What’s the Best Tax Software? – Not Who You Think!
Running Time: 10 minutes
Before testing, I predicted that the best Tax Preparation software was going to be TaxSlayer, And hot damn, I was totally right. What’s TaxSlayer?!
I am going to strip away all of the marketing nonsense, and give you a straightforward comparison of all the major USA Tax Software Options for Small Businesses. I have had my own freelance and computer repair business for well over a decade, and I always used TurboTax. This video is going to show you how it may have cost me a fortune in overpayments.
TURBOTAX vs. TAXSLAYER vs. TaxAct vs. HR Block
Tax Software is expensive, no matter which one you buy (rent, lease? It’s only good for a single use). They are all very expensive on the front end. But the real question is which cost the most on the back-end. I systematically entered the same information into 4 of the leading products, TurboTax, TaxSlayer, TaxAct, and H&R Block. I have no affiliation with any of these companies, so this is a pure and simple personal evaluation. I thought that because taxes were nothing more than a mathematical equation, all the different software options available would spit back basically the same tax refund. Math is Math, right? Boy was I wrong.
Up Front Costs
On the surface, before purchase, the prices seemed to vary wildly, however it was all a marketing ploy. It mostly came down how much they were going to charge extra for the state filing. TurboTax included the state taxes into the initial price, this is why they seem to cost significantly more than the competition. However, everyone else listed one price for federal, then charged extra for the state. Upon realizing this, the purchase price difference wasn’t nearly as noticeable.
I have always used TurboTax, and I have always found it very easy to use. This year, I will be putting in some extra effort to try other online software so you can get the best bang for your buck. None of them are cheap. But my general experience is that it’s less about the up-front money, and more about the overall experience, and who can save you the most at tax-time, given the exact same information.
I am a freelancer with my own business. I have needed to use TurboTax Home and Business for forever now. Between rental property and business deductions, I’ve had little choice. In this video, I want to compare the most popular (and cost effective) options available today.
If you are a simple 1040EZ filer that has nothing special to calculate, then you can actually file online for free, no need for anything else. Just go to freefile.intuit.com. There you can find a resource to the underlying TurboTax source code for free. One major limitation is the lack of support for Student Loans. The other is an income limitation of $72,000/yr. This is a painfully deliberate way to force you into paying for their software. For me, my taxes are pretty complex, so I needed to work off the top tier offerings for each of these programs we are going to test out.
Importing Basic Information from Last Year’s 1040 Form
TaxSlayer only got the most basic items like names, address, and … well, that was it. All my W-2’s, 1099’s and business information needed to be added by hand. This was terribly inconvenient, when it was all available right there during the import. But I suffered through, and manually entered everything in by hand.
After signing up for H&R Block, it asked to import either last year’s TurboTax file, or a PDF. It accepted neither, saying that file format was not supported. Of course not. It did allow me to upload my wife’s W2 though. Unfortunately it would not accept the valid employer EIN saying that it was an invalid number. I had to make up extra numbers. I want to emphasize this, H&R Block would NOT accept a valid Employer Federal ID number. I looked it up, and they talked about how the employer needed to get a new longer or shorter number, depending on your state. Are you kidding me? Because of this, and the hassle it brings, this was a major Red Flag of a problem.
Then I went over to TaxAct. It didn’t even offer to import anything at all. So I had to set it up manually, including the W2’s and 1099’s, as well as the rest of my business information.
The last one I needed to do was TurboTax. This one has the home field advantage, as it can import my taxes from last year. It imported my previous year’s info at about 95% success. One odd thing was my 1099-MISC forms, which are now 1099-NEC forms. I have 2 regular clients that use this every single year. So I would expect TurboTax to have imported it without issue, like every other year.
Oddly, they were not being calculated as income. I clicked on the Forms button, and sure enough, they were listed, even though the graphic interface never saw it. I had to delete them both, and enter them both manually. I came across some other smaller items I won’t bother you with, but this is the buggiest version of TurboTax I have ever used. But in the end, I seem to have worked it out.
TurboTax desktop was faster than its online counterparts, and it also had a much better visual interface, as the desktop program was not limited to online coding that looks quite 2005. Beyond the aesthetics, it was the desktop client that provided the most information as I was working. But more on that in a bit.
For some strange reason, TaxSlayer did not know that “Consulting” is a standard identifying Business Code. I had to make something up. So I chose to be an investment banker, which I had chosen from its pull-down menuing system. This matters because it told me it was the wrong code too. Seriously. What is wrong with all these highly priced software?! I am literally making numbers up, just to keep this comparison moving. I chose Collection Agency, and moved on. However, this is not really acceptable to me. While not as egregious as H&R Blocks Employer Identification Number glitch, still, it’s a big problem.
Up to this point, my favorite is still the desktop version of TurboTax. While I am quite fluent in it (used it for like 10 years), everything just seems to be available at once, and I can jump around freely. I have the most information available on the screen at the same time. The others just seemed to have a narrow view for the overall user experience.
Although, I found TaxAct to start off the cleanest, by gathering the most relevant information up front, and displaying what it knows. For example, only TurboTax and TaxAct showed both the Federal AND State Refund as I worked. Additionally, while most showed clear negative numbers like “-$318” in red, TaxAct simply said “Owed $318” in a general font and color. At a glance looked like everything was fine, the same as being a positive value, even though it was painfully not.
Let’s continue to add progressively more complex situations into the mix. I thought my business was going to be the first issue, but actually it was Unemployment. TurboTax offered me $59, TaxSlayer offered me $51, and TaxAct was last at $50. This is odd, as I am entering the exact same information. This should be a simple math equation as they all started off at the same place, but apparently not. I am extremely curious how TurboTax managed to get an extra $9 out of it.
H&R Block did not allow me to start the State filing without finishing Federal paperwork in it’s painful entirety. This is a HUGE negative, as I had to fake my way through the entire Federal section, just to simply get the State information on the screen. This is yet another HUGE negative for H&R Block.
After adding in 1099-NEC forms (which hung up TurboTax), and all the relevant Schedule-C information for my business, here is what I ended with. H&R was -$318 Federal / +$50 State, TaxSlayer was -$318 / +$51, TurboTax was -$562 / -$26, and TaxAct was -$608 / -$46. The simple math take-away is that H&R Block and TaxSlayer were the overall profitable winners, being off by a single dollar from each other. As I had several issues with H&R Block, TaxSlayer needs to be the winner, even though TurboTax desktop was the most comprehensive to use. TaxAct was the worst of the lot costing me the most in taxes. I would love to know why, but unless I want to pay an extra $100 to TaxAct, I have no idea.
When including the up-front cost for TurboTax (best interface) at $117, and then TaxSlayer (best value) of $94.90, the clearest winner of this comparison is TaxSlayer ultimately saving me $219. So you need to decide how important Intuit’s Closed System of Quicken, Mint and Quickbooks means to you. If you don’t use the other software, go with TaxSlayer and save a bunch. If you need to import from other software, go with TurboTax.
In the end TurboTax gave me the detailed and itemized control to offset my 1099-NEC’s, with valid business deductions that none of the other products really offered. Overall, I felt as though TurboTax’s ability to display large amounts of information at once really gave me a birds eye view when I wanted it to.
The Schedule C in TaxAct was a little bit light on details. The broad strokes are there, but it didn’t overly customize my home office as well as it could have. I think it just went with a more standardized deduction. This is likely why it came in less, costing the most overall. By comparison, HR Block had a fairly robust Schedule C as for deductions, comparable with TurboTax.
However, my LEAST favorite was definitely H&R Block. The entire interface was clunky, forceful, and uninspiring. It was difficult to navigate and made little sense to me. For example, I wanted to add a 1099-NEC as a freelancer, and off it went on my full business profile. As I mentioned, it failed to identify a valid W-2 Employer ID Number, so I had to rule this product, pretty out early on.
Considering everything now on the table, I would still choose Intuit’s TurboTax. It was the easiest to use, and allowed me to fine tune every step of the way. It also dominates the marketplace. If I wasn’t already in their eco-system, then TaxSlayer would have been the clear value winner.