Review of Online Filing Services TurboTax and H&R Block

With Telefile no longer being offered by the IRS, more taxpayers are filing online this year than ever before. It is, however, important to know if your tax situation is a correct fit for the online providers. With that in mind, after filing several returns with two of the more popular companies, TurboTax and H&R Block, here are the pros and cons of each.

Many Americans today may qualify for free online tax preparation and filing. It is generally available to anyone with an adjusted gross income of $50,000 or less. Those wishing to take advantage of the offer should visit www.IRS.gov and look through the list of twenty different online providers. Some other qualifications may apply. The “free file” option is not always available through the company’s regular web site; most are available only through links at the IRS site.

Two of the more popular online providers, TurboTax and H&R Block, offer the same services at about the same price, but each has a different way of walking a taxpayer through their return. It must be noted, if you are considering using an online return preparation service, it works best for those with less complicated tax needs.

If you only have one or two W2s and choose to use the standard deduction, filing online is a great option and an easy way to get your refund sooner, especially if you use direct deposit. If your return is more complicated, with additional forms and schedules, the online services can still meet your needs, but you must be prepared to understand all of the tax terms to make sure you answer the software’s questions correctly to best utilize the service. If you do have a more complicated tax situation, you would do much better to sit down with a live tax preparer who can review all of your documents.

TurboTax seems geared for the simple return: it isn’t hard to navigate the program, and it doesn’t throw a lot of questions or financial scenarios at you. If you have a more complicated return, it does provide the links to handle those parts of the return. H&R Block seems a bit more thorough in this area, asking you more questions to better get an idea of your needs. You should make note: TurboTax seemed to work fine on older browsers, but H&R Block would work on nothing less than the absolute latest browsers. This can be troublesome, as I was not able to get Block’s software to run in a slightly older browser which I thought was up to date. It did not provide any error messages or prompts that it was a browser issue, which can confuse some. After I updated to the latest version, the program worked fine.

H&R Block’s software did seem better equipped to handle questions via a side window that posed questions and listed a number of options. Block also asked a number of questions that helps customers find deductions that they might otherwise miss. Much to my dismay, TurboTax would not import information I had given them from last year’s return (like your personal and work information), without charging $9.95. This seems unnecessary and a cheap attempt to get you to pay (I was using the no-cost version). It would have been easy and not much trouble to import last year’s data. On the plus side, TurboTax does have a nice feature: it gives you a running update on your refund (or your amount due), so you can see how each entry affects the bottom line.

For those who do not use TurboTax’s free option, online preparation fees start at $9.95 for their “Essentials” preparation, which they promote as the best for simple 1040 returns. Their “Deluxe” preparation costs $19.95 and offers more tools, and checks for over 350 deductions. For anyone who has telefiled in the past, they offer a “quick” form that only takes a few minutes to complete and costs $5.95.

H&R Block offers taxpayers using the free service a $19.95 service, which features a number of online tools much like TurboTax, and for the $79.95 “Signature” service an H&R Block agent will look over the return to make sure you claim every last deduction.

While both services worked well, whether or not you should use the fee-based services depends on your personal preference. In nearly all cases, you can “try out” even the fee-based services to see if they are to your liking. Whether you decide to finish filing and pay the fee is up to you. If you do qualify for “free” preparation, and have even a little familiarity with filing taxes, you will probably be able to use the available help to answer questions without using the additional, fee-based services.

If you don’t have a lot of time and questions, online filing is perfect and can get you a return in days with e-filing and direct deposit. If you have a lot of questions and a more complicated personal tax situation, you are better off visiting a live preparer. The fees and expertise are sure to give many peace of mind. In addition to “national chain” preparers like H&R Block, there are a number of independent, certified preparers out there. You can visit www.IRS.gov to search for a tax preparer who offers e-filing by zip code.

Please note: this article reviews the 2005 tax year software.

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