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Tax-time Giveaway – Win a Free iPad

Written by Sam on April 13, 2010 – 11:06 am -

I usually don’t promote other giveaways much, but it just struck me that this one at the site Money Crashers comes at a perfect time of the year that many of us dread – tax time. And what better prize than the hottest electronic gizmo out there, the iPad.

There are multiple ways to enter including subscribing to the site, following them on twitter, and filing your taxes via one of their recommended sources.

Someone’s taxes will be worth celebrating this year.


Posted in Giveaways, Taxes | No Comments »

Tax Preparation Software Pricing Comparison

Written by Sam on February 28, 2007 – 1:44 am -

UPDATE: There have been some excellent comments in this post and I’ve updated some incorrect information in the charts. I’ve summarized some of the main points in comments #24 below.

Tax software pricing comparison
I have such a headache. I thought I would post a little summary comparison of the major (and a few minor) tax preparation programs both software and online. I figured I would end up comparing them anyway for my own personal use, so why not let others benefit. What I didn’t realize was that all the companies I reviewed, including the big ones (TurboTax and TaxCut) would have some strange incompetency to communicate features and benefits in a clear, concise manner. I spent hours trolling and searching deep through these sites looking for clarification on such basic things as pricing and major benefits. Even information such as which products include state tax preparation in addition to federal was hard to find. Well, I’m happy to say I’m done with my research and can now share the fruits.

“Out-the-door” pricing defined

In order to make an apples to apples comparison between offerings I used “out-the-door” (OTD) pricing. I define OTD pricing as the total price of an offering including both the costs of federal and state tax preparation as well as federal and state tax e-filing. It was surprisingly difficult to mine this data and almost seemed to be purposefully ambiguous on the provider websites. In most cases, the OTD price wasn’t listed by the provider so I had to manually add together the various costs scattered across the websites to sum up the OTD prices. See the charts below for more details.

I did not review the quality of the software. Not only would such a comparison be a monumental effort, but tax situations vary so much from person to person that my experience alone would not necessarily be an accurate representation. At least you can get the low-down on price and then choose the feature set that’s right for you from the lowest cost offerings.

Providers Reviewed

I was amazed at how many tax preparation providers there are. I chose to review the most prominent providers, TurboTax from Intuit and TaxCut from H&R Block, in addition to a smattering of smaller offerings. Here is the complete list:

The bottom line

If your Adjusted Gross Income (AGI) is under $50,000 you can prepare and file federal taxes for free

Let me get to the point for those who don’t have the patience to wade through the details. If your AGI is under $50,000, you can prepare and e-file federal taxes for free through the IRS “free file” program. In fact there’s a whole list of tax preparation providers that will provide this free service.

View a complete list of free tax preparation providers here.

If you qualify for free federal tax services, you’ll still need to pay to prepare and e-file state taxes. The best price for online state tax preparation and e-filing I came across was CompleteTax who offers this service for $12.95.

If your AGI is above $50,000
Lowest cost offerings
Services needed Major Providers Other Providers
Federal and State preparation and e-filing

TaxCut “Premium + State + E-file Online ($39.95 OTD) TaxActOnline.com “Deluxe + State” ($15.95 OTD)
Federal preparation and e-filing

TaxCut “Basic + E-file Online” ($9.95 OTD) TaxActOnline.com “Standard” ($0 OTD)
State preparation and e-filing

TurboTax State Online ($29.95 OTD) CompleteTax ($12.95 OTD)

If you want to use one of the “big two” providers (TurboTax or TaxCut), then the cheapest and most comprehensive way to go is TaxCut’s Premium + State + E-file Online” (that’s the actual name; awkward and non-sexy, but descriptive). At $39.95 out the door it covers everything from bare-bones tax returns to investments and real estate, to business ownership. Oddly enough it’s actually cheaper out the door than the TaxCut “Basic + E-file Online” at $50.85.

If you don’t care about using one of the big two providers, the TaxActOnline.com “Deluxe + State” offering is the cheapest out the door at $15.95. Considering that some of the offerings I looked at were as high as $134.80 (for TurboTax Premier Software) without any significant value add, that’s quite a dramatic spread. With the confusing way offerings are communicated, it would be easy for someone to pay over $100 too much.

Filing only federal taxes (no state taxes or preparing state taxes by hand)

If you only need to prepare and e-file federal taxes (maybe your state doesn’t have income tax) the best choice is TaxCut “Basic + E-file Online” for $9.95 OTD if you want to go with a major provider. If you’re ok with a smaller company it’s hard to beat TaxActOnline’s “Standard” account for $0 (including e-file). I’m not sure how they offer it for free but they seem to be a perfectly legitimate company and have been around since 2000 with an alexa rank of about 182,000 (and quickly improving).

The details

TurboTax Pricing

The big travesty with TurboTax is that the software version costs way more than the online version because e-file isn’t included in neither the federal nor state programs. And each e-file costs $14.95. The online versions include e-file in the price. Bottom line: Use the online version.

TurboTax Online offerings
Offering Base price Federal e-file price State e-file price Out-the-door price OTD calculation Feature differences
TurboTax Basic Online 14.95 $0 – Included Included with purchase of TurboTax State Online $44.90 14.95 + 29.95 (TurboTax State Online) Basic 1040 forms (not including investments or business forms)
TurboTax Deluxe Online $29.95 $0 – Included Included with purchase of TurboTax State Online $59.90 29.95 + 29.95 (TurboTax State Online) Above plus – Deduction maximizer, It’s Deductible bluebook for charitable donations, Summary of deductions a to z
TurboTax Premier Online $49.95 $0 – Included Included with purchase of TurboTax State Online $79.90 49.95 + 29.95 (TurboTax State Online) Above plus – Investment and rental property forms, BasisPro calculates historical cost basis
TurboTax Home & Business Online $74.95 $0 – Included Included with purchase of TurboTax State Online $104.90 74.95 + 29.95 (TurboTax State Online) Above plus – Schedule C forms for businesses, business deductions, calculates depreciation of business assets
TurboTax State Online $29.95 n/a $0 – Included n/a n/a  

TurboTax Software offerings
Offering Base price Federal e-file price State e-file price Out-the-door price OTD calculation Feature differences
TurboTax Basic 19.95 $14.95 $14.95 (and you must purchase TurboTax State) $79.80 19.95 + $14.95 (fed e-file) + 29.95 (TurboTax State) + $14.95 (State e-file) Basic 1040 forms (not including investments or business forms)
TurboTax Deluxe $44.95 $14.95 $14.95 $74.85 [UPDATED] 44.95 + $14.95 (fed e-file) + $14.95 (State e-file) [UPDATED] Above plus – Deduction maximizer, It’s Deductible bluebook for charitable donations, Summary of deductions a to z
TurboTax Premier $74.95 $14.95 $14.95 $104.85 [UPDATED] 74.95 + $14.95 (fed e-file) + $14.95 (State e-file) [UPDATED] Above plus – Investment and rental property forms, BasisPro calculates historical cost basis
TurboTax Home & Business $89.95 $14.95 $14.95 $119.85 [UPDATED] 89.95 + $14.95 (fed e-file) + $14.95 (State e-file) [UPDATED] Above plus – Schedule C forms for businesses, business deductions, calculates depreciation of business assets
TurboTax State $29.95 n/a $14.95 n/a n/a  
TaxCut Pricing

TaxCut provides the cheapest out-the-door offering of the “big two” companies Intuit and H&R Block. TaxCut “Premium + State + E-file Online” gets you all you need for only $39.95. The crazy thing with TaxCut is that the OTD price actually decreases as the offering tiers increase. Go figure.

TaxCut Online offerings
Offering Base price Federal e-file price State e-file price Out-the-door price OTD calculation Feature differences
TaxCut Basic + E-file Online 9.95 $0 – Included $15.95 with purchase of TaxCut State Software $50.85 9.95 + $24.95 (TaxCut State Software) + $15.95 (State e-file) No business, investment, or deduction tools or forms
TaxCut Premium + E-file Online 19.95 $0 – Included $15.95 with purchase of TaxCut State Software $60.85 19.95 + $24.95 (TaxCut State Software) + $15.95 (State e-file) Tools and forms for businesses (schedule C), investors, and maximizing deductions
TaxCut Premium + State + E-file Online 39.95 $0 – Included $0 – Included $39.95 n/a Same as above

TaxCut Software offerings
Offering Base price Federal e-file price State e-file price Out-the-door price OTD calculation Feature differences
TaxCut Premium Software 19.95 $15.95 $15.95 with purchase of TaxCut State Software $76.80 19.95 + $15.95 (fed e-file) + $24.95 (TaxCut State Software) + $15.95 (State e-file) There is no difference in features between software products
TaxCut Premium + State Software 29.95 $15.95 $15.95 with purchase of TaxCut State Software $61.85 29.95 + $15.95 (fed e-file) + $15.95 (State e-file) There is no difference in features between software products
TaxCut Premium + State + E-file Software 59.95 $0 – Included $0 – Included $59.95 n/a There is no difference in features between software products
TaxBrain Pricing

I didn’t find anything particularly compelling about TaxBrain. Their site was one of the worst in presenting basic offering information. But I did use their online chat twice and they were helpful enough.

Tax Brain
Offering Base price Federal e-file price State e-file price Out-the-door price OTD calculation Feature differences
TaxBrain 1040 EZ $19.95 $0 – Included $19.95-29.95 for state tax preparation and e-filing. $39.90-49.90 $19.95 + $19.95-29.95(State prep and e-file) The most basic return for single or married taxpayers to report general wages, unemployment and W2 income under $100,000.
TaxBrain 1040 A $29.95 $0 – Included $19.95-29.95 for state tax preparation and e-filing. $49.90-59.90 $29.95 + $19.95-29.95(State prep and e-file) Expanded from the EZ to include educator expenses, IRA deductions, student loan, tuition and fees deductions.
TaxBrain 1040 Basic $39.95 $0 – Included $19.95-29.95 for state tax preparation and e-filing. $59.90-69.90 $39.95 + $19.95-29.95(State prep and e-file) Includes the full 1040 long form, Form 4137 Unreported tips and Schedule A.
TaxBrain 1040 Expanded $49.95 $0 – Included $19.95-29.95 for state tax preparation and e-filing. $69.90-79.90 $49.95 + $19.95-29.95(State prep and e-file) Also Includes forms 2106, 4684, 4952, 5329, 6251, 8606, 8880, Home Sale Worksheet & Schedule D.
TaxBrain 1040 Premium $69.95 $0 – Included $19.95-29.95 for state tax preparation and e-filing. $89.90-99.90 $69.95 + $19.95-29.95(State prep and e-file) Also Includes forms 4136, 4562, 4797, 4835, 6198, 8582, 8829 & Schedules C, E, F and SE.
TaxBrain State Tax Preparation $19.95-29.95 n/a $19.95-29.95 for state tax preparation and e-filing. n/a n/a Includes State preparation and e-filing

*You don’t know the final price of state taxes until you actually prepare your them. You also don’t sign up for a particular account tier. As you answer the questions the program will figure out what tier you’re in.

CompleteTax Pricing

It turns out Complete Tax and the next provider EZ Tax Refunds are owned by the same company. I’m guessing it’s a market test to see how they can maximize revenue targeting different markets.

Complete Tax
Offering Base price Federal e-file price State e-file price Out-the-door price OTD calculation Feature differences
Federal Tax $25.95 $0 – Included $12.95 for state tax preparation and e-filing. $38.90 $25.95 + $12.95(State prep and e-file) Nice simple pricing structure regardless of the forms used
State Tax $12.95 n/a $12.95 for state tax preparation and e-filing. n/a n/a  
EZ Tax Refunds Pricing
EZ Tax Refunds
Offering Base price Federal e-file price State e-file price Out-the-door price OTD calculation Feature differences
Standard $9.95 $0 – Included No state-only option n/a n/a There’s no state only option so you would only use this account if you only needed to do your federal taxes.
Deluxe $19.95 $0 – Included $0 – Included $19.95 $19.95 All forms, all available states
Premier Bundle $89.95 $0 – Included $0 – Included $89.95 $89.95 All forms, all available states. Live phone and online chat support.
TaxActOnline Pricing
TaxActOnline
Offering Base price Federal e-file price State e-file price Out-the-door price OTD calculation Feature differences
Standard Free $0 – Included Doesn’t include state prep or filing n/a n/a There’s no state-only option so you would only use this account if you only needed to do your federal taxes.
Deluxe $9.95 $0 – Included Doesn’t include state prep or filing n/a n/a There’s no state-only option so you would only use this account if you only needed to do your federal taxes.
Deluxe + State $15.95 $0 – Included $0 – Included $15.95 $15.95 Includes all available federal and state forms and free e-filing.

Differentiating Features

Overall, TurboTax and TaxCut really do have some nice value-added features that may justify the higher cost depending on your situation. If you’re looking for audit support, TaxCut is supported by hundreds of establish brick and mortar H&R Block locations. TurboTax will provide a “local tax professional” in case of an audit, but who knows where they find the tax professionals. You could end up with crummy under-qualified representation. At least with H&R Block, there’s some quality control.

I was going to post a comparison of features across the providers but it was seriously too much. It seemed like on every point I had to dig and dig to find a decent answer, if I found one at all. In the end they all seemed about the same as far as basic tax-prep features. However, if you have special needs it’s worth spending a little more time to find just the right provider. Here’s a list of the types of features and variations to consider:

  • Audit Support (cost, who does it, extent of support and representation)
  • What guarantees do they make and what are the terms?
    • Guaranteed maximum deduction (what are the terms of the guarantee?)
    • Accuracy of calculations (almost all offer this)
    • “Biggest tax refund or your money back” (this was a TurboTax guarantee)
  • Deduction finder. If you are itemizing, you want to make sure this feature is offered. It’s implied that they all do. However, some made it more obvious than others.
  • Can you start a tax return without paying money? All of the providers will let you jump right in and start preparing your taxes without paying. Some make you register first and you inevitably have to provide your social security number at some point in the process. Most of the providers also show your refund as you go. If you wanted, you could prepare your taxes in a couple different programs and see which one provides a larger refund before deciding on a final provider.
  • Support. This varies widely. Some provide full support while others make you pay per conversation. With the lesser known companies, it was also hard to tell if the support was for the software or actual tax advice so be careful. If it’s not explicit, I would contact them and ask.
  • Import capabilities. TaxCut and TurboTax both seemed to have pretty wide import compatibility with financial software providers. TaxCut even lets to import a previous tax return from a brick and mortar H&R Block location. If you have special import needs, I would contact the provider to be safe.
  • Refund options. Most providers offer “quick refund” type loans which I don’t recommend. You’ll likely be charged a healthy fee for the loan in addition to interest (completetax.com charges $14.95 for this feature). It’s also pretty standard to be able to pay for the tax software directly from the refund so there are no out-of-pocket expenses.
  • Options to pay taxes owed. Some providers will let you pay taxes owed with a credit card. Beware of extra fees.

Confusion and Conclusion

Here were a few of the bewildering points I came across:

  • While several companies had little charts comparing their offerings, they were, without exception, incomplete. In every case I had to track down vital additional pieces of information. There’s no reason I could see why they couldn’t have included all the important info in one spot.
  • Midway through my research on TurboTax the prices of their account tiers changed on me. At least they went down instead of up. I did an online chat and was never able to figure out why they changed.
  • One of the most hidden pieces of information was how much e-file costs and if it’s included with various account types. I had to search FAQs and knowledge bases to find the answers. I actually had to chat with TurboTax and TaxBrain to finally find and confirm their pricing for e-file. I guess the upside is that both online chats were friendly and useful.
  • While researching CompletTax and EZTaxRefunds, I started to notice that much of their content looked the same. I did a little research and sure enough they’re both owned by the same company. I guess there’s nothing wrong with that, it just struck me as odd.

Overall, I was shocked at how confusing this process was. Taxes are already confusing enough. I don’t need the added confusion of piecing together the tax preparation offerings. Kudos to the smaller CompleteTax, EZTaxRefunds, and TaxActOnline for providing simple, straight forward offerings. The big players TurboTax and TaxCut should take note. In the long run I doubt they will benefit financially from confusing their customers into submission. If anything I anticipate there will be a lot of unhappy customers once they have to keep paying unexpected e-filing fees.

Do you know about any other tax software comparisons or reviews? Leave them in the comments.


Posted in Taxes | 72 Comments »

How to estimate FSA expenses: Cafeteria Plans can save you a lot of dough

Written by Sam on December 20, 2006 – 2:01 am -

cafeteria plan (FSA)Cafeteria plans can save you a lot of money and yet are one of the most under-utilized benefits that many employers offer. One of the reasons they’re neglected is because it can seem so overwhelming to determine how much money to set aside for medical expenses. Having just gone through the process ourselves, we wanted to share a brief overview of how Cafeteria Plans (FSA) work and how to optimize your participation.

My wife graciously volunteered to write this post and it’s her first post on GFD so be sure to give her extra praise and adoration!

It’s that time of year again. Rushing around, making last-minute decisions. I’m not talking about Christmas shopping. It’s the annual employee benefits festival—you come home with all sorts of insurance papers, medical, dental, life, and (my favorite) accidental death and dismemberment. It’s not enough that you still have Christmas shopping to do before you get ready for holiday traveling—you are supposed to find the time to make important financial decisions as well.

To help you on your way with minimal loss of holiday cheer, my husband has asked me to write a helpful guide to cafeteria savings plans. Even with the risk of making my debut on his site as “the cafeteria lady,” I have agreed. Read more »


Posted in Budgeting, Finances, Personal Finance, Saving, Taxes, Tools | 6 Comments »

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