Intuit's TurboTax and its predecessor MacinTax have dominated the desktop tax preparation market since 1991. In 1998, H&R Block jumped in with a competitor, TaxCut, and that leads to a decision every year for Mac users? Which to use? Which is better? Which one earns loyalty? This review compares the outer, crunchy shells of these two programs and leaves the soft chewy inside for later.
These two companies, Intuit and H&R Block, are very competitive. They pay attention to what the other company is doing, pay a lot of attention to customer feedback, and take the their brand and customer trust very seriously. As a result, the two programs, given the same user inputs, are very likely going to produce the identical return, same refund (or tax due) and offer similar disk and online security. That leaves some very nuanced differences that make it hard to recommend one over the other.
If there's one obvious philosophical difference in the two programs, it's driven by respective market shares. Turbo Tax has about 80 percent market share of the boxed retail CD sales, so Intuit charges a little more, but claims to offer a little more in terms of product features and bells and whistles. H&R Block's TaxCut is the underdog, perhaps doesn't have the financial resources for the development team, and keeps the price low to entice users to switch. H&R Block also has a national presence with local offices, so the company can leverage that advantage.
The Products Reviewed
I asked for and received versions that would cover most users: a federal return, a state return, and a small business. For TaxCut, that was: TaxCut Premium Federal. For TurboTax, that was TurboTax Home & Business. (I refer to TaxCut first in these pairings because it comes first in alphabetical order.)
IRS rules prohibit the software from preparing more than five federal returns, and each package allows that -- with five free federal preparations and e-files. In the case of TaxCut, the licensing allows the program on CD to be used by family and even friends when you're done. For TurboTax, it can only be used by the purchaser. Again, this appears to be a concession by H&R block to their market position.
The state return situation is a little different. The version of TaxCut I reviewed includes one free state preparation and printing (which can be mailed) but the e-file fee for the state is an additional US$19.95. The same is true for TurboTax. If you buy a version of either product without the state preparation, the state form will cost $29.95 from H&R Block and $34.95 from Intuit. Note that even after you buy the state form, prepare and print, there will still be that additional $19.95 fee to e-file in both cases -- if you elect to do so.
The bottom line? Don't let the term "prepare and print a state return" delude you into thinking that you don't have to also pay to e-file a state return.
Below is a summary chart of the features likely to influence a purchase decision. Of course, each company is able to develop a long list of supposed features and advantages on their Website, but the real question is: can the customer use all those features and what's it all going to cost in the end? In my experience, the marketing positions of both companies is right on: one can pay less and get a little less, or pay a little more and get a little more. It's very similar to the Mac and PC proposition -- keeping in mind that the attitude we have about PCs cannot be extended to H&R Block's product.
H&R Block TaxCut
I have used TaxCut in the past. I recall that one year, Intuit did something, I can't recall what, that really annoyed the PC users, so I switched to TaxCut on the Mac side as a personal boycott and e-filed. Everything went smoothly. However, when TaxCut wasn't available for year 2005, I returned to TurboTax.
The installation of TaxCut is trivial: simply drag the app to the /Applications directory. All the required support graphics and forms are contained in the application package. The first thing TaxCut does is to update to the latest forms and regulations passed by Congress and the IRS. This process seemed a bit fragmented with different windows popping up and the core application disappearing during the process. VISE-X is used as a tool to update the forms, and in my case there were 5108 files that needed to be updated.
When that's done, and it didn't take long, an iCal subscription if offered that has important dates for the tax return process. Then the user is registered. Unfortunately, it confused me with my dad (I'm a junior) from my Mac OS X address book, but all I had to do was select myself in a resolution box.
After one updates the program and then registers, the next task is typically to load last year's return which has useful information that you don't want to re-type: names, addresses, occupation, SSNs and so on. TaxCut honored the password I used to protect last year's TurboTax return and seamlessly loaded the required data. Being the underdog, like Apple, TaxCut has to be able to import TurboTax returns. Intuit, being in a stronger position, doesn't return the favor.
TaxCut: Look and Feel
I decided to save the return at this point, and the file was saved without password protection. A separate menu item in TaxCut sets the password protection for the file. That seems like a bad decision, in contrast to TurboTax's technique.
Like TurboTax, TaxCut has a prominent entry, early on, that focuses on "Life Changes" that may have been the result of the difficult financial times we're in: a job loss, a home foreclosed, and so on.
At this point, one is off and running with the tried-and-true interview technique that steps the user through a decision tree and collects all the information necessary to prepare a return. On each page, there are FAQs in a column on the right side that are appropriate to each page. These two companies have a lot of experience with typical questions asked, so the FAQs will typically cover the most common questions.
A strength of TaxCut is that one phone call on one topic to an H&R Block tax consultant is included in the price. For example, exemptions for live-in relatives. The topic itself may entail many calls, and that's okay. If a new topic comes up, additional calls are priced at $19.95 each. The H&R Block network of tax professionals makes this possible.
TurboTax has the same ease of installation. No admin password: just drag the application, which is really a very large OS X package, to /Applications.
TurboTax choses to do the registration first, and presents a window for the user to enter name, address, etc. Unfortunately, it tries to be too cute by half because as soon as one starts to type a few characters of the first name, it starts to winnow from the Mac OS X Address Book. I typed in "J" and instantly saw a former Apple colleague in Cupertino with the address filled in. My first reaction was alarm and thoughts of a security breach until I realized it was drawing from my address book. After I got to "John M..." it figured out who I am. It would seem better to just import from last year's return, then autofill the registration fields.
Updates seemed more coherent, more contained within the program than TaxCut, and the program was more clear about what it was doing. Developers always have a choice: they can use external tools and save some effort or do everything themselves. Intuit takes the high road. In my subjective opinion, the TurboTax software seems better designed and has a cleaner UI.
Unfortunately, the app must be restarted after the forms are updated, but it's not a major problem. After I got registered, downloaded updates, and imported last year's return, the first step was to save the return. In this case, there's a checkbox in the save dialog to set a password, it's hard to miss, and I think that was a better choice. As with TaxCut the interview process starts at this point. TurboTax also offers iCal integration.
If you have a tax question that requires a tax professional, the call will cost an extra $29.95.
Finally, TurboTax also has a major focus on life changes and presents a very large and clear page that assists the user in identifying events that could affect the profile of the return. This page is yet another indicator that the Intuit team always goes just a little above and beyond in terms of the UI. Some will appreciate this and others may not think it important.
TurboTax: Life Changes
One of the things that interested me was the protection of the return on the hard disk. I spoke to representatives of both companies, and it turned out to be a sensitive issue. The public disclosure of the method just makes it easier for hackers to attack the file if it comes into their possession, so I won't even get into it. The same is true for the transmission of the completed return. I think both companies use the best technology possible here, and I've never heard of a transmission breach.
Another item that interested me was audit support. Not surprisingly, each company led to its strengths. H&R Block points out that if you receive an audit letter, which is usually just a request for correction of an error, you can go into any H&R Block local office and request guidance from a person. If the IRS asks you to come to their office for something more serious, an H&R block representative can accompany you or go on your behalf. This service is included in the price of the software.
TurboTax: Audit Support is Web Pages Only (in price of software)
On the other hand, Intuit points out, in their defense, that it's very rare to be audited by mail, and even rarer to be invited to an IRS office. Accordingly, there is extensive, but only, Web page help on what to do in the company's "Audit Support Center" However, if you wish, you can buy essentially an insurance policy against an audit for US$40.00 before you file. This offers the same service as TaxCut: a human adviser to help you through the process.
Back in 2005, H&R Block abandoned the Mac users but not the PC users and elected not to provide a product for tax year 2005. There were some questions raised at the time, by yours truly included, about H&R Block's professionalism and commitment to Mac users. They seem to have learned their lesson and a representative swore it would never happen again. If one believes it's important to take into account experience and consistency, Intuit has the better track record here.
While the price difference between the two programs appears significant, it can become minor when one is working with a small business, hundreds of thousands of dollars and big money rebates or taxes. Income Tax preparation is a stressful process, and time is money. That's another factor for the customer to consider.
I'll write up an After Action report when I'm done filing. It's not practical to step through the interview process twice because federal taxes are painful enough done once. Neither can I e-file twice. However, I do expect to have some observations on the general process of using both programs up to the point of e-filing.
Intuit offered, and I accepted, to step me though the important features on TurboTax in a WebEx session. The company, with its dominant market share, could have just sat back and saved themselves the trouble. It was just one more signal to me that Intuit is a little bigger on this playing field, better funded, but still very hungry and not taking anything for granted.
On the other hand, Intuit sometimes uses its market position to try dubious things that infuriate its (former) customers, as I mentioned above. The company can get away with it because of its dominance, but a certain percentage will defect, and H&R Block is standing by, ready to benefit.
Based on all the above, it's not realistic to declare a clear cut winner because customers have different standards for assessing a company, a tax product, including previous experience, how injured they feel at a given time by the policies of one competitor and the complexity of their tax situation. The goal is for the observations I've provided to help the prospective buyer make that decision based on their own needs.
Basically, it boils down to whether one takes a minimalist approach or an expansive approach. Also, whether one has a relatively simple tax situation that merits a modest expenditure for software or a more complex one that requires the most capable program possible, which I judge to be TurboTax. That's not to say minimalism shortchanges the customer, and H&R Block does have the weight of their 12,500 U.S. offices as a support mechanism. Rather, it boils down to more of a personal philosophy for software products and tax preparation.
As I said in the introduction, if you answer all the questions the same way, odds are excellent that you'll get the same tax due or refund. It's those other subtle nuances that swing one towards the TaxCut underdog or the TurboTax top dog.