Tax Preparation Software: Tax Cut, Turbo Tax or Tax Act?
Posted: Tuesday, February 10, 2009
by Mogama
http://www.mogama.info
At the time I migrated to the United States and began to work here, tax software programs began to show up for computer users to file their tax returns on their own. Once I tried my first return on my own computer, I had no appetite for taking my tax documents to a professional.
Why did I choose doing my own taxes via computer rather than going to a tax preparer? For one thing, I love using a computer for just everything that a computer can help me do. I'm waiting for the day when I can cook or bake on my laptop. Secondly, I have had my share of standing in line or sitting and waiting. I have access to my desktop or laptop computer whenever I want. Third, I have no idea what Jackson Hewitt, Liberty Tax Service, H & R Block, and the other walk-in tax preparers charge for their services, but I decided I did not want to pay them, and I want to keep more of my refund if I get one. Fourth and most important, doing my own taxes on my computer gives me a lot of control. That control is lacking even if you ask someone at the Salvation Army to prepare your tax return at no cost. On my computer, I can take as long as one to two weeks to do my taxes. I'm in the driver's seat from start to finish.
Thus, from the 1990s until now (2008), I have tried/used three tax software programs, and for the most part I've been satisfied with each program: TaxCut, Turbo Tax, and TaxAct.
TaxCut -- navigation is pretty good
The first tax software I used was TaxCut , made by the H & R Block people. From the start, TaxCut leaned towards the technical side, though in later versions, they tweaked the interview and forms to be more understandable to the regular guy or gal. Currently, TaxCut offers 4 levels of their software:
Judging from the cost, it's no secret why I moved over to Intuit's Turbo Tax , which stepped on the scene to compete with TaxCut. I found Turbo Tax to be much easier in its language, and the audit protection plan, which they added later, made their program very attractive. Turbo Tax offers 5 levels of their tax software:
I was friends with Turbo Tax Home and Business until I heard Kim Komando one Saturday on the radio. Kim hosts The Kim Komando Show, the largest radio show in America on all things digital; where I live, Kim is usually on over the weekend. I'm a Kim fan, so when she highly recommended this free or low-cost alternative software called TaxAct, I was eager to try it. I visited the website (taxact dot com), and that year I filed my tax online without using a CD. Since then both TaxCut and Turbo Tax now have online versions as well. But I have remained with TaxAct primarily because it's as easy as Turbo Tax, and it costs far less. For example, for my 2008 tax return, which I've just filed, the total cost, using TaxAct's highest level of the software was only $18.90, and that includes $5.95 for data storage access for three years! As a returning customer, who signed up early for this tax year, I got a discount on the cost of the software.
Here are TaxAct's 3 levels of the program:
It's that simple and fun! Doing your own taxes on the computer is perhaps the only fun thing about taxes in America. Anyone who can use a computer and get on the Internet can do his/her taxes. Do it one time, and you'll get hooked, once you see that you can actually be in charge of your own taxes.
Why did I choose doing my own taxes via computer rather than going to a tax preparer? For one thing, I love using a computer for just everything that a computer can help me do. I'm waiting for the day when I can cook or bake on my laptop. Secondly, I have had my share of standing in line or sitting and waiting. I have access to my desktop or laptop computer whenever I want. Third, I have no idea what Jackson Hewitt, Liberty Tax Service, H & R Block, and the other walk-in tax preparers charge for their services, but I decided I did not want to pay them, and I want to keep more of my refund if I get one. Fourth and most important, doing my own taxes on my computer gives me a lot of control. That control is lacking even if you ask someone at the Salvation Army to prepare your tax return at no cost. On my computer, I can take as long as one to two weeks to do my taxes. I'm in the driver's seat from start to finish.
TaxCut -- navigation is pretty good
The first tax software I used was TaxCut , made by the H & R Block people. From the start, TaxCut leaned towards the technical side, though in later versions, they tweaked the interview and forms to be more understandable to the regular guy or gal. Currently, TaxCut offers 4 levels of their software:
- Basic Federal + E-file. You can use this program to file 5 federal e-files for $19.95. It costs $29.95 for each state return filed, and $19.95 for each state e-file used. This level is for the person who has a simple return, using IRS Form 1040EZ.
- TaxCut Home & Business + E-file . Here you get 2 programs in 1; you can do 5 federal e-files as well as file business returns for an unlimited number of states. The cost is $79.95. State e-file costs $19.95.
- TaxCut Premium Federal + State + E-file . You get 5 free federal e-files and 1 state tax program for $49.95. State e-file is $19.95.
- TaxCut Premium Federal + E-file. Choose this level if you have investments and you want to itemize your deductions. You can do 5 free federal e-files; the cost is $34.95. It's $29.95 for each state return filed, and $19.95 for each state e-file used.
Judging from the cost, it's no secret why I moved over to Intuit's Turbo Tax , which stepped on the scene to compete with TaxCut. I found Turbo Tax to be much easier in its language, and the audit protection plan, which they added later, made their program very attractive. Turbo Tax offers 5 levels of their tax software:
- Free Edition. You federal tax return is free. Pay $29.95 for state filing. This level is for the tax payer who has a simple return to be filed using IRS Form 1040EZ. Turbo Tax did not have a free edition when I first used the program; the competition has brought this about.
- Business , $109.95 for federal; $49.95 for state. This level is for corporations, partnerships, and LLCs.
- Home & Business , $74.95 for federal; $34.95 for state. This package has a personal return and business return in one. Intuit designed this package for the sole proprietor, consultant, contractor, or single-owner LLC.
- Premier , $49.95 for federal; $34.95 for state. If you own investments like stocks, bonds and mutual funds, and you have rental property, the Premier package is designed with you in mind.
- Deluxe , $29.95 for federal; $34.95 for state. This level is for someone who owns a home, made charitable donations, and has medical expenses.
I was friends with Turbo Tax Home and Business until I heard Kim Komando one Saturday on the radio. Kim hosts The Kim Komando Show, the largest radio show in America on all things digital; where I live, Kim is usually on over the weekend. I'm a Kim fan, so when she highly recommended this free or low-cost alternative software called TaxAct, I was eager to try it. I visited the website (taxact dot com), and that year I filed my tax online without using a CD. Since then both TaxCut and Turbo Tax now have online versions as well. But I have remained with TaxAct primarily because it's as easy as Turbo Tax, and it costs far less. For example, for my 2008 tax return, which I've just filed, the total cost, using TaxAct's highest level of the software was only $18.90, and that includes $5.95 for data storage access for three years! As a returning customer, who signed up early for this tax year, I got a discount on the cost of the software.
Here are TaxAct's 3 levels of the program:
- Free Edition -- federal efile is free; state efile is $13.95.
- Deluxe -- federal filing costs $9.95, and state is $7
- Ultimate -- both federal and state is $16.95. This is the best value if you have investments, if you are a business filer. I use the Ultimate, because it covers everything, including my ministry, which gives my home a business use. Also, unlike users of the Free Edition, I can call TaxAct's tech support, at no extra cost, if I have any questions or doubts; that number is 319-373-4514 , and it is not the same as their order line.
- In the Basic Info section, you will be asked to enter your name, address, dependents, and choose a tax filing status (single, married, etc).
- The Life Events tab covers topics like marriage, divorce, birth/adoption, death, bankruptcy, natural disasters, change of jobs, home purchase, etc.
- In Federal Q & A, you will enter your wages (info from W-2), other sources of income, investments, benefits, adjustments to your income, tax credits, and tax deductions.
- In the State Q & A section, TaxAct will automatically import all relevant information from the Federal section, so you don't have to repeat much of the same info. Then you will respond to some questions specific to your state.
- The Review section will run alerts to find red flags that could trigger an IRS audit. The program will show you how to correct the information where necessary. The review will also compare your return from the previous year with the current year (if you used TaxAct the year before). You will be shown summaries, national averages of tax payers, tax watch, and a feature for you to compare filing status to determine whether you'll pay less in taxes, for example, as married filing jointly or married filing separately.
- In the Filing section, you will choose between paper filing and electronic filing. Decide whether to file an extension or an amendment (change) to your federal tax return.
- The final section called Next Year takes you through product suggestions, and W-4 withholding, if you want to change how much your employer should withhold from your paycheck for taxes. This section is designed to help you plan for the next tax year, so that filing your return becomes even easier.
It's that simple and fun! Doing your own taxes on the computer is perhaps the only fun thing about taxes in America. Anyone who can use a computer and get on the Internet can do his/her taxes. Do it one time, and you'll get hooked, once you see that you can actually be in charge of your own taxes.
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Top-level comments on this article: (4 total)Dear Mogama,I think you write such great, informative articles. Maybe someday I can reach at least half way to your level.Thank youHi there, Linda. I receive and drink in your kind comments like cool refreshment to a thirsty traveler of the Sahara. I'm glad the info is helpful to you. BTW, I filed my federal and state taxes on February 10th, and by February 11th, I've already received email from TaxAct that both of my tax returns have been accepted by the IRS and the state of Kentucky. ~mogama~That is absolutely amazing.
Mogama, very interesting and informative article....I have used Turbo Tax, but the software you speak of sounds great, and I am speaking of the Tax Act...I'm going to have to look into that.....Thanks for sharing this info, I will look into this....sounds allot better....Your fan, and friend in pen......Gary.Gary, I think Turbo Tax is just as good. I chose TaxAct primarily to pay less for the software and for filing the state return. So it's a cost advantage more than it is about features. Thanks for commenting. ~mogama~
Thank you, Mogama. You have just confirmed what I have known for several years. I have been using Tax Act for several years now and it is the best tax software out there. I had previously been taking my taxes to Jackson-Hewitt until I received a letter from IRS saying I owed them $2,227. I took my tax papers and the letter and went straight to my nearest IRS office--I was terrified. When the lady at the IRS office looked over my tax papers, she said Jackson-Hewitt did this? I said 'yes, mam.' She said, do you mind if I re-do these for you; this doesn't look right to me'. I said , please, do. I came away with the IRS still owing me over $200 instead of me owing them. Needless to say, I never went back to Jackson-Hewitt and I was paying them $175. to electronically file for me. Now I pay Tax Act $9. and get back more.Jackson-Hewitt hires school kids to do the taxes--so, I know I can do them better.Thanks for allowing me to vent.SandraWo, wo, Sandra, that personal story of yours is really an eye opener! I've just assumed the Jackson Hewitt people were among the experts. Boy, was I wrong! Thanks for sharing your experience for sure. Enjoy your day, and your tax refund, may I add. ~mogama~
It is true that you can use these softwares to file your own taxes, but only basic taxes. If your taxes are very involved, which I am pretty sure are, you cannot file your own taxes. You need the help of a professional tax preparer.I want to say your taxes are very basic and not involved at all, That is why you can use these software. But you cannot if your returns are very complex. There are tax issues that can leave you scratching your heads and a professional who is well trained in the business is the only one who can help you figure them out.When I hear that I need "a professional tax preparer" I hear a professional who doubts that those who prepared a complicated tax software like TaxAct could not have been professional tax preparers themselves. I'm not sure I accept your premise. As a self-employed person who use my home as office, I think my tax situation is not as simple as you assume. TaxAct has various levels to handle the complex cases. Of course, TaxAct is much cheaper than "a professional tax preparer", and that's really the bottom line of the fight against them. ~mogama~Hi Mogama,
I did our taxes with Turbo Tax for years while we were a Sole Proprietorship all the way up until we incorporated. Then I began using a CPA because there were just too many wrinkles in the tax code for me to keep up with. So I agree with your assessment that those tax programs can handle small businesses.
Also, I found that getting a good CPA is not easy. We found one we used for three years but we had "communication issues" so I switched and ended up having to re-file 3 years worth of taxes to correct mistakes the first one made because he didn't listen when I was talking (I got more than $10,000 back all totalled). So just going to a preparer does not guarantee they'll do it right."...just going to a preparer does not guarantee they'll do it right." Ah ha! I can't prove it, but I think those who design tax software like Turbo Tax, TaxCut and TaxAct consider themselves professional tax preparers equal to CPAs, though their claim may be debatable. Thanks, Jean, for clearing the air with your real-life experience. ~mogama~
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