Comparing TurboTax and H&R Block at Home
Wednesday, February 24, 2010 at 11:18PM A Side-by-Side Look at Tax Software
By TIM GRAY
TAXES can make people do silly things, like investing in chinchilla and ostrich ranches or, over the last several years, buying a second home — which was a bad move just about anywhere in the United States.
For some folks, buying tax-preparation software may be nearly as wrong-headed.
If you earned less than $57,000 in 2009, you can file free electronically, through the Free File program of the Internal Revenue Service. And if your taxes are complicated, you may be better off enlisting a professional’s help.
But for people in the middle — say, someone with a salaried job but also a rental property — tax software can ease the hassle of filing. Two leading programs, TurboTax and H & R Block at Home, may ensure, for example, that you don’t make the mistakes that afflict many handwritten returns. One in five hand-done returns has a basic error like bad math or an entry in the wrong place, versus one in 100 in electronically prepared returns, said David R. Williams, I.R.S. director of electronic tax administration.
“Software deals with a number of mistakes,” he said. “It also helps with the leaving-money-on-the-table problem. Most people aren’t that familiar with the tax laws, and software can ensure that they take advantage of everything that they’re eligible for.”
About three of every four filers receive a refund, and filing online can accelerate the process. You must use software, either personally or through a preparer, to file electronically, and e-filers can see their refunds in as few as 10 days, Mr. Williams said. Mail filers typically wait at least six weeks.
Before you buy a tax-preparation program, understand that it won’t be a panacea. You still have to keep good records — they matter mightily if you’re audited — and, in complicated situations, you may need to research tax laws yourself. The software can’t tell you whether tuition for your Spanish class is deductible, only that job-related educational expenses might be. What’s more, it won’t ease the headache you may get by trying to find answers on the I.R.S. Web site. The agency provides reams of guidance, but the rules can be murky for people who muck about with them only occasionally — even pros.
H & R Block at Home is the perennial runner-up in tax software popularity, despite Block’s prominence in the walk-in business. The program, formerly called Tax Cut, hasn’t been able to catch up with TurboTax, made by Intuit, the producer of the personal-finance program Quicken.
The programs’ costs vary. At a Staples store in Bedford, Mass., in late January, TurboTax Premier, which also prepares one state return, sold for $89.99. In contrast, H & R Block at Home Premium, also including one state return, cost $59.99 with an additional $10 off, thanks to an in-store coupon.
As of early February, online-only versions of both programs were selling for $49.95 on the makers’ Web sites, but those prepare only a single federal return each. Intuit asked an additional $36.95 for each state return, while Block charged $29.95. The more expensive CD/download versions of the programs permit e-filing of five federal returns and preparation of a single state return. E-filing of the state returns cost an additional $19.95 each with both.
The two companies go to great lengths to try to distinguish their programs. Block stresses the backup provided by its nationwide network of professional tax preparers. Buyers of its Premium edition can receive a phone consultation with a Block staffer. The company will also provide the help of an enrolled agent — someone trained specifically to prepare returns and represent taxpayers before the I.R.S. — if a customer is audited.
Intuit, in contrast, emphasizes the ease with which TurboTax dovetails with other sources of financial data. Quicken users, for example, can transfer all of their information into the program with a couple of clicks.
For basic matters like W-2 income and mortgage-interest deductions, the two programs didn’t differ much. Both guide you via interviews, asking questions to prompt you to provide information. If all goes smoothly, you won’t see actual tax forms until it’s time to print out a copy.
Both also give ample guidance, including pop-up explanations and links to more detailed online help. And both lead you through error checks once you’ve completed your return. Somehow, I accidentally recorded our home’s mortgage interest as a negative number in TurboTax. The program caught that and nagged me until I corrected it.
Over all, I found Block’s explanations clearer but thought TurboTax better handled the recording of more complicated items like business expenses. In Block’s program, a lot of my expenses ended up in a vague “other” category, which made me nervous. TurboTax, by contrast, guided me to various categories of expenses and let me record each item in more detail. Thus, for example, an I.R.S. reviewer could see that I’d bought a new antiviral protection for my computer, not merely “software.”
The biggest shortcoming in each program isn’t what’s in it but what’s not: You’ll have to laboriously enter your personal data. If you’ve used tax software previously, you can transfer some of your information. But you’ll need to update entries to reflect last year’s earnings and expenses, and that takes time.
AS your taxes become more complicated, the programs’ guidance can become less helpful.
My wife and I, for example, moved from Philadelphia to Massachusetts in 2008 and, as a result, paid state and local taxes in several places last year. Philadelphia alone imposes a variety of taxes on the self-employed, and I managed to get tangled up trying to record all of them. In both programs, I had to jump back and forth repeatedly between the interview and the underlying forms to ensure I got them right. In several instances, I had to override the interviews and record information directly to the returns.
Using either program and filing electronically will certainly save time — at least you won’t have to check your math or hunt for the right I.R.S. forms. But neither is certain to deliver you from tax-time stress. It’s the hard questions, like puzzling through the alternative minimum tax, that eat up the most time and cause the most worry. When you grapple with those, you may still be gulping antacids and aspirin come April 15.
Off the Shelf - Comparing the Software - TurboTax and H&R Block at Home - Review - NYTimes.com
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