Saturday, February 8, 2014

Reflections on Taxslayer, TaxACT and HRBlock

I've become the de facto tax preparer for the household and this year for the reason expressed in this post, I had the opportunity to sample 3 different online electronic tax services.  I will note upfront that this post is not an "apples to apples" clinical study.  Specifically, I did not enter the same return into all 3 systems.

Taxslayer:  I have used Taxslayer for several years as a low cost choice for conveniently filing my personal tax return.  I will note that prior to the onset of electronic tax services, I had long been a paper and pen filer of reasonably complex taxes.  For instances, I have looked up tax costs on microfiche (inherited), dealt with the multiple spin-offs of telephone company stock, addressed rental income and amortization of real and personal property.  Other than self-identifying myself as an old fart, I would note that this experience with taxes is extremely helpful with these electronic tax services because in the "dumbing down" of the software, it is easy to lose track of the actual tax guidance. 

Taxslayer is an excellent low cost choice for most filers.  If you have only W-2 income, interest and dividend income likely any of these 3 tax services will work fine for you.  I have used Taxslayer email help (provided in their "Classic Edition") and have received timely responses although as is the case with more complicated questions sometimes the response seemed a bit canned.  For example, my wife's W-2 was blank for the State Tax ID.  Last year, I was able to leave it blank in the software using this service without a problem; this year, it was a required field.  I emailed this concern and without fail was told that it is indeed a required field and to consult with the W-2 preparer.  For those in big organizations we all know how much fun that can be... sort of like when you get an error message on your computer that tells you to see your system administrator... good luck with that.  Fortunately, I did get an answer to this and for all those New York filers out there, the New York Tax ID for your employer is the same as your employer's Federal Tax ID.

I don't like the way Taxslayer buries the "Credits" under the "Deductions" heading.  Yes, I understand that the credits are there, but you have to look for them and I am one of those hard heads who views "credits" as different and apart from "deductions".

It has also been my experience that, perhaps understandably, the thoroughness of the state software is less refined than the federal portion of the program.  For example, in my early years with Taxslayer I had to hunt to find the spot to record my 529 deduction.  Also, the Taxslayer software failed to point me to a state education credit which considering that I had inputted data for a federal education credit would have seemed to have been a reasonable expectation.  As a result, I filed an amended state return to obtain the credit for the missed year.  I will remark that I have seen improvement in their development of the state portion over the years and this coupled with taking a harder look has adequately addressed my needs.

TaxACT:  Each year I consider migrating to a different tax service and then I poop out (as I did again this year).  For a low cost option, TaxACT is the cheapest.  For those moderate to high income earners in states with no income tax, this would likely be my choice as TaxACT provides free federal e-file even for more complex returns.  I liked the intuitive way that TaxACT walked you through the questions; however, concerns arose when I arrived at the education credit portion.  Specifically, educational institutions will send a 1098T reflecting "qualified" education expenses as well as "scholarships".  My daughter had a special situation whereby her 1098T reflected more scholarships than qualified expenses on the 1098T and TaxACT then walked you through not only reflecting that you are not eligible for the education tax credit but also that my daughter owed taxes on the overage.  Intuitively, this did not make sense to me as I know that I had paid several thousand toward her education, she had paid several thousand from her savings and earnings (which count as she is a dependent) and she had borrowed money (loans) as well.  What happened is that around December 2012, we received and paid the estimated portion for spring 2013.  Around January 2013 the school recorded the scholarships and loans which they lumped as "aid".  The Fall semester was paid in the summer of 2013 so no issues there.  In adding up the loans and our payments from the statements, we clearly paid much more than $4,000 for qualified education expenses in 2013.  I went through TaxACT several times to try to figure out how you were supposed to handle something like this within this program.  In the course of doing this, I found that there is a notation that the 1098T may not be correct and you were largely left to "correct" the 1098T to obtain the education credit.  I was very uncomfortable with doing this as for all I know the 1098T may be "correct" using the accounting standards of the institution.  I am, however, very comfortable with claiming payment of $4000 in qualified education expenses on IRS form 8863.  In short, I found that TaxACT placed an over-reliance on the 1098T to calculate education related credits (and in this case actually identified, incorrectly, a tax liability).  Due to this hiccup, I did not proceed with filing with TaxACT and paid the extra $8. or so to continue with Taxslayer.  I cannot comment on the state tax experience within TaxACT; however, given this 1098T experience, I would expect an experience on par with Taxslayer.  In fairness to these tax services, when it comes to state taxes, they have to contend with a myriad of nuances from state to state.

H&R Block:  In New York, it pays to be poor (or at least low income) and so it is that if you are under a certain threshold, you can file your state and federal taxes free online.  Both of my student daughters met this criterion.  As a pleasant surprise, the provider / partner for this free service turned out to be H&R Block, considered by many the Cadillac of tax services.  I found the software intuitive and fluid.

Lest anyone think that H&R Block is going to get a free pass, let me dissuade you right now.  My eldest daughter had income from 2 states which generated the first hiccup.  After completing the federal and Vermont income tax forms, the program stalled on completion of the New York state providing a message that you must pay for the Vermont tax form before the program would auto fill the information for New York.  As I expected that I would likely have to pay for the extra state form, I attempted to click the link, but no data was generated in the pop up.  The required information happened to be the amounts that was paid to the other state and what was being refunded from the other state which was, fortunately, information I already knew so I entered the information manually and was able to get past this point and the returns seemed to calculate correctly.  Amazingly, there was not an extra charge for filing with 2 states.

In e-filing with H&R Block I did not see a clear way to e-file only the Federal and then return later to e-file the state returns.  (You could identify e-file Federal and file state by paper, but I didn't see a way to e-file both, but pause between federal and state).  Also because I was working with my daughter and my wife was also providing a second set of eyes, I didn't want to commit the e-file immediately.   Irratatingly, each time I came back I had to re-enter routing number and account number for the refund.  Additionally, for New York a small amount was owed and I had to re-enter routing and account numbers there as well.   I printed a copy of the return (good practice for everyone and I will remark that TaxACT and H&R Block both allowed printing before payment, unlike Taxlayer; however, it should be noted that this was the free service version through H&R Block so the commercial experience may vary).  Unlike Taxslayer, the print version from H&R Block included your PIN which I liked as who remembers that from year to year?  On the negative side, H&R Block did not print W-2s which I did not like as in double checking my return I want to be able to compare the W-2 that I typed into the program with the W-2 from the employer.  H&R Block provided summary data which required you to go back to your W-2s and manually add them up to double check your entries.  It is likely that it would be an easy thing for H&R Block to change and which I would encourage to improve their product.

No comments:

Post a Comment

Comments are appreciated. Please note that comments are moderated, but will generally be published if on topic and free from excessive profanity or hostility.