Around February 1st, advertisements for tax preparation services start flooding TVs, radios, and newspapers. Every company wants you to know how great its services are, and that it can get you a bigger refund and will make tax filing easier for you. Essentially, tax preparation companies tell you anything they think will appeal to you and get you to use their service.
However, not all tax services are created equal. Many have significant benefits and drawbacks when compared to other services and for different tax situations. What follows is a comparison of three of the largest tax prep services: H&R Block, TurboTax, and TaxACT.
To get a sense of how they stack up, I used each service for my taxes, which included the following forms and deductions:
- Time spent preparing: 31 minutes
- Federal refund result: $4,348
- State refund result: $122
I’ve used H&R Block several times to do my taxes, so it’s not surprising that this was the least time-consuming program for me to use. The first thing the software asks is which tax program you used last year so it can import the information – H&R Block can import from TurboTax or TaxACT if you used either program previously.
The next screen asks what life changes you had during the past year – examples include getting a new job, having a baby, getting married, buying a house, and several others. I got married and so the service provides a page of advice about how getting married can change my taxes, and a brief explanation of how my filing status has changed as a result. Then it asks which filing status you want to use – married filing jointly or separately. However, it doesn’t provide guidance on how to choose one.
Federal Tax Filing
The first data entry section, Income, begins with a list of forms to gather, such as W-2 forms and a variety of 1099 forms. It asks whether you have each form, and if you answer “yes,” you are taken straight to a page to input data. Help files specific to the form you’re working on are available on the right side of the screen, and a search bar is located at the top. Also, there are several links throughout each form that provide additional information and details.
When I was prompted to input information for my 1099-MISC form, I was asked to upgrade, as the free version does not support Schedule C for small business owners. If you’re a small business owner, you must upgrade to at least the Basic version to file Schedule C.
While entering small business information, the program asks if you have “business expenses”; however, it provides no guidance. To gain access to the step-by-step categorization program, which provides guidance to ensure that you properly input all of your business expenses, you need to upgrade to the Deluxe edition. In the Basic version, it just asks you to fill in the amounts for each of the categories found on the Schedule C itself, worded exactly as the Schedule C – which isn’t always clear.
The language is very formal on some data entry screens in the program, but it isn’t difficult to determine what needs to be done. Upon completion of the federal return, the program runs its Accuracy Review to ensure that no major errors can be found.
State Tax Filing
The state return is simple to complete – the program imports all the data from the federal return and determines which state you should file for, though it offers the option upfront to file for another state as well. You are then asked a number of questions specific to the state in which you are filing, and again it performs the Accuracy Review.
Upon completion of the Accuracy Review for my state tax filing, I was told, “You have federal C, E, and F. Please review to see if you can deduct small business investor income deduction on your Ohio return.” In truth, I only filed a federal Schedule C, and I feel that the program should recognize this. The service seems incomplete due to the fact that it isn’t personalized to my situation – and it doesn’t offer any assistance on how to go about following its instructions.
At the end, you are asked if you would like a tax professional to go over your return (the “Best of Both” service) for an additional $60.
- Organized and Clear. The step-by-step method, preparatory checklists, and clear instructions make the tax filing process relatively straightforward and easy to understand.
- Basic Version Covers a Lot. Unlike TurboTax, you can complete a Schedule C and enter mortgage deductions or dividends with the Basic version (if you are willing to forgo the extra help provided by the Deluxe edition). The Basic version should be fine for most filers.
- Professional Help Available. One of the big advantages H&R Block has over TurboTax and TaxACT is its network of seasoned tax pros and physical locations. If you decide you aren’t comfortable doing your taxes yourself, you can use the Best of Both service – or, visit an office for help.
- Help Files Are Overly Complicated. If you’re a first-time filer or have simple taxes, you might desire simple, concise answers to your questions, rather than the full page of information the H&R Block help file often provides.
- Can’t View Draft Files. H&R Block doesn’t let you view a draft copy of your actual tax forms until after you’ve paid – so it can be difficult to determine which form your information is being shunted into, especially if you’re trying to follow IRS instructions.
- Thoroughness: 7 of 10. H&R Block isn’t as thorough as TaxACT, but more so than TurboTax. It covers most of the more common deductions and forms on the first round, which reduces the need to hunt for forms in the program.
- Experience: 8 of 10. It could be organized a little better, but it is free of pop-ups, auto-play videos, or anything else that would make it a nerve-wracking experience. You may need to scroll through numerous screens that don’t apply to you, but overall it goes by pretty quickly.
- User-Friendliness: 7 of 10. Some of the wording isn’t very clear, and it could offer a little more guidance. And while there are many help files available, they aren’t always very easy to understand. Of course, you can use the Best of Both service and have a live tax pro look over your return. It is somewhat costly, but it’s still cheaper than actually visiting a tax preparer.
H&R Block is a solid choice for small business owners. It offers a lower price than TurboTax (which requires small business owners to upgrade to the Home & Business version), but more support than TaxACT (which supports Schedule C at a lower price, but offers much less help). It’s not as user-friendly as TurboTax, but is more thorough in the questions it asks. Overall, H&R Block is a good choice for those who are comfortable doing their taxes and don’t need too much hand-holding, but do not regard themselves as tax pros ready to complete the forms with little to no assistance.
See our H&R Block Review for more information.
Free Edition: $0. Basic: $19.99. Military: Free or $24.99, depending on rank. Deluxe: $29.99. Premier: $49.99. Home & Business: $74.99. State filing is $36.99 per state, with every edition except Military (free for ranks E1-E5).
- Time spent preparing: 38 minutes
- Federal refund: $4,348
- State refund: $122
TurboTax has a simple, clean design. You can import last year’s data from tax forms created by H&R Block or TaxACT. It features a step-by-step interview process that often only asks you to fill in one piece of data per page, and there’s hardly ever a need to scroll down.
Instead of asking you to choose a status, TurboTax tells you which status it thinks is best. This is a nice feature, as choosing a filing status can be confusing.
Federal Tax Filing
This section is split into multiple chapters: Wages & Income, Deductions & Credits, Other Tax Situations, Federal Review, and Error Check.
For each of the first three sections, you have two options for entering data: a guided walk-through or a choose-your-own-adventure where you can select what you’d like to enter. In the latter, you can choose to start with any item on the list, or you can choose a section and visit all of the subsections it contains. For example, under the Wages & Income section, you can select from subsections including Wages and Salaries, Unemployment, Interest and Dividends, and more.
Using the guided route is a little easier (though it can take longer if you already know exactly what you need to enter and where to enter it) – it goes through the more common items first, such as W-2s, and then prompts you to choose from the same pick-your-own list of forms if you have anything else to enter. However, if you have an uncommon item, you may not be prompted to enter it and may need to look for the needed form in a big list, or use the search bar to find it.
To file a Schedule C-EZ form, you must upgrade to the Basic version – the business expense entry is very quick, but not detailed. Unfortunately, the full Schedule C is available only after upgrading to the Home & Business version.
While filing, TurboTax informed me that I had entered three of nine income sections, but I did not need to go through all nine to move on. This feature makes it much quicker for people who have fairly normal tax situations.
After inputting your income, TurboTax walks you through a short interview, which asks whether you have experienced any common occurrences that might affect your taxes, such as having a child or buying a car. It provides quick advice about how these events can affect taxes, but doesn’t get into much detail. Getting through the credits and deductions section is also quick and easy.
State Tax Filing
TurboTax transfers data from the federal return to the state tax filing section. It’s likely that you will not need to input anything for this section.
I found that when completing the state return, TurboTax asked many questions that didn’t really apply to me, which I found to be odd considering how few inapplicable questions I was asked while completing the federal return. However, while using TurboTax took me longer than H&R Block, I felt a little less exhausted by the process.
- Help Files Are Easy to Understand. Most of TurboTax’s help files answer your question in a few sentences, rather than providing lengthy, full-page walls of text.
- Simple Taxes Are Quick. If you have an uncomplicated tax situation, TurboTax will likely be a quicker option than either H&R Block or TaxACT. TurboTax has fewer extraneous screens than the other systems and focuses on the most common situations.
- Clean, Simple Design. TurboTax’s spare blue and white design is easy on the eyes, and the fact that it asks only one or two questions at a time on most screens helps you feel more confident in your ability to file taxes yourself.
- Uncommon Situations Require More Hunting. TurboTax doesn’t do as well if you have a more complicated tax situation. If you have to file an unusual form, such as a W2-G (gambling income) form, you might have to do a bit of searching to find where to input your data.
- Pricey Upgrade Required for Schedule C Users. I’m not a fan of TurboTax’s setup, which requires you to upgrade all the way to Home & Business to get support for the full Schedule C. It does come with many other features, but there should be an option to be able to use it at a lower price point minus the other features.
- Thoroughness: 6 of 10. TurboTax is reasonably thorough and should be enough for most people. However, if you have more complicated taxes and aren’t very confident in your abilities to file – or do not know exactly which forms you need – you may want to avoid this program.
- Experience: 8 of 10. Using TurboTax is very calming due to the pleasant layout – the color scheme and the fonts are easy on the eyes. However, the pop-ups can be annoying.
- User-Friendliness: 10 of 10. This is great software for novices with a simple tax situation. It gets you through the process with a minimum of fuss.
I like TurboTax a lot. If my taxes were simple and I had a nail-biting fear of financial documents, I would absolutely use it. But, as someone who has a more complicated tax situation, it’s actually more difficult for me to use since I needed to search for the appropriate forms and the information to properly complete them.
See our TurboTax Review for more information.
- Time spent preparing: 54 minutes
- Federal refund: $4,347
- State refund: $123
The design of TaxACT is busy, but it’s easy to find what you’re looking for – tabs located at the top of the page show which section you’re on, while help files and a search bar are located to the right. You can import the previous year’s data from H&R Block or TurboTax if you saved PDF copies. The free version of TaxACT provides little guidance, but if you upgrade to the Deluxe version, the TaxTutor system – which is basically an expanded help system – can provide explanations of forms and detailed answers to common tax questions. TaxACT provides a good amount of information, even in the Free version, including details about the new tax law changes related to health insurance.
The program attempts to provide more guidance in its “Life Events” system, where you can select different major life changes from the past year. Free edition users can select one life change, but Deluxe users can make an unlimited number of selections. After selecting a life change, TaxACT provides you with several pages of information explaining how that life change affects your taxes. While it’s a nice concept, it would be more convenient as a downloadable packet.
Federal Tax Filing
TaxACT offers you the option to input information yourself, or to utilize step-by-step guidance. If you’ve already been through the guided path and are looking for something specific, the list of topics is actually quite useful – you can jump directly to any form or section, whether or not you’ve already completed it. During a first run-through, however, it could look a little overwhelming. With the step-by-step guidance, you go through every kind of income, deduction, or credit that the system thinks could apply to you.
TaxACT has some nice features that are intended to help you navigate, such as the Bookmark feature, which allows you to return to any specific page. This can be very helpful for people who don’t have all their forms yet. However, in general, it seems that TaxACT contains an unnecessary amount of pages during the federal tax filing input stage. It’s similar to TurboTax’s one-question-at-a-time method, but feels like it takes longer, and the questions and explanations aren’t always very clear.
TaxACT does offer the option to look at a view-only, non-printable version of the 1040, which is a nice feature that the other programs don’t offer until after you’ve filed and paid.
State Tax Filing
TaxACT imports all of your information from your federal taxes, so you don’t need to reenter any. However, when I used the program, it asked for my local school district number (I reside in Ohio and some school districts levy a local school district tax). Both TurboTax and H&R Block offer assistance in locating this information, but TaxACT just provides a list of all the school districts in the entire state. Plus, the help file I viewed was merely a copy of the Ohio tax department’s manual (as opposed to clear instruction), and the school district form was confusing and offered no additional guidance.
The state tax filing section has an “Alerts Review,” where TaxACT reviews your return for missing or incorrect information, as well as potential tax savings. Before you can see any refund options, you must click through more than a dozen pages of worksheets, comparisons, and other tools and upgrade offers.
- You Can’t Beat the Price. TaxACT’s free version covers every form in its database except the 1040X (the amended tax return). Schedule C is included in the free version, which is a nice change from H&R Block and TurboTax. If you do upgrade, it’s only $12.99, or $17.99 for the upgraded federal edition plus state, which is hands down the cheapest of any federal plus state combination software available.
- Lots of Forms Included. Every form I’ve ever heard of is included in the Free version. You don’t have to upgrade repeatedly to access various forms. Rather, what you get with the upgrade is access to more tax tools and a better help system.
- Help Files Are Not Very Helpful. Many of the help files are confusing. Also, many help files simply redirect you to the IRS site, or are copies of IRS or state tax documentation. TaxACT does offer email support (and phone support for Deluxe version users), but no live chat.
- Process Isn’t Personalized. TurboTax and H&R Block both have a better interview process, wherein the program determines which forms you need and which questions you should be asked. TaxACT is less intuitive, and asks many more questions, regardless of whether or not they apply to you and your unique tax situation. This can take a long time to finish.
- Thoroughness: 10 of 10. This program is perhaps too thorough. During the interview process, it asks all the questions that apply to your tax situation, and many more that do not.
- Experience: 2 of 10. TaxACT offers lots of advice, but it isn’t customized to your situation. The descriptions and instructions it provides are often not useful, or worse, just confusing.
- User-Friendliness: 1 of 10. If I didn’t know what I was doing, I probably would have quit using TaxACT after about five screens. There is no way to simplify the process if you have a basic tax situation – somebody filing who has only a W-2 and a couple of dependents would likely need as much time to file as someone who owns a small business. There are a many extraneous screens that could be eliminated if the program completed a short, up-front interview.
TaxACT is the cheapest of the three products, but, unfortunately, you get what you pay for. It requires the greatest amount of time to file, and causes the most episodes of despondency. You can’t go back and forth between the step-by-step guidance and choosing which tax forms you need to enter, and this is where H&R Block outperforms TaxACT, as well as TurboTax, by offering the option to navigate between these two.
But it is cheap – much cheaper than the other products, and it doesn’t make you upgrade in order to be able to use certain forms.
See our TaxACT Review for more information.
Each of these three tax preparation products seem to work best for three very different groups of people. TurboTax is great if you have a simple tax situation and just want to get it done with a minimum of stress. H&R Block works best if you have a somewhat more complicated situation and pretty much know what you’re doing, but would still like some assistance along the way. And TaxACT works if you are very confident in your abilities to do your own taxes with minimum guidance (and don’t mind clicking a lot), or if you really don’t want to pay any more than is absolutely necessary.
Personally, I use H&R Block – my actual tax situation is more complicated than the scenario I used for this review, and I like having access to detailed help files and live chat. Plus, I don’t want to have to buy the TurboTax Home & Business version just to file my Schedule C.
Which tax preparation software do you prefer? Have you used any other software not listed here?