TaxCut Vs. TurboTax: Which Tax Program Is Better?

It's time to collect all your receipts, checks, and W-2s again. If you haven't already tried one of the do-it-yourself tax preparation packages, maybe this is the year you decide to take the leap. (You may even be eligible to file online, for free.)

In years past, you had to visit the local store, or at least order your CD copy of software online, and install it on your own computer. But the growing trend of SaaS (software as a service) has taken hold of the tax prep industry. As we found out, it's just as (or maybe even more) convenient to simply create an account online and start filling in the blanks.

We hooked up with both H&R Block's TaxCut and Intuit's TurboTax to see what differences these industry-leading applications might have in store, and if the online experience held up to the traditional installed software expectation.

Our "normal" family consisted of Wanda Refund, head of household, Mac A. Refund, her husband, and their two year old son, Justin Refund. Mom and Dad both work outside the home, have no other income, just started their retirement investments this year, and pay for child care while they are at work.

The bottom line is that both TaxCut and TurboTax crunched out the exact same refunds when supplied with identical information. Along the way, there were some differences worth noting, and some that might make a difference depending on your familiarity with the tax preparation process. But in the end, we were able to file both Federal and state tax returns. The Federal return can be filed electronically, while sending state returns electronically varies on a state by state basis. TaxCut
H&R Block's TaxCut is available in a range of options. The Basic version sells for $14.95 and includes electronic filing, but does not include state tax calculations. The Premium version sells for $19.95 and adds access to the company's "Ask a Tax Advisor" feature. We chose the Premium + State version, priced at $44.95 since we knew the Refunds had to file a state return, and would likely need some help along the way.

We were able to create an account and start the software easily, and were presented with what amounts to an interview, collecting the information about the Refunds. If the Refunds had used the service last year, they could have imported the previous year's information to shortcut the process. TaxCut also provides a facility to import last year's information from TurboTax software, if that applies.

TaxCut makes the process of filling in the information simple. The browser window always shows how much you will need to pay, or the refund you can expect in the upper right corner. Transferring numbers from the W-2 to the boxes in the browser is simple enough to be boring. The process is identical to copying the same numbers to a paper tax return, but easier to correct if you make a mistake. In fact, even after you've completed the entire return, (but before you've printed or e-filed it) you can revisit any previous page and change your entries.

TaxCut's Online Help Not Much Help
We found the interview process to be clear and understandable, with help sections along the way. The link to pose questions to a professional tax advisor was always close at hand. We posted a question of our own, and were assured we would receive a response in about an hour. Disappointingly, the response never arrived, and we were left feeling that the extra $5 a user might spend to upgrade from the Basic version to get professional help could have gone to better use.

Completing the Refund family's state tax return was eased by the fact that TaxCut used the information we had already entered for the Federal return. We only had to answer those additional questions that were specific to our state. Intuit's TurboTax
Like H&R Block's TaxCut, TurboTax offers a range of capabilities, starting with a free version that may be useful for those filing 1040EZ returns. The Premier version sells for $51.95, and is suitable for more complex returns. We chose the Deluxe version that offers to "Maximize Your Deductions" for $31.95, plus $29.95 for our state filing. The e-fling fee is free. All TurboTax versions include e-file capability. TurboTax also allows you to "Start for Free," and in fact, it's possible to complete the entire data entry process. Of course you don't get to print or e-file your returns until you pay up.

TurboTax's interview process was easy to work through. If you are familiar with Intuit's Quicken or QuickBooks, you will be familiar with the nicely designed visual presentation of the online version of TurboTax. Like TaxCut, TurboTax offers to import last year's data (if you used TurboTax). It also offers to import your information from Quicken... nice to know that all that effort you put into entering checks and categorizing all your expenses can be used to good purpose.

TurboTax guided us through the data entry process, all the while showing us how much we owed, or would receive as a refund at the top right corner -- much like TaxCut.

Online, Interactive Help For Filers
We found the interactive help that is always available, to be actually helpful. Intuit supplements its professional staff with Live Community -- a tribe of fellow TurboTax customers who answer each others' questions in a Wikipedia-like model. We posed a question to the system and were immediately presented with a half dozen responses that TurboTax thought might be close to what we were looking for.

In fact, the answers did address our question, even if posed in different terms.

Still, these were answers supplied by non-professionals. They were user-generated answers to questions posed by others previously. So we reviewed them all and concluded that on the weight of majority opinion and the tone of those writing, we got a good answer... immediately. If we had not liked the answers we got, we could have posted our specific question to the Live Community for another opinion, or even sent it off to a professional (for an additional charge), but we decided to stick with the consensus answer.

Seeking Professional Help
Personalized professional assistance is available for from TurboTax for $29.95 per question. The company points out that while the fee is for one single question, there is no time limit on the length of time required. The paid advice is probably the right way to go if you are not convinced by the consensus of the answers you get from the public forum. But in the case of our question, there was enough agreement from multiple people that we felt confident we got a valid answer.

When we completed the Federal return, TurboTax asked us what state we wanted to file in. Like TaxCut, it proceeded to request the additional and specific information required for our state.

The Verdict
Both TaxCut and TurboTax are easy to use, and both calculated the same outcomes for both our Federal and State returns.

Both apps showed us how much we owed, or would receive as a refund at the top right corner, as we worked. While this information is, after all, the purpose of filing taxes, we found it to be either disconcerting or exciting depending on the direction of the money flow. It's conceivable that the pressure of influencing the value could influence various answers along the way, but it's important to provide true and accurate information regardless of the outcome.

If you know exactly what you are doing, and don't need help, you can save about $10 by choosing TaxCut. Remember that we paid for the premium version so we could access the "Ask a Tax Advisor," but never received an answer to our question.

If you're not all that sure of yourself, we suggest spending a little bit more and using TurboTax, where you can use its groupthink feature to get quick and probably correct answers. Alternatively you can pay for personalized help. If you used Quicken to collect your financial information in 2007, use TurboTax and save yourself some keystroking.

If you meet certain requirements, you may be able to use a free version of these tax filing applications. Free Federal Online Tax Filing: 2007
The Free File Alliance is a group of 19 companies that work with the IRS to offer free tax filing to individuals who qualify. Requirements vary by vendor.

Tax filers whose adjusted gross income was $54,000 or less in 2007 can use the IRS's Free File to electronically prepare and file taxes online.

TaxCut participates in the Free File Alliance, offering free federal filing for those under the age of 50 with an adjusted gross income below $54,000 under its TaxCut Free File program. Filing a state return costs $29.95. TurboTax offers free e-filing to individuals who

Residents of 21 states who meet the above criteria are also eligible for free state filing. Those in other states can file a state return for $9.95.

Anyone who opts to file for free must begin here. We did not review any of these free filing options.