With the perennial chore of preparing your income tax returns looming, it’s time to decide whether to go with a pro or roll your own return. If you opt for the latter, you shouldn’t proceed without tax-preparation software at the ready. H&R Block’s TaxCut and Intuit’s TurboTax each provide the up-to-date tax expertise and number crunching that you’ll need to minimize your tax due or maximize your refund.
This year TaxCut and TurboTax both offer new features—some of them specific to the Mac, such as the ability to easily backup to .Mac. TurboTax, in particular, has undergone a major overhaul, sporting a brand-new user interface with some appealing innovations.
TaxCut and TurboTax each come in several versions, starting with a basic version for people with simple tax returns and topping out at a full version that will prepare your state tax returns and file electronically. Specifically, TurboTax comes in four Mac versions. The $19.95 Basic targets users filing a 1040EZ or other simple return. The $44.95 Deluxe includes a state return and aims to serve users who itemize deductions, while the $74.95 Premier serves users with investments and rental property. The $89.95 Home & Business is aimed at individuals who are also consultants, contractors, or self-employed. TaxCut offers three Mac-compatible editions: a $19.95 Premium version that offers a federal return; a $39.95 Premium + State version that adds a state return; and a $69.95 Premium + State + E-file that lets users file federal and state returns electronically.
I put the complete version of each through its paces—TurboTax Home & Business from Intuit and TaxCut Premium + State + E-file from H&R Block—with salary and self-employment income, rental property, investment income, and various deductions, depreciations, and other complications you may run into. Each person’s tax situation is different, but by looking at each program’s highest-end option, we can get a view of their respective capabilities and limitations.
While I’m focusing on the desktop versions of these programs, both Intuit and H&R Block also offer online editions of TurboTax and TaxCut, respectively. You can read a review of those two services and other online tax options elsewhere on Macworld.com.
Although both packages deliver a non-intimidating, interview-style user interface chock-full of tax expertise, TurboTax makes it easier to complete your tax return with an innovative user interface features and plainer English. TurboTax also has the better ability to find deductions that can save you money.
The virtual interview
When you first launch either TurboTax and TaxCut, both programs check for last year’s tax return in order to import data. TurboTax only supports its own files and Quicken files. TaxCut has an advantage here, not only supporting H&R Block’s TaxCut and DeductionPro, (a Windows program), but also letting you import Intuit’s TurboTax and Quicken data. Another handy bit of automation that TaxCut features is the ability to import your address from Address Book with one click.
Intuit and H&R Block also do a good job of automatically keeping you up to date. Both applications check for updates whenever they’re launched; both downloaded updates several times during the course of my tests for this review. If you have bought the state versions, they’ll also download software for your state returns when you first launch the program.
Both programs start the interview in a similar manner, providing a screen where you identify major changes to your situation, such as marriages, the sale of a home, a new job, and the buying or selling of stocks. Filling in this screen accurately tailors the interview to your situation, making sure that the program asks you the right questions.
The differences between the two programs begin to emerge once you get past this screen. TurboTax’s user interface feels cleaner and more intuitive than TaxCut’s. TurboTax also requires fewer mouse clicks to do the job than does TaxCut.
For instance, if you have lot of 1099-MISC forms to report for self-employment income, you’ll spend a lot more time in TaxCut clicking through screens. That’s because TaxCut has several screens to get through to enter each 1099. TurboTax only has one screen to get through for each 1099-MISC entry. Click continue, and it brings you right back to add another entry.
TurboTax also makes it easier to navigate your way around the different sections of your tax return. In TurboTax, there’s always a Back button to take you to the previous screen you visited, even if the program has taken you to a different section in the tax from process.
TaxCut doesn’t always provide a Back button to take you to the last screen you were working on. When you find yourself in a new section, you’ll have to use the tabs at the top of the window to find your way back to where you were, often requiring you to click through several screens.
When you quit the application and relaunch, TurboTax also does a better job at getting you back to exactly where you left off.
The ease with which you can navigate through a program is certainly important, but tax preparation earn their keep by correctly assembling your return and saving you money in the process. For this aspect, the nod again goes to TurboTax, which is better able to find deductions for you by asking the right questions.
For instance, in the section on Rental property, Intuit’s program asked questions about items a user might not realize are deductible, such as ink for printers and copiers. In TaxCut, I had to go hunting for a place to enter some deductions, such as phone and equipment expenses for a home office.
At one point, TurboTax informs you that the IRS may not allow part of deduction if you charge too much rent for your rental property. How do you know if you’re charging too much rent? TurboTax offers to look up the current fair market rent for your county.
TurboTax also tends to use clearer language than TaxCut. This is the case for the interview questions, pop-up explanations, and help documentation. TurboTax uses more common English, while TaxCut tended toward more technical language.
For instance, TaxCut explained the term “average basis” for the sale of mutual funds this way: “Add up your total basis in all the shares you owned before the sale, and divide by the number of shares. The result is the per-share basis.” If you don’t know what is the term “basis” means, this explanation isn’t much help.
If you know what “basis” means and know your way around the tax forms, both programs give you the option of checking the actual IRS form that pertains to what you are doing at any given time. You can also enter data directly in an IRS form.
To get to the relevant IRS form, TurboTax has a spiffy new feature that animates the entire window to flip it around to the “other side,” revealing the IRS form. The left pane lists of all forms and worksheets created so far by the interview process. Another click flips the window back around to the interview questions.
TaxCut can also show you the IRS forms, but with a little more work. Two mouse clicks brings up a full view of the pertinent form. To get a list of other forms, you need to go to the Forms menu and choose Open Forms.
You many never use the help system in a word processor, but you will when it comes to tax software. You might not require assistance in using the program, but you will need help deciphering the tax code. You’ll especially need help when you are asked to do more than enter numbers, such as choosing methods of depreciating assets.
Both TaxCut and TurboTax provide ample help in the form of text links next to items and links to the built-in help system, IRS explanations, and online help. TurboTax also has a link to its online discussion forums where you can post a question. Both also offer telephone tax advice for a fee. Clicking a link in the program takes you to a Web page with info about where to call and how much it will cost. Intuit charges $29.95 to answer a tax question; H&R Block phone help is $19.95 per topic. (Note that the charges apply to tax-related questions; tech support questions are free for both programs.)
TurboTax also has links to movies that are like PowerPoint presentations with some illustrative animation. While they don’t impart deep knowledge, the movies are handy for quickly learning the basics about types of income or deductions. A movie on calculating the basis for mutual funds was helpful, providing an example with figures.
TaxCut features informational movies as well, but I never got to see them; a bug in the application brought up an error message whenever I clicked a movie link. H&R Block said it was aware of the bug and plans to fix it in one of the automated updates. However, none of the updates that I downloaded during the course of my testing for this review fixed the problem.
One of the TaxCut updates did fix another bug. When I first started working with TaxCut, it sometimes displayed entries in the wrong place. Some of my office deductions turned up as Farm expenses, and rental income showed up as “Other.” After an automatic update, this behavior disappeared. TurboTax, on the other hand, did not exhibit these or any other problems.
Filing and getting audited
When it’s time to print out your tax return or file electronically, both programs will do error checking to make sure you didn’t miss anything. It’s a useful feature, alerting you that certain information is missing or incorrect.
Again, TurboTax is a bit friendlier, as it asks the error-correction questions in the interview format, while TaxCut displays the IRS or State form. However, both programs can use improvement here, as the explanations as to what was missing or how to correct it were short and technical.
After error checking, you can print your return, or if you have the full versions that I tested, file electronically from within the application. The version of TaxCut I reviewed includes free electronic filing for one federal and one state return; additional e-filing costs $19.95 per return. TurboTax users must pay separate fees to file their returns electronically—$17.95 per e-file for up to five federal returns and $17.95 per e-file for up to three state returns.
TurboTax offers something else—help with IRS audits. Before you print or file, it presents you with an assessment of the risk of being audited. If the risk is high, the program provides suggestions for reducing your audit risk.
TurboTax also asks you if you want to download a free audit application that helps you deal with a letter from the IRS. The Audit Support Center application first shows you the four types of form letters that the IRS sends out. When you select one, the audit application interviews you, informing you what the IRS intends to do and how you would best respond.
The TurboTax Audit Support Center is an impressive little application with much thought put into it. H&R Block, however, goes a step further by providing free audit services if you file your return electronically with TaxCut. You’ll have access to an H&R Block agent, who will advise you on how to prepare for an audit and accompany you to an IRS audit.
Macworld’s buying advice
Both TaxCut and TurboTax offer competent tax preparation instruction and advice, guiding you through the process without requiring you to know which IRS forms to use. This year, however, TurboTax does a better job. TurboTax’s ability to identify deductions is better than that of TaxCut. It also provides a tax prep experience that is simply easier than TaxCut’s.
For more users, TurboTax is the better option and is well worth the extra $20. It will save you time and effort—and maybe even some money.
[John Rizzo has been writing about Macs since 1987. Since 1997, he has published the MacWindows.com Web site.]