Archives for February 2015

Here is my 2014 review of H&R Block Online DIY tax preparation software, to complement my TurboTax 2014 review and TaxACT 2014 review. I filed my personal tax return using each of the “Big 3” and I will try to share the overall experience along with their specific strengths and weaknesses.

Price
H&R Block Online comes in Free, Basic, Deluxe, and Premium tiers. Due to having stock sales but no self-employment deductions, I am going with H&R Block Deluxe Online which costs $29.99 for Federal and $36.99 for State (free state options may be available separately). I am reviewing the more popular online software, not the desktop download software which may be different both in user experience and price.

Tax Situation
Here’s a quick summary of our personal tax situation.

• Married filing jointly, subject to state income tax
• Both with W-2 income, as well as some simple 1099-MISC forms.
• Interest income and dividend income from bank accounts, stocks, and bonds (Schedule B).
• Contribute to retirement accounts (401ks and IRAs).
• Capital gains and losses from brokerage accounts (Schedule D).
• Itemized deductions (Schedule A), including property taxes and charitable giving.

User Interface and User Experience
In terms of overall visual feel, the 2014 user interface is clean and pleasant. If I was comparing with TurboTax and TaxACT, I would say H&R Block is a little less pleasing than TurboTax and a little more pleasing than TaxACT. All of them are perfectly acceptable, but that is my personal ranking. See screenshots throughout this review.

In terms of user experience, H&R Block also uses a question-and-answer format like other tax prep software, but I actually think they have the best layout for intermediate to advanced users (i.e. you’ve done your taxes online before). Before each major section (Income, Deductions, Credits), it present a long checklist of potential items to enter in. You just tick off the ones you need, instead of repeatedly reading a new screen for each little thing and clicking Yes, No, No, No, Yes, No, etc. It know it may sound insignificant, but it really does speed things up with everything on one screen. Here are partial screenshots to help explain:

Importing Data From Previous Years
You can pull up all of your old tax information for free from any of the Big 3 providers (H&R Block, TurboTax, TaxACT) as long as you are using Basic, Deluxe, or Premium (no Free). You may need to have the information downloaded in PDF format. You’ll get filing status, dependents, address, DOB, SSN, etc.

Importing W-2 and 1099 Forms Directly From Providers
Similar to TurboTax, H&R Block also automatically imports many W-2 and 1099 forms. You can pull up W-2 data using your employer’s tax ID number (EIN). My data point: the same W-2 that TurboTax imported, H&R Block did successfully as well (TaxAct could not).

H&R Block does not appear to publish a list of all their 1099 import partners, but I would say it is a little smaller than TurboTax and much more than the 6 partners that TaxACT supports. You just start typing the name and it tries to autocomplete if available:

Here is a partial sampling of eligible financial institutions:

• ADP Retirement Services
• Alliant Credit Union
• Ally Bank
• Ameriprise Financial
• Bank of America
• Betterment
• Charles Schwab
• Chase Bank
• Citibank
• Discover Bank
• E*Trade
• Edward Jones
• Fidelity
• Gainskeeper
• Interactive Brokers
• Merrill Lynch
• Navy Federal Credit Union
• Pentagon Federal Credit Union
• Scottrade
• Sharebuilder
• T Rowe Price
• TD Ameritrade
• TIAA-CREF
• TradeKing
• USAA, USAA Federal Savings Bank
• Vanguard Brokerage, Mutual Funds
• Wells Fargo Bank, Advisors

I’m a fan of automatic import because it both saves time and reduces data entry errors. I did have a couple of hiccups with the import, however. I suspect that the problem is the same as I had with TurboTax – that the file is not ready for electronic import yet even though it is available in physical form. Some patience may be in order?

The Small Stuff

• When entering charitable donations of physical goods, H&R Block did not provide any assistance as to valuing the object. (TurboTax and TaxACT did.)
• When entering my 1099-MISC information, H&R Block quickly allowed me to indicate that it was not a business and instead a one-time event. That saved me from answering a lot of unnecessary questions.

  

• Starting in the 2014 tax year, you’ll have to have health insurance or else pay a penalty. I indicated to H&R Block that I had employer-provided coverage for the entire year, and it did not ask for further proof or documentation.

Upselling and Price Change Tricks?
I was not presented with any upsell attempts to their Premium tier and there were no price change shenanigans, which was nice. They also had no need to offer me $40 “audit protection” because it is already included in the price. H&R Block’s “Free In-person Audit Support” is definitely a differentiating factor for the audit-fearing folks out there. In the unlikely event of an audit, an H&R Block Enrolled Agent will help you communicate with the IRS, prepare for the audit, and will attend the audit with you (though they do not provide legal representation).

The only upsell was for their “Best of Both” package, which for $50 lets you have an H&R Block human discuss and review your return with you:

H&R Block also keeps your past returns for up to 6 years for free, so there is no option to pay more for “data archiving”. Seriously, how much space on a hard drive could it possibly take?

TL;DR Recap
H&R Block did my taxes properly and covered the same topics as their competitors. I actually liked H&R Block’s Q&A format a little better than either TurboTax or TaxACT, assuming you have done your taxes online at least once or twice before; it may save you some time.

I would say that H&R Block Deluxe’s value proposition is this: it offers most of the added import conveniences of the similar TurboTax Premium, all at a fraction of the cost ($30 vs. $55 Federal, both $37 State). If you have a lot of stock sales from a specific broker, sign up for a account (they are all free to try; you only pay when you file) and go straight to the 1099 section to see if the H&R Block supports it. H&R Block also offers free in-person audit support, which costs $45 from TurboTax and $40 from TaxACT.

Bottom line: H&R Block Online offers most of the time-saving features of TurboTax for a lower price ($30 vs. $55 Federal, both $37 State), plus it includes free audit support which costs $40+ with other services.

Having already done my TurboTax 2014 review, here is my review of TaxACT 2014. (H&R Block is next week.) For all three, I will be comparing the far-more-popular online versions.

Price
TaxACT come only in two basic flavors: Free and Deluxe. With the Free Edition, Federal (including e-File) is free, while State (included e-File) is $14.99. With the Deluxe Edition, Federal (including e-File) is $12.99, while State (included e-File) is $7. (The “Ultimate Bundle” is simply getting Deluxe + State for the same price of $19.99; there is no discount.) So if you do want Fed + State returns, the Deluxe bundle is only $5 more expensive than the Free bundle.

They also have a promotion where if you import a PDF copy of your 2013 TurboTax or H&R Block return, you can get TaxACT Free Federal + State for $5, a savings of $9.99 off the regular price. Similar $5 deal for US Armed Forces with qualifying EIN.

Unlike TurboTax and H&R Block, TaxACT supposedly does not base the tiers on your tax situation – for example if you have stock sales or itemized deductions. Instead, it’s more about the level of service and convenience. Deluxe includes things like telephone support, charitable donation valuation assistance, importing from previous year TaxACT returns, and importing W-2 and 1099 forms (where available).

Accordingly, I tried my best to just use the Free version, but as you’ll see below after multiple hurdles and upsell attempts, I finally gave up and upgraded to Deluxe. Note that after you agree to upgrade, there is no way to downgrade again. You have to start over with a new account and username.

Tax Situation
Here’s a quick summary of our personal tax situation.

• Married filing jointly, subject to state income tax
• Both with W-2 income, as well as some simple 1099-MISC forms.
• Interest income and dividend income from bank accounts, stocks, and bonds (Schedule B).
• Contribute to retirement accounts (401ks and IRAs).
• Capital gains and losses from brokerage accounts (Schedule D).
• Itemized deductions (Schedule A), including property taxes and charitable giving.

User Interface and User Experience
The 2014 user interface for TaxACT is also cleaner than in previous years. Overall I think it is just fine, but on on a relative basis it felt a little cluttered with smaller text (you can enlarge things with your browser using Ctrl+ or Command+, but then the graphics looked a little off). Everything worked without issue, I just felt more eye strain as compared with TurboTax. There will be screenshots throughout this review.

TaxACT uses the same question-and-answer format as other tax prep software. One way that they are different is that for filling out 1099-INT and 1099-DIV forms, you can use a special forms view where it looks like your actual paper form:

I liked the idea, but in practice it wasn’t that great. 1099 forms may have the same numbers but usually have different layouts from provider to provider, and their model form has spaces for information like address that you don’t even need to enter in the normal Q&A guided format. In the end, the regular way is probably faster.

Importing Data From Previous Years
If you used TaxACT the previous year, it will pull up all of your old tax information only if you upgrade to Deluxe. You’ll get filing status, dependents, address, DOB, SSN, etc. Ironically, you can also import a previous year’s return from another provider like TurboTax or H&R Block by uploading a PDF of your old return – all without upgrading to Deluxe (I guess they don’t want to put up another hurdle for potential converts). So much for rewarding loyalty!

Importing W-2 and 1099 Forms Directly From Providers
Technically, TaxACT does support some W-2 and 1099 direct imports for Deluxe users. But in reality, this feature is very limited as compared to bigger competitors H&R Block and TurboTax. The same W-2 form that I imported successfully while using TurboTax was not available on TaxACT. I got the impression that relatively few employers were supported.

TaxACT does not support 1099-INT from any banking institutions. None.

TaxACT does now support 1099-B direct imports, but only from the following six financial institutions:

• TD Ameritrade™
• ShareBuilder®
• Form8949.com
• GainsKeeper®
• Raymond James®
• Betterment

This is where I gave up and upgraded to Deluxe, as I wanted to test out this import feature. It worked fine, but you will need information from your paper 1099 form from TD Ameritrade and Sharebuilder, as opposed to just knowing your login information. Betterment import worked fine with just login information. You can also import via .CSV file as with other tax prep providers.

The Small Stuff

• Having to input W-2 and 1099 forms manually increases the likelihood of data entry errors, and in fact I did make an error but TaxACT caught it as it didn’t make sense relative to my other numbers.
• When entering my 1099-MISC information, TaxACT also led me down the same rabbit hole as TurboTax, asking the name and nature of my “business”, trying to determine if it was a hobby/farm/business, asking my business license number, and trying to claim various deductions like home office. I guess that’s just how it is done now by everyone.
• Starting in the 2014 tax year, you’ll have to have health insurance or else pay a penalty. I indicated to TaxACT that I had employer-provided coverage for the entire year, and it did not ask for further proof or documentation.
• When it came to the foreign tax credit, TaxACT’s questions made it easier to claim it as a credit rather than a deduction, as compared to TurboTax (it is more valuable as a credit).

Upselling and Price Change Tricks?
My goodness. The upsells with TaxACT Free were quite annoying this year, seemingly on every third screen. If you want to import a W-2, you’ll have to upgrade to Deluxe. If you want to import a 1099, you have to upgrade. If you want TaxACT to compare your tax refund if you file Married Joint vs. Married Separate, you’ll have to upgrade:

If you have more than one “Life Event” like getting married, having kids, retiring, owning a home, breathing air (ok I’m kidding on that one), then you’ll have to upgrade to Deluxe. But they don’t make it very clear that this is all just “extra guidance” and not critical to finishing your return. You could easily assume that you need to upgrade if you did any two of the things on this very broad list. Here’s the page so you can see what I mean:

The thing is, TaxACT Deluxe is still cheaper than their competitors by more than $20 if you do both Federal and State! I would say just pay the extra $5, get all the features available, and save yourself the headache of reading their spiel and saying no over and over. It’s still a good deal. If you only have a Federal return and have relatively simple needs, then out of pure cheapskate principle I might try harder to get that $0 return. 😉

The final two upsells are Tax Audit Defense for $39.99 and Data Archive Service for $6.99. I would personally decline both as I’m not sure of the quality of their subcontracted personnel and I can just save a PDF of my final return thank you very much.

TL;DR Recap
In the end, TaxACT did my taxes properly and basically asked the same questions in the same manner as their more expensive competitors. The full-featured version of TaxACT Deluxe costs at most $20 for both Federal and State returns including e-File for both. Their Free Federal version provides a full-featured free Federal return at any income level and for all tax forms. Many other providers have “free” editions that are restricted to certain income levels or are only for 1040-EZ forms with no investment income or business income.

Users should accept that the import feature set is rather weak and you will spend more time with data entry if you have multiple W-2 and/or 1099 forms, including stock sales. In addition, the repeated upsell attempts to Deluxe were a turn-off. I had to read every one carefully and decide “is it really worth the upgrade?” If I was going to pay for the State return anyway, I would have gone back in time and paid the extra $5 upfront just to avoid the hassle.

Bottom line: TaxACT is the best value choice if you just want accurate DIY tax return software and you don’t value the time-saving features of their competitors. If your return is relatively simple, why pay more than nothing (Fed only) or $20 (Fed + State)? If you are doing Federal + State returns and want to avoid repeated upsell attempts, I would pay the extra 5 bucks and upgrade to Deluxe right off the bat. You’ll still pocket some decent savings and you’ll be in a better mood. If you are converting from TurboTax or H&R Block and have a PDF copy of your 2013 return, note their $5 Fed + State deal.

Although I’m still waiting on some 1099 forms (*cough* TD Ameritrade), I’ve already got most of my paperwork in order for my tax returns. I plan on comparing the three major tax preparation websites again this year: TurboTax, H&R Block, and TaxACT. I like shopping around as with all of these services, you only pay when you file. First up is Intuit TurboTax, the more popular online version.

Tax Situation
Here’s a quick summary of our personal tax situation.

• Married filing jointly, subject to state income tax
• Both with W-2 income, as well as some simple 1099-MISC forms.
• Interest income and dividend income from bank accounts, stocks, and bonds (Schedule B).
• Contribute to retirement accounts (401ks and IRAs).
• Capital gains and losses from brokerage accounts (Schedule D).
• Itemized deductions (Schedule A), including property taxes and charitable giving.

Price
TurboTax comes in Free, Deluxe, Premier, and Home & Business tiers. Due to my stock sales, I am going with TurboTax Premier Online. Although their website shows a “retail” price of $79.99, anyone who visits the site will automatically see a discounted price of $54.99 for Federal including e-File. TurboTax State Online an optional add-on at $36.99 including e-file. There are additional discounts out there available through various financial firms like Vanguard or Fidelity.

This year, TurboTax also has a Free Edition where you can get $0 Fed + $0 State for simple tax returns only. You must file Form 1040A or 1040EZ – that means taxable income of $100,000 or less, no itemized deductions, no investment income, no stock sales. I remember those days… my entire tax return fit on a single sheet of paper.

Note: I was able to enter the data from 1099-MISC forms without having to upgrade to Home & Business, even though this could be technically called “self-employment income”. I’m pretty sure if you don’t enter any business expenses and/or deductions then you won’t have to make the upgrade.

User Interface and User Experience
The 2014 user interface is probably the cleanest one I’ve seen from Intuit. It feels like I could fill it out on an iPad, with its clear text, lots of pictures, and big buttons. I’m sprinkling several screenshots throughout this review, which you can click to enlarge.

As in previous years, TurboTax uses a question-and-answer interview format. I still remember filling out paper 1040 forms, and this is definitely easier to understand and less intimidating. I did feel like there were two slight changes from previous years though:

• There was an increase in probing questions. For example, just entering a simple $700 1099-MISC from some random bonus deal led me down a 5-minute rabbit hole where TurboTax was trying to decided if this was really a W-2 job or independent contractor pay, if it was a business or hobby, and if I could deduct my cell phone usage and mileage for it. It should have asked me first if I actually wanted to figure these things out.
• The software’s “personality” was more friendly and positive. For example, after entering in my property taxes, it said something like “Good news! The $X,XXX you paid is deductible and just reduced your tax bill!”

Importing Data From Previous Years
If you used TurboTax the previous year, it will pull up all of your old tax information. Filing status, dependents, address, DOB, SSN, etc. They also had all my old W-2 and 1099 providers to reduce my data entry needs a little bit more. For example, all my Employer Tax IDs and addresses were pre-filled. This did feel rather convenient, and it helped make sure I didn’t forget any 1099s from old bank accounts. I think most other competitors do this as well, however.

I did not use the option to try and import a previous year’s return from another provider like TaxACT or H&R Block. Please share in the comments if you used this feature.

Importing W-2 and 1099 Forms Directly From Providers
One of the major reasons to use TurboTax is that you can directly import your W-2 and 1099 information from a hundreds of partner providers, more than their competitors. The W-2 import function has been improved; you now simply type in your employer’s tax ID number (EIN) and if they can they’ll import your entire W-2 electronically. It worked seamlessly for me.

However, 1099 forms are the real time saver for me. If you have a lot of stock sales, this could save you hours of tedious data entry. Now that 1099-B forms include cost basis, the benefit is even greater. Example 1099-INT, 1099-B, and 1099-DIVs that I was able to import: Vanguard, Fidelity, Betterment, Motif Investing, Sharebuilder, Scottrade. (The big banks like Bank of America and Chase are also available, but who actually earns any interest from them?) I did have a hiccup: Pentagon Federal Credit Union was on their partner list above, but I could not find it as an option while filing my return. I created a community question about it, my guess is perhaps it won’t be supported until later in the year? (Update: My guess was right, PenFed 1099s will be available starting February 23rd.)

In addition, it can prevent costly errors. In a previous year, I found that I had made a data entry error of $300 with one wrong digit when manually entering all those capital gains and losses from stock sales. The TurboTax import would have avoided that mistake, which I don’t think I would have caught if I wasn’t comparing these three tax software side-by-side.

The Small Stuff
A few observations:

• As in previous years, TurboTax automatically enters commas when you reach thousands (ie. 3,459 instead of 3459). It helps with data entry, as I have already shown that I am error-prone! I think it’s a nice touch.
• If you donate goods to a charity like the Salvation Army, you’ll get a free walkthrough using their ItsDeductible software which helps you value your donations. It’s a good double-check, although somehow it thinks a used jogging suit is worth $20, but you can edit their suggestions as needed.
• Starting in the 2014 tax year, you’ll have to have health insurance or else pay a penalty. I indicated to TurboTax that I had employer-provided coverage for the entire year, and it did not ask for further proof or documentation.
• When it came to the foreign tax credit, it was again much more work to claim it as a credit rather than a deduction (it is more valuable as a credit). In previous years, it was much easier in TaxACT to do so but I haven’t tried this year yet.

Upselling and Price Change Tricks?
This year, I noticed much fewer upsell attempts during the tax return, but that may be because I already started with Premier and not Deluxe. However, I was never upsold to Home & Business and the only offer I had was a final pitch for a product call Audit Defense for $44.99, which provides you “professional representation in the event of an audit” and covers both federal and state returns. In the end, the final price was the same as quoted in the beginning with no tricks.

TL;DR Recap
In the end, TurboTax.com showed why it is both the most expensive and widely-used tax software. It covers all of the tax aspects as well as the others, perhaps with a bit more thoroughness (sometimes even too much thoroughness). However, where it separates itself is with the extra features including ItsDeductible and the ease of importing data from many financial institutions. The design is clean and direct, without the air of desperate upsells. I should also acknowledge here that TurboTax did receive negative publicity this year due to an poorly-handled price increase for their Desktop users (download and CD versions).

Bottom line: TurboTax is more expensive than its competitors – but if it saves you both time and effort in data entry (and potentially prevents errors), then I can definitely see how people would be willing to pay a premium. If your return is simple, you are less likely to need the additional features.