Tax Sites: TurboTax Is Still the One to Beat

As more people turn to the Web for help in preparing and filing their income tax returns, some familiar sites continue to beef up their offerings in hopes of attracting newcomers and enticing competitors’ customers. Most of the five online tax-prep services we looked at–versions of CompleteTax, H&R Block at Home, TaxAct, Tax Brain, and TurboTax that include guidance for individuals as well as for investors and sole proprietors–now support importing at least some (but regrettably not all) data from a PDF (the most common format for saving a return created online) of your 2010 return. This makes switching services easier than ever.

Also new: A couple of sites offer dedicated iPad and/or iPhone apps (see “Tax Prep? There’s an App for That, Too“)–or at least have eliminated technologies such as Adobe Flash that, in the past, precluded using the site on an iOS browser.

The overall competitive landscape for tax preparation sites hasn’t vastly changed since last year, though. Intuit’s market-leading TurboTax continues to charge a hefty premium for its excellent interface, extensive data importation support, and considerable guidance–which for the first time includes unlimited one-to-one access to a tax professional via phone or chat. This move appears to be a response to H&R Block’s ongoing leveraging of its brick-and-mortar tax-prep operation to enhance its online product, which is solid and moderately priced, but doesn’t quite match TurboTax’s ease of use, especially in its Schedule C business area.

TaxAct, which is by far the least expensive option ($18 to prepare and e-file returns for both federal taxes and one state’s taxes), remains a great choice for people who have relatively simple tax situations and don’t need much guidance. CompleteTax costs somewhat more than TaxAct and offers a little more help, while TaxBrain continues to charge dearly for its minimalist, worksheet-based approach. For a comparison chart of the tax services we evaluated, with relevant prices listed, click the image at left.

Perhaps the best thing about tax sites is that you can try them before you buy: All five that we looked at will let you start a return and do everything short of printing or e-filing it, without charging you a dime. Remember, too, that people with an adjusted gross income (income after deductions) of $57,000 or less are eligible for free tax prep software and e-filing through the government’s Free File website–and anyone who simply wants to fill out IRS tax forms online without third-party guidance can do so for free, also through the FreeFile program.

TurboTax Online Home and Business

TurboTax remains the priciest of the online services. This year, using TurboTax Online Home and Business edition to prepare and e-file one state return and one federal return will set you back $115, compared to $85 for comparable services from archrival H&R Block at Home. But Intuit’s venerable tax-prep software continues to set the bar for its thoughtful user interface and great data import features–and the addition of free, unlimited access to a tax professional (in case you can’t find answers to your tax questions in the very helpful user forums) makes the price premium easier to swallow.

The “Ask a Tax Pro” service–accessible via a button on every screen–is open from 5 a.m. to 9 p.m. PST daily, and will now answer your questions for free; previously, Intuit permitted you to ask one question and then charged for additional ones. (TurboTax still makes you pay extra for audit defense service, which Block throws in as a freebie.)

TurboTax supports electronic import of W-2 (payroll), 1099 (investments), and–for the first time–1098 (mortgage interest) data from 400,000 employers, payroll services, and financial institutions, more than any other service. This feature saves time and tends to improve accuracy.

Unfortunately, TurboTax Online doesn’t support importation of 2010 returns prepared by competitors; it can only bring in information from a 2010 TurboTax return prepared online or with desktop software. Nor does the online service support importation of financial data from Quicken or QuickBooks. If this ability matters to you, consider using the desktop version of TurboTax, which does support transfers of information from competitors’ PDF returns, along with QuickBooks, Quicken, and other financial data.

TurboTax’s slick, interview-based interface uses the GPS metaphor touted in Intuit’s ad campaigns: Interview topics appear as billboards on a road. But the program gives you lots of ways to hop around, starting with a Tools button in the upper right area of the screen: Click it for access to a list of topics that you can navigate to.

At the start of each section, you either choose a guided setup or click ‘Explore on my own’ to bring up a clickable list of subtopics. Finally, like most other tax prep services, TurboTax has a bookmark feature (which it calls Flags) that lets you identify pages you want to revisit, or return to ones you’ve previously flagged.

Turbotax’s flexible approach to navigation is particularly effective in its sole-proprietor (Schedule C) area, which many users will want to fill out in dribs and drabs. Finding a specific business expense page was much easier in TurboTax than in other services. I also appreciated how relatively painlessly the program handles business assets, making it easy to take the Section 179 option of completely writing off the purchase price of a new asset in the year you acquire it. TurboTax also does a fine job of explaining what you need to know about various business issues, providing essential information without drowning you in arcane details.

Intuit has had years to perfect TurboTax; and while it can’t completely remove the pain of doing your taxes, it continues to shine at mitigating the suffering. People whose tax situations are very simple may not be able to justify spending the extra money, but if you have lots of data to import and you need guidance (especially in connection with self-employment issues), TurboTax is well worth buying.

Next: H&R Block at Home and TaxAct Online Ultimate Bundle

H&R Block at Home

Not to be confused with the heavily marketed H&R Block Live (a videoconferencing tax-consulting service), H&R Block at Home Premium ($85 for one state and federal return, including e-filing charges) offers a wealth of options for adding human help to your tax software experience. Block also has beefed up its ability to import data from a previous year’s return–though people who invest in H&R Block and Home Premium might be disappointed at how little Schedule C (sole proprietorship) data shows up.

Block at Home Premium lets you import 2010 tax data from the online or desktop versions of TurboTax, TaxAct online, or any H&R Block return. In my test importation of a PDF version of a TurboTax Online return, the fields that Block completed for me (most of the personal information) looked good. But I was disappointed to see no records of depreciated assets for my freelance writing business. Block also supports importation of payroll and investment data, but its partner roster is much smaller than TurboTax’s.

Despite its supermarket color scheme, Block’s lime green, orange, and aqua interface has a rather spartan simplicity, with few icons to break up the text. But because Block tends to put only one or two items on a page, getting through its Q&A-style interview takes a lot of clicking. Like other tax services, Block tailors the interview to your needs by presenting you at the outset with a checklist of “life events” (such as job changes, deaths, and purchase or foreclosure of a home).

But Block constrains you from navigating to topics upstream in its interview process by graying them out in the clickable ‘Take Me To’ list of topics (which is otherwise a very effective navigation tool, easily accessible via a button on the top right of every page). Block says that this limitation is designed to prevent users from altering its carefully designed Q&A flow.

Unfortunately, even getting to previously visited areas can be a challenge. In trying to revise my Schedule C business expenses, I had to click through a list of categories–there was no way to see them all on a single page and then click the one I wanted. The best workaround would be to flag a specific item using the Bookmark feature–but you don’t always know that you’ll want to revisit an item when you’re first working on it.

I also found Block’s approach to some business issues a little confusing. To enter the purchase of my iPad, which I wanted to write off as a Section 179 deduction, I first had to go through screens asking me to choose a standard accounting depreciation method. Eventually I reached the Section 179 option, but the process would have been a lot simpler if I could have seen it up front.

Block does provide some basic FAQ-style information in a pane to the right of each interview question, along with a search box. However, to get personal tax assistance from an H&R Block Tax professional–which is part of the service–you have to leave the Q&A completely and navigate to the main menu, where you type in your question. Block asks you to limit yourself to one tax topic per message, but you can send multiple messages.

On the other hand, Block’s service does include audit defense help, which costs extra if you go with arch-rival (and already more expensive) TurboTax. If you want a tax pro to review and e-file your entire return, you can opt to pay $30 more for Block’s Best of Both service (which raises the total cost to about that of TurboTax Online Home & Business with no tax pro review or audit defense).

Block has a solid product with a clean and simple design, and access to human help via messaging. It falls a bit short in the navigation department, and it doesn’t deliver all the importing assistance you get with TurboTax, but otherwise it will amply meet the needs of many taxpayers.

TaxAct Online Ultimate Bundle

TaxAct from 2nd Story Software remains the outstanding bargain option among tax sites: The TaxAct Ultimate Bundle gives you federal and state returns, including e-filing, for just $18. To sweeten the deal further, TaxAct this year supports importing of 2010 returns in PDF form from a dazzling array of competitors: ATX, CompleteTax, eSmart Tax, ezTaxReturn.com, FreeTaxUSA, H&R Block At Home, IRS Free File Fillable Forms, Lacerte, ProSeries, TaxSlayer, and TurboTax.

TaxAct also lets you import W-2 data from employers who use the TALX W2Express service, but the only way to import 1099 data is via a CSV spreadsheet file, which most users would have to create. You might as well just enter the data manually.

TaxAct provides a very slick Q&A-based interface, with a running tax bill ticker, a bookmark feature, and navigation help via a ‘Jump to Forms and Topics’ link on the top right of each screen. Clicking the Help tab in the right pane gives you access to basic general explanations and answers related to the topic at hand in an updated Answer Center; other tabs afford one-click access to tax forms and assorted calculators.

More often than not, though, TaxAct’s skimpy help will ultimately send you to a relevant IRS publication. This is particularly true of Schedule C topics for sole proprietors, for which TaxAct provides only bare-bones assistance. Also, the import function didn’t transfer much Schedule C data from my 2010 TurboTax Online Home and Business-created PDF.

For $18, you can’t expect much in the way of personalized or human help, and TaxAct doesn’t provide it. But if you have a relatively simple return with no novel peculiarities, and you don’t view importing W-2 or financial institution data as crucial, but you do want some inexpensive and straightforward guidance as an alternative to filling out the forms on your own, TaxAct may be all you need.

Next: TaxBrain 1040 Premium and CompleteTax Premium

TaxBrain 1040 Premium

Petz Enterprises’ TaxBrain 1040 Premium dispenses with the pretty colors and icons that other sites use in favor of a no-nonsense, blue-and-gray questionnaire and worksheet approach. You fill out a lengthy questionnaire, and TaxBrain decides–based on your answers–which forms you should be filing. It then presents you with the worksheets for those forms (also on a long list), and fills out the forms based on your input to the worksheets.

This method certainly gets the job done, but why would anyone pay $100–the second highest cost for federal and state returns with e-filing in this roundup–for such a bare-bones service? TaxBrain does not support importation of W-2 forms or of your previous year’s returns from any competing service. It does let you import investment transactions from Gainskeeper.

Each worksheet and questionnaire item links to explanations, but there’s no real mechanism for additional help (other than links to IRS forms). The available chat line is for tech support, not tax help. Navigation isn’t much of an issue since you can only go to worksheets for different federal forms. And there’s no ticker showing where you stand in terms of owing taxes or getting a refund, because TaxBrain doesn’t keep track until you’ve completed filling out all of the forms and submitted them to the service for calculation.

TaxBrain will sell you audit defense, and the site does offer a separate service for people who want to work with a tax pro. You can pay for a consulting session, hire someone to do your return, or pay even more for help in dealing with a problem such as an audit or a negotiation to reduce penalties.

But it’s difficult to justify such a high cost for, essentially, figuring out which forms you need to file and filling them out. For most taxpayers, choosing one of the alternatives to TaxBrain should be a no-brainer.

CompleteTax Premium

CCH’s CompleteTax Premium has made considerable strides in recent years, and today it provides a reasonably low-cost alternative to the higher-profile services. Preparing and e-filing tax returns for the federal government and one state will set you back $70; for another $20, you can get three months of unlimited phone access to a TaxHotline tax pro to answer specific questions.

CompleteTax also offers a pretty good tax guide, FAQs, and context-sensitive help–all of them readily accessible via links in the right pane. Its user interface, though not as appealing as some of its pricier competitors’, adheres to most of the popular conventions: You get a ticker showing whether you stand to get a refund or owe money based on the information you’ve provided; a progress bar; and (new this year) a bookmarking feature accessible via a pushpin icon at the bottom of each page.

A Quick Navigation link in the right pane takes you to a clickable list of general topics. The list doesn’t drill down very deeply, but CompleteTax does an acceptable job of avoiding the clutter of putting too many items on a single page without forcing you to click an inordinate number of times to reach a specific item. (If anything, Complete Tax sometimes errs in the direction of cramming lots of questions on a single page.)

To attract customers from competing services, CompleteTax supports importation of PDFs for 2010 returns created by H&R Block at Home, TaxAct, and TurboTax. Unfortunately the feature didn’t work especially well with my 2010 TurboTax Online Home & Business return: It put my husband’s first name in both the first-name and last-name fields. As was the case with the other services I tested, the transfer didn’t bring much–if any–Schedule C (sole proprietorship) information with it.

CompleteTax supports importation of W-2 data from employers who use ADP or TALX W2eXpress payroll services, though I wasn’t able to test this functionality. The service doesn’t support importation of data from financial institutions.

Overall, CompleteTax delivers good value for people who want some tax guidance (especially those who can import W-2 data from their employers’ payroll provider) and are willing to forgo design niceties to save a few bucks. I wouldn’t get too excited about the ability to import last year’s return data, though, since it basically just saves you the trouble of entering a little personal information.