2, unemployment, retirement plans); business, rental, partnership, farm and royalties; investment income; retirement and Social Security; sales and transfers; and other. You start by checking the boxes of the appropriate income you have received this year. The program then takes you step by step through each of the selected income types. If you need to add an income type later, you can do so from a table of contents with links to each income section.
While TurboTax and TaxCut organize the income slightly differently, the most common income sources are included in both programs. TaxCut includes a few less common types such as Health Savings Accounts distributions, Alaska Permanent Fund dividends and Archer Medical Savings Accounts. Both programs offer the option to add income types not listed.
Unlike TurboTax, you cannot import information from a W-2 into TaxCut, but entering the data yourself is not hard. In keeping with the business-like approach, TaxCut dives right in and asks you to enter information from your W-2 forms. Corresponding numbers and letters from the boxes on your W-2 form are included for easy data entry. TaxCut automatically rounds to full dollar amounts for calculations (rounding up if $0.50 or above, down if $0.49 or less). TurboTax will round numbers that appear on your final federal return form. TaxCut does not have an import option for 1099 forms.
A summary of your income allows you to review and change any information before moving to the next section. TaxCut also includes a continuously updated tax refund or payment amount, as well.
The Bottom Line
TurboTax users have the option to import W-2s and investment transactions, which can be a huge time-saver. Not all financial institutions are included in the import option, but a number of the larger, more popular, banks and brokerage firms are. Also, not all companies will be in the W-2 import database either. For those who can use these options, the time saved is a definite plus. However, you should always compare imported numbers with the tax forms sent to you by the firms.
TurboTax’s question-asking style offers a “hand hold” for those unfamiliar with tax filing. The program is organized and orderly for both the step-by-step instructions as well as the more do-it-yourself “Select a Topic” option. Data is displayed in an easy-to-read format and can be edited without difficulty. If you have questions while filling out the forms, a “Learn More” link can be found next to most terms and questions.
TaxCut’s more business-like approach is very user-friendly, although not as simple to follow as TurboTax. TaxCut offers step-by-step instructions, but also allows the user to jump from section to section. One drawback is that the program goes through, in order, each income type you’ve checked, even if it’s already been filled out. To skip around, you must go back to the table of contents each time. In contrast, TurboTax automatically takes you back to the table of contents after each income section.
Also, at any time if you need help or more information about a topic, you can choose a “Learn More” or “Explain This” link.
One thing missing from TurboTax was an income summary. TaxCut offers this, and it makes reviewing and changing data quick and easy.
Deductions and Credits
TurboTax has the ability to check for over 350 tax deductions and credits. TurboTax combines all deductions and credits into one section, while TaxCut separates them in to two distinct areas. With TurboTax, you have the option to find deductions yourself or to use the program’s Maximize Deductions option, which guides you through a number of deductions and credits you may be able to take based on previously entered information.
If you choose to find deductions yourself, you can pick from 10 topics including home, family, donations, cars, education, medical, taxes paid, retirement and investments, employment expenses and other. You will also find a glossary of deductions and credits for reference. TurboTax lets you know what forms and paperwork you will need in order to file certain deductions and credits. You can view a summary of your deductions, which makes reviewing and editing information easy.
Finally, the Other section deals with tax issues like the alternative minimum tax.
After you have filled out all of the information, TurboTax will review the deductions you are qualified to take. You can also do a “what-if” analysis to optimize some of the deductions by making small changes or, for example, see what additional contributions to a retirement account will do to your return. An analysis for errors quickly searches your return for common mistakes. You are then given an Audit Risk Summary, which tells you if you are at risk for an audit (it ranks your risk from low to high).
You can then print and e-file your return. TurboTax includes a few advertisements for tax professionals and audit assistance that you must view before filing.
TaxCut finds appropriate deductions based on previously entered data. To maximize deductions, H&R Block offers Deduction Pro to all software users for free.
The program starts with a list of forms you will need in order to claim your deductions. A list of common deductions (including IRA contributions, student loan interest, mortgage interest and charitable donations) are shown first along with a “What qualifies” link if you have questions about each deduction.
For less common deductions, you can expand the Other category, which has 13 additional deductions. The first step is to select the boxes that apply to deductions you will take and then follow the step-by-step instructions.
Each deduction type starts with a brief summary of what will qualify for 2007 or a list of various deductions in the category. For example, charity contribution deductions include out-of-pocket money for charities, mileage driven for charities, donated items and a carryover from 2006. A great feature for IRA contributions is the ability to create a history of contributions that can be accessed from year to year if you continue to use TaxCut.
The Credits section allows you to account for child care expenses, tuition, adoption-related expenses, retirement plan contributions and more. Finally, the Taxes section accounts for IRA or pension penalties for excess contributions, early withdrawals or minimum distributions and alternative minimum tax adjustments.
TaxCut then checks for errors and omissions and provides a summary of your return. You can print this page for your records and continue to e-filing.
The Bottom Line
TurboTax searches for more deductions than TaxCut and does so more smoothly than TaxCut (without using the Deduction Pro). Both include new deductions such as the hybrid car and other energy-related credits. TaxCut has a great table of contents feature that allows you to jump from one section to another easily and view the data you have input. This makes updating and adding information simple. TurboTax offers a summary once you have filled everything out and provides links to edit information throughout the process.
TurboTax offers its “what-if” analysis for certain deductions and provides an audit probability, features not offered through TaxCut.
Preparing State Taxes
Both TurboTax and TaxCut have the option to import personal information from the federal form into the state form. A similar step-by-step process is used for state filings.
E-Filing and Printing
Both on-line programs will automatically e-file both state and federal taxes. You can print copies for your records, or you can print copies to mail. You also can elect to have your refund directly deposited into a checking or savings account; if you owe money it can be automatically deducted from these same accounts. This is the quickest way to receive a refund or pay your taxes. The programs both allow you to check the status of your e-filed return.
Both TurboTax and TaxCut send E-mails when all of your data is sent to the IRS and when the return is deposited or a deduction is taken from your account.
Support and Other Web Site Materials
Both TurboTax and TaxCut offer support by E-mail, on-line chat or telephone. On both sites you will also find articles with tax tips such as the effect on your taxes of marriage, divorce, college, new jobs and more. A variety of calculators such as tax estimators and deduction finders are also available at both sites for free.
At any time while using TurboTax, you can “Ask a Real Live Tax Pro” for $29.95.
An interesting feature included in the on-line version of TurboTax is the “TurboTax Live Community,” which allows you to ask questions and answer other users’ tax questions. A box appears on the right-hand side of your window with links to ask, answer and view questions. You can also access this feature if you are using TurboTax’s Premier desktop software by creating a username and password at the TurboTax Web site.
If at any time you have a question about what to choose or enter, TurboTax offers an “explain this” button. A small window pops up with a brief explanation.
You can also get advice and technical support for program use from the “Support” tab on the TurboTax home page. Answers to frequently asked questions are divided into categories, as well as listed by the product you are using. E-mail questions are typically answered within 24 hours. A phone number for technical support is available as well.
TaxCut offers answers to frequently asked questions and an extensive Help section divided into categories for easy searching. TaxCut also allows you to “Ask a Tax Advisor” once for free. These questions are submitted by E-mail, or you can submit your phone number to receive a phone call from a professional. E-mails are typically answered within one business day.
While using the TaxCut program, commonly asked questions related to the topic you are working on appear on the right-hand side of the screen.
You can also get support at the TaxCut Web site from the “Customer Support” area of the site. After you choose which product you are using, you can browse a list of topics. Representatives can be contacted via phone or live chat during business hours.
Both TurboTax and TaxCut offer similar tax preparation programs. TurboTax is highly simplified by using colors, pictures and a question-and-answer interview-type format. TaxCut offers step-by-step instructions for data entry. Each program makes filing taxes simple.
A great feature in TaxCut is the summaries for each section—personal information, income, deductions, credits and taxes. This program also has a “Take Me To” button, which delivers you directly to the table of contents with links to each of the sections and data summaries. TurboTax presents a summary of each section as well, but you must expand specific sections to see the actual data you entered. The concise nature of TaxCut’s summaries helped when checking and reviewing data entry.
TurboTax does have a “Topic List” option that can be found in the Tools section. This allows you to move more easily from section to section if you need to update or review data. Both programs offer error checking as well as deduction finding. TurboTax “finds” appropriate deductions more easily than TaxCut, but both will account for a variety of deductions and credits and each includes a miscellaneous category.
Because a number of forms were not available as of this writing, a simple test using each program to complete a basic tax return was done: filing as a single person, with one W-2 form, one 1099-INT for interest earned, one 1099-Div form for dividends paid from a brokerage account, interest paid from a student loan, property taxes and mortgage interest paid and charitable contributions. Both programs returned the exact same amount for the refund.
Overall, both programs are easy and convenient to use. A tabbed window in each program helps you jump from section to section with ease. TaxCut lets you know which sections have been completed by filling in a green box on the table of contents, while TurboTax labels sections you have been to as “Revisit” (if you’d like to make changes) and labels those you have yet to visit as “Start.”
Table 1 gives a side-by-side list of the features of each program for easy comparison. However, the decision between these two programs is really a matter of personal choice, as both offer similar set-ups and charge similar fees. TurboTax’s help areas are a little more in-depth and would be a better choice for the taxpayer who is unfamiliar with filing. TaxCut’s table of contents format allows you to easily jump from section to section, which is good for the more seasoned taxpayer.
|Table 1. Comparing TaxCut and TurboTax|
|H&R Block’s TaxCut Premium (federal & state)||TurboTax Premier by Intuit (federal)|
|$69.95||Cost of Software||$74.95|
|X||Import last year’s data from TaxCut and TurboTax||X|
|X||Import tax information from software||X|
|Import data from financial institutions||X|
|Import W-2 Forms||X|
|X||Transfer data from federal return to state return||X|
|X||File returns for multiple states||X|
|X||Automatically checks for applicable deductions||X|
|What-if analysis for deductions||X|
|Printing and Filing|
|X||Deduct e-file fee from refund||X|
|X||Check status of e-file||X|
|X||E-mail confirmations of IRS reciept||X|
|Technical/User Support Features|
|X||Ask a tax professional||X|
|X||Phone/on-line chat with company reps||X|
|Ask, answer and read other user questions||X|
|Calculates audit risk||X|
|Additional Web Site Materials|
|X||Tax articles, tips and calculators||X|
|Minimum System Requirements|
|OSX 10.3.9+||Mac||OSX 10.4+|
|IE 6.0+, Safari 1.3.2+||Internet connection||IE 6.0+|
|170MB||Hard disk space||265MB|