What’s the Best Tax Prep Software?

77 Responses to “What’s the Best Tax Prep Software?”

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1. 51
   Bruce Says:
   February 21st, 2009 at 11:07 am

   This year I did my federal and state taxes with both TaxAct desktop and TurboTax Deluxe Online. TurboTax has a better quide through and seems to ask more questions, and I could import the data from my financial investment houses.

   I had one problem with TaxAct and two with TurboTax. The big difference was that one of the TurboTax problems I was not able to correct.
   The TaxAct problem was that my real estate taxes were not carried over from the federal to the state. It was corrected simply by entering the value in the state form, and then it made all the right uses of it.

   Both TurboTax problems had to do with the imported data, and it may be that the problem started with the financial investment house. It might also be that these would not have occurred with the Premier edition. The one that I could correct was that when investments were sold, only the sold price and date were reported. Thus, it was capital gains income for the full price of the sale. TurboTax told me nothing about that, even though it might have when I ran the review, but I saw it first.
   The other TurboTax problem was similar to TaxAct’s problem. Tax exempt dividends were carried to the state as fully exempt. I was not asked to indicate what part of the income was for my state. With US obligations on other dividends, I was not asked, nor saw, how to specify what portion was tax exempt in my state. If they were not imported, that may have happened when I entered the data, as I’ll explain. Being reported fully exempt, that made my taxable income much less than it should have been for the state.
   I manually entered the tax exempt income, and was given an opportunity to divide it among states. It did not change the federal tax, it also corrected the state tax, but my tax exempt reporting on the federal was double what it should be (imported plus manual). The details only showed the manual reporting, not the imported, for the tax exempt dividends.
   This made the results unusable for reporting to the IRS.

   One area that both TaxAct and TurboTax Deluxe have a problem with, and TurboTax is worse in how it is handled, is tax exempt investments as they apply to the state. You have to do the calculations and enter the dollar portions that are taxable and tax exempt. As I remember from a few years ago, TaxCut let you enter either the dollar amount or the percentage. The percentage would be taken directly from info you receive from the investment house. For the dollar amount, you have to calculate it yourself, which is what software is good at.

2. 52
   Bob Meighan Says:
   February 21st, 2009 at 2:32 pm

   Bruce… If you follow through to Final Review, TurboTax flags all imported stock transactions that don’t have a cost basis assigned to them. As you may know, not all brokerages provide cost basis information on shares sold.

   Bob Meighan
   VP, TurboTax

3. 53
   Bruce Says:
   February 21st, 2009 at 4:19 pm

   Bob,

   I had mentioned that TurboTax might mention it in the review, but that I caight it before that. I also mentioned that it might be the fault of the financial investment house, but they did provide the cost basis and date acquired for these items (CDs) in the 1099 that I received. I also thought that the Premier edition might do better in the transfer of the tax exempt dividends to the state, but if it does, then the deluxe edition should flag it to let me know. Again, I thought that could be how the financial services firm indicated the tax exempt dividends, but I found no way to override it. And thanks, Bob, for your comments.

4. 54
   Cindy Says:
   February 26th, 2009 at 7:57 pm

   Which Tax program would be the best for a very small S Corporation business?
   We’ve had an accountant file the taxes for the last few years, but he seems really expensive, for such a small business as ours.We fill out his forms with all our numbers and then he files them and has us mail the papers. He doesn’t give us any advice about anything, we only see him once a year and he charges us over $500 to do our taxes.
   I think we can do this ourselves with the proper software. We’ve used TurboTax in the past for personal taxes and for a sole proprietorship business, and it was easy to use and really had no major problems with it.
   We use Quickbooks for our accounting.

5. 55
   Bob Meighan Says:
   February 26th, 2009 at 11:02 pm

   Cindy… Since you’ve had a great experience with TurboTax for your personal taxes, seems like using it to do your S Corp makes sense (you would use TurboTax Business). It too is easy to use. If your accountant is just filling in the forms, than it’s time to move onto tax software like TurboTax.

   Bob Meighan
   VP, TurboTax

6. 56
   Wayne Bartling Says:
   January 24th, 2010 at 11:06 pm

   I have used TaxACT but will not use it again. I bought the deluxe plus state download version, which they claimed included a free federal e-file, but when I filed, they charged me for both the federal and state e-file. They are dishonest.

7. 57
   Darryl Says:
   February 7th, 2010 at 12:50 pm

   I used tax prep software in the past, and then a friend suggested using an accountant, and I must admit, received a substantially higher return.
   I’m a bright guy, and I noticed for the past two years I’ve used him, he is using some form of software, since I bring him all my paperwork, he inputs, asks me a couple of questions about expenses and then prints everything out.
   Here’s my question, I’m a teacher and do consultant work for a couple of foundations that give me 1099s for filing. We programs would allow me to file?

8. 58
   Bob Meighan Says:
   February 7th, 2010 at 1:04 pm

   Darryl… The output you get is only as good as the quality of the input. One advantage of TurboTax is that by asking you a few questions upfront, it determines which questions to ask. Then at the end, it will again ask you about potential deductions or write-offs you may have missed. Your situation is pretty straightforward and TurboTax Deluxe will easily handle your situation.

   Bob Meighan
   VP, TurboTax

9. 59
   Bruce Says:
   February 7th, 2010 at 8:12 pm

   I used both TaxAct and TurboTax Deluxe this year. I was again satisfied with TaxAct, but TurboTax was very disappointing. Maybe I’d be told to use TT Premier, but if that was needed, Deluxe should tell me it won’t handle my entries properly, rather than just a general recommendation before I start entering data.

   My experience with Turbo Tax this year has been disappointing. First, it takes a long time to open the program, followed by a long time to open my current tax return. It was also a huge memory hog as I went through filling in the answers. I am using a 2.8 GB dual core PC with XP 2 and plenty of memory.

   Then is its handling of line 10 of the Federal 1040. This is for state tax refund. It uses a different worksheet than is used in the 1040 instructions. Maybe it is valid to use, but there is nothing that indicates why this worksheet is used while the instructions refer to 2 options. I certainly do not want to file a form using data I cannot prove why I used it.

   I found that some of my entries for dividends kept disappearing from the summary. Sometimes they were there and sometimes not. This was on the page where you click on ‘update’ from the ‘Your Income’ summary.

   The next area is the handling of Tax Exempt interest dividends. These were fine for the federal tax, but some of it is taxable and some not for my state tax. It did not provide me with a way to specify that some of it was taxable for the state. Everything was treated as tax-exempt.

   It did not point out that it was providing me with the Making Work Pay Tax Credit. I did find that it took it, but TaxAct told me about it during the Q&A.

10. 60
    Bob Meighan Says:
    February 8th, 2010 at 6:53 pm

    Bruce… Thanks for taking the time to provide you detailed feedback. Several points I’d like to make:

    1. Performance is very subjective. While some may have slow performance (as you did), for the most part this has not been an issue with the majority of our customers.

    2. Our worksheet for state refunds may not mirror the IRS worksheet, but the advantage is that it is accurate in all situations. I can almost guarantee you that others’ worksheet does not correctly do the calculation in all situations. You could end up paying more than you should by using the others. In fact, the IRS will frequently assess taxpayers in a state refund situation (because even their systems are not always right). We’ll send the IRS worksheet our worksheet and they accept our results.

    Some of the dividends may not appear where you expect them because they need to be accounted for differently depending on the nature of the dividends (tax free, nominee, capital gains dividends, and some “dvidends are actually interest income, etc.). I am not aware of a single instance where the dividends have not been fully accounted for and certainly don’t know of any case (other than yours) where the dividends disappear.

    As for the specific handling of dividends for state purposes, the taxable status of them is usually handled at the state level if the nature of them is unique. In other words, some of the normal rules would be applied automatically by TurboTax. Also, don’t get confused with interest income where many states do have specific rules based on the source of the interest income. In those cases, we ask about that immediately after you enter your interest income.

    The Make Work Pay Credit is always displayed at the end of the deductions area even if you take no deductions. It is hardcoded so that it can’t be skipped. In that section, TurboTax will tell you if you qualified or not. It is also displayed in the Federal Review summary.

    I hope this information helps.
    Bob Meighan
    VP, TurboTax

11. 61
    Arty Says:
    February 15th, 2010 at 6:35 pm

    Bob, thanks for replying to all questions on this forum

    I have done some research on what sources to use: TT, Taxcut, Taxact, etc. I have read many bad reviews on some other sites when it comes to TT not fulfilling their promise on the free version. They state that the Turbo tax site is deceptive because they state the federal e-file will be for free than they charge you at the very end. This is after one has opted out of the upgrade and pushed the ‘no thanks’ button.
    I understand your answer will be ‘biased’, however please explain how this could be possible? (pertaining to some possible deceptions that one ends up paying for the service).
    Im looking to using your site, (ive read some pretty good reviews here as well), but want to use the free service now since I’ve been unemployed and just started working. I hope to use your purchased services next yr. for my business but am not sure.
    please advice, and we are appreciative of your answers.

12. 62
    arty Says:
    February 15th, 2010 at 6:38 pm

    …cont. also will your state filing be decreased in the near future, or will they be going up from $30.00?
    also, by using a site like yours, will one still need an accountant at all or will this suffice?
    thank you

13. 63
    Bob Meighan Says:
    February 15th, 2010 at 6:59 pm

    Arty… Thanks for giving me an opportunity to respond. There is much misinformation out there and one of my jobs is to ensure factual errors are pointed out. You and others can make your own judgments/conclusions. By the way, my response here is cut from somewhere else (??). So here it is.

    ——
    I do take exception to suggestions that the fees to upgrade are not adequately disclosed. In all cases, the user MUST agree to upgrade before TurboTax does any upgrade. Furthermore, the cost are always clearly disclosed on the same page. In fact, in almost all cases the price is in bold. Furthermore, if the Free version does not support a particular form or schedule, TurboTax gives you the choice of TurboTax Basic or the product that is more appropriate. Again, you have the option to choose the one best for you.

    Listed below are links to illustrate the upgrade screens one would see in the TurboTax product. I wish I could post the screen shots here, but I don’t think that functionality exists.

    http://www.screencast.com/t/YmIxYTM2MTEt – This screen shows the upgrade benefits of going from Free to Basic.

    http://www.screencast.com/t/ZjA0ZjAwMmMt – This is another screen that shows the benefits of Basic. Notice that the price is clearly disclosed (in bold) and the option buttons clearly labeled.

    http://www.screencast.com/t/MDI0N2M1Y – If Free doesn’t cover your situation, TurboTax gives you the option of Basic or the product most appropriate. Notice that we give you the least cost option as well as the one most appropriate. There is no hard sell to push you into the higher priced product.

    http://www.screencast.com/t/ODg4NDNhO – Same situation, but this screen shot shows how Deluxe will help you maximize your deductions. Again, the price to upgrade is bolded and the option buttons clearly labeled.

    I hope these screen shots are sufficient for you to reach your own conclusion.

    Bob Meighan
    VP, TurboTax

14. 64
    Bob Meighan Says:
    February 15th, 2010 at 7:05 pm

    Arty… If you’re using the TurboTax Free Edition, state costs $27.95. As you may know, prices normally go up around the last 2 weeks of the tax filing season. For those customers who have already started a return, we always send them an email encouraging them to finish their return prior to the price increase (this again shows that we do try to be ethical and transparent in everything we do). Other than this customary price change, we do not disclose future price increases/decreases– primarily for competitive reasons.

    I hope this information helps.
    Bob Meighan
    VP, TurboTax

15. 65
    arty Says:
    February 15th, 2010 at 8:11 pm

    Bob, thks for your reply on my 2nd question.
    could you elaborate on the 2nd to last of the questions?
    thks again

16. 66
    Bob Meighan Says:
    February 16th, 2010 at 1:12 am

    Arty… Sorry I overlooked the easiest of questions. The answer is No, you will not need an accountant unless you have a very complex return that has something like lots of state returns, lots of rental properties, or you just don’t have the appetite to pay attention to details. While TurboTax can do these returns, the risk of you missing something is real. That’s when a CPA is called for. The vast majority of Americans would have what we consider to be very simple returns (even though they may believe otherwise).

    Bob Meighan
    VP, TurboTax

17. 67
    Bruce Says:
    February 21st, 2010 at 8:32 pm

    Bob,

    1. A possible reason I found Turbo Tax to be slow starting is that if I remember correctly it wanted to start some processes at startup, which I disallowed via WinPatrol. There is no reason to have a tax program running something all the time.

    2. I’m sure Turbo tax worksheets are approved, but Publications 17 and 525 and the 1040 instructions referred to 2 possible worksheets, and the one used by Turbo Tax was not one of them. I could not find the reasoning for some of the preliminary numbers used before starting the worksheet. It seemed to be a determining a portion of the total refund that was applicable.

    3. The problems with the dividends seems to be related to downloading the numbers from my financial institution. I found tax exempt funds with both the regular dividends and tax exempt dividends. Not all were with the regular dividends, they showed the dividends were not included in the total, and I could exclude US obligations, which is not appropriate. Under tax exempt dividends, it seemed that I would have to enter them twice for the portion that was tax exempt for the federal only and for the portion that was tax exempt for the state and federal. It could have used the same method used for excluding US obligations, but didn’t. Thus, downloading it didn’t work well for the tax exempt portion. I don’t know whether it is the way the institution codes it or it is how Turbo Tax handles it. It would have been better to do it manually.

    There was no capability to modify these numbers at the state level. It did not show the interest and dividends, just capital gains.

18. 68
    Bob Meighan Says:
    February 21st, 2010 at 9:36 pm

    Bruce… We support OFX as the standard for downloading transactions from financial institutions. This is an industry-wide standard and it sounds like your financial institution is not writing out this file correctly. By the way, I cannot think of any situation where you need to modify dividends/interest at the state level. This should be done at the federal level.

    Bob Meighan
    VP, TurboTax

19. 69
    Bruce Says:
    February 21st, 2010 at 10:45 pm

    Bob,

    Thanks for a quick reply again, on Sunday. I only said that about the state level because you had written: “As for the specific handling of dividends for state purposes, the taxable status of them is usually handled at the state level if the nature of them is unique.” Maybe I misinterpreted that.

20. 70
    Bob Meighan Says:
    February 22nd, 2010 at 10:12 am

    Bruce… You are correct and I am somewhat inconsistent. Let me clarify. In almost all cases, the specific tax treatment of div/int is normally identified in the federal program. There may be a few states that have such unique rules for div/int that int those few states TurboTax will ask about this information at the state level.

    Bob Meighan
    VP, TurboTax

21. 71
    Bruce Says:
    March 5th, 2010 at 2:20 pm

    Previously I mentioned problems using Turbo Tax. Those problems all came from the getting the investment tax returns from the financial firm. Tax exempt dividends were listed as interest instead of dividends. Thus I could not separate what was tax exempt for fed only and what for fed and state.

    State tax deductions for disability insurance and unemployment insurance were given a different name (code?) from what Turbo tax recognized as to apply to a tax exemption.

    Investment sales did not include the date of buying and the cost, even though the financial institution has that information. This is no different than what is provided by them in your 1099-B, but when you do it automatically you don’t see the entry. I’m sure Turbo Tax would flag that when you do the alerts, but before that I ended up with the total sale as income, not just the profits.

    Once I deleted these entries and entered them manually in the right location I discovered how the state tax refund was handled differently. I had said it was using a different worksheet. It excluded the refund to tax paid after 12/31/2008 from income. This same amount, though, was excluded from the tax deduction on Schedule A. Thus the final taxable amount was exactly the same as including that portion of the refund. There may be other consequences, say for next year, but none for this year.

    Thus, downloading the data from your financial institution may cause more headaches than it is worth, depending on the type of investments, the financial institution, etc. Thus the problems may not be Turbo Tax’s fault. The only annoyance is having to enter the tax exempt data twice: once for the amount that is fed exempt only and once for the part that is fed and state exempt. Turbo Tax does tell you that this needs to be done.

22. 72
    Bob Meighan Says:
    March 5th, 2010 at 2:28 pm

    Bruce… I appreciate the update. It’s unfortunate that the broker’s data wasn’t cleaner. That part is beyond our control (although we do flag transactions with incomplete information like cost and purchase date). As others should know, TurboTax uses an industry-wide import/export specification known as Open Financial Exchange (OFX). This is in industry standard, not a TurboTax specific one. By using this specification, we can support any broker who also supports this OFX standard. We write our code once and it works for any financial institution that adopts OFX.

    Bob Meighan
    VP, TurboTax

23. 73
    Robert Rossi Says:
    March 13th, 2010 at 11:46 am

    I’m trying to make the switch from TaxCut to Turbo Tax this year. Having used TaxCut for four years, last year I found several errors in TaxCut’s calculations, some the result of poorly worded questions, others just bald errors (most were around a rare and complicated situation, though: overcontribution to and subsequent distribution of the excess from an HSA).

    My father took the plunge first, but could not get his prior year data to transfer at all. I’m having more luck with that issue, but am still finding myself having to (re-)enter all previous year depreciation data by hand. Bob, do you know if that is something the Premier version would import automatically? (We have the Deluxe version…and this version business is something that takes some getting used to.)

    So far, Turbo Tax asks better-defined questions and offers more concrete advice (expense rather than depreciate equipment under $100, for example). I may just still be getting used to it, but I am finding it a bit harder to puzzle out where a given number came from in Turbo Tax, however. I really like the option to enter only the business portion of any expense (like property tax), but find that in some cases Turbo Tax isn’t great about reminding you to enter only the personal portion later on (or possibly it wants you to enter the whole amount, and will subtract the business portion – it’s unclear to me…hence the need to track back where certain numbers are coming from!)

    All in all, I’m favoring Turbo Tax for the marginal price difference…but have considered going with
    https://www.freefilefillableforms.org/
    instead in times of frustration (with both TaxCut and Turbo Tax).

24. 74
    Robert Rossi Says:
    March 13th, 2010 at 11:56 am

    Bob, you wrote:
    “One tip that might help you and others see the interaction/interplay between your responses in the interview and the forms is to use the Split View mode (a button at the right hand side of the screen). Split View allows you to view the interview and related form simultaneously. As you answer the interview question, you response is immediately reflected on the tax form. This is a very helpful way for taxpayers to better understand how their answers affect the tax forms. (Although Split View is a new feature this year, its functionality has been around for at least a decade. To access it in 2007 and earlier TurboTax products, you would click on the Show Forms button at the bottom of the screen.)”

    Is this a feature only available on certain versions? I have a “Forms” button at upper right, which lets me switch between forms and interview…but I can’t find any side-by-side mode that lets me see both the interview and the form at the same time…ah, but wait. I do have a button at the bottom (“Show Form”) that does the trick…if I’m at a point in the interview that corresponds to a specific form (that wasn’t the case when I tried finding it the first time!)

25. 75
    Bob Meighan Says:
    March 13th, 2010 at 11:20 pm

    Robert R… Depreciation conversion is not supported in any version, so stick with the TurboTax version you have. TurboTax will tell you when you need to enter 100% or when you’ll need to enter the personal portion on Sch A. Just follow what the interview tells you.

    The Split and Forms views are available in the CD-based versions of TurboTax. As you found out, the split view is accessed by clicking on the Show Form button/link at bottom left (when it’s available).

    Your acknowledgment that TurboTax is much richer and refined in its guidance and clarity are points often overlooked by taxpayers looking for a tax software program. Thanks for the feedback and making the switch.

    Bob Meighan
    VP, TurboTax

26. 76
    Robert Rossi Says:
    March 20th, 2010 at 4:16 pm

    Well, golly. I want to follow up here for anyone still considering which direction to go with tax preparation (it’s getting late, though, folks!).

    First, either I was half-asleep when I ran through it the first time (possible, I’ve a one-year-old) or Bob saw to it that the issue I mentioned above (about whether to enter all or part of things like property taxes and mortgage interest) was fixed…but the updated version I’m currently running makes it clear as day what to do! If that’s Bob’s work, it’s an impressive example of active quality improvement! (If it’s my failing…it shows you can’t trust just any moron who posts on the internet.) The only remaining fuzziness involves a question about whether the amount you are entering matches that on your 1098: I could see someone checking yes for that box when they shouldn’t.

    More broadly, Turbo Tax is giving me much better and more concrete advice concerning rental property improvements (asset class selection and expensing vs. depreciating). The helpfiles are better, the questions better worded, and the examples more expansive than those in TaxCut – and this in the Deluxe version, which ostensibly doesn’t help you much with rental property stuff. It leaves me curious what the Premier version actually does better or differently, tough.

    I’m wrapping things up now and will comment again if I find anything significant to say about the accuracy of the result or the e-filing process…but at this point I’m finding Turbo Tax very well worth the slightly higher cost, when compared against what used to be called TaxCut (now H&R Block something-or-other…guess they are trying to emulate Prince…er…the artist formerly known as the artist formerly known as Prince).

27. 77
    Robert Rossi Says:
    March 27th, 2010 at 7:25 am

    I remained thoroughly impressed with the Federal version of Turbo Tax through to the end of the (in my case, e-filing) process. It explained things well and as best I could tell calculated everything correctly. It slightly increased my refund by giving me better information than TaxCut did last year about the extent to which my state auto license tab fees were deductible.

    The state version of Turbo Tax (MN, in my case)…not so much. Granted, my state is quickly going to the dogs, and among the signs is a tax code that went from simple and logical to dismally stupid, rivaling the CA returns I had to do while in grad school. The forms and instructions are now daft. I don’t know if that’s an excuse for TurboTax basically copying those instructions verbatim into electronic form, though. Part of what I pay for in a tax program’s interview is to translate those questions into English for me. (An egregious example question from the interview: “You claimed special bonus depreciation on items on your federal tax return. Would you like to limit special depreciation allowance for all activities by suspended passive and at-risk carryforwards?” I love that TurboTax gives me the option, TaxCut likely wouldn’t…but…huh? Talk about tax preparer geek-speak!) I also found a few (typo-like) errors, one serious enough for me to report (it directed folks to the wrong line on a prior-year form to get a needed amount…and was not fixed a week later) – this one month before the filing deadline, when I’d like to hope things had been vetted carefully. Put bluntly, all the state version did for me was save me having to enter some numbers, by transferring them for me from my Federal form. It would have been just as easy to fill out the paper form myself, short of that. I haven’t yet seen this year’s TaxCut MN state, but I have access to it and will try to compare; last year’s TaxCut MN state was definitely stronger than this year’s TurboTax MN state offering.

    All told, though, I still plan to plunk down a bit of extra moolah for TurboTax next year, unless the pricing structure of the competitors changes markedly.

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