Monday, March 23, 2015

TurboTax vrs H&R Block

It is tax season again and as in prior years I have been using TurboTax (published by Intuit) to do my taxes. A friend was visiting with a similar H&R Block tax program so I decided to compare the two programs. This proved somewhat painful as although the H&R Block program is able to import TurboTax data from 2013 easily as best as I can tell there is no way to import the TurboTax data from 2014. So I had to enter all my 2014 data again. When I had done so the H&R Block program produced similar but not identical results. Some differences were due to the way the programs round to whole dollars. For example TurboTax sums up all my dividends received and then rounds while H&R Block rounds each entry before summing. This sort of thing makes a difference of a dollar or two here and there.

The biggest difference was in their handling of a state tax refund. These are taxable if they are for a year in which you had previously deducted state income taxes and received a tax benefit for doing so. I normally deduct my state income taxes and receive a benefit on my ordinary income tax for doing so. However since I am also subject to the alternative minimum tax (AMT) which does not allow deductions for state income taxes my tax benefit disappears once the AMT is added in. So my state income tax refunds are not taxable. It seems to me that given your prior year's return a tax program should be able to figure this out for you. But neither program handles does. As I have complained before TurboTax makes it quite complicated to exclude such tax refunds from income. H&R Block is better in that it is simpler to tell it that the refund is not taxable but you still have know that it isn't. Fortunately I know this from doing my tax returns by hand but many people won't and will end up paying extra taxes. Recently the Obamacare tax on investment income has added a new complication. Because this tax is on net investment income you are allowed to allocate and deduct a portion of your state income taxes paid from your gross investment income. But this means if you later receive a state tax refund you deducted too much and are required to adjust your investment income in the current year appropriately to compensate. TurboTax (given your prior year's return) helpfully figures all this out for you and automatically computes the appropriate value. H&R Block just gives you an opportunity to enter an adjustment but provides no useful help in determining when such an adjustment is needed or how to compute it. Given that the Obamacare tax started last year so that this is the first year that this adjustment may be needed I expect most H&R Block users will have no idea about what to do and will just assume this doesn't apply to them (which is what I did). Even if a user did realize an adjustment is needed they would have to compute it by hand which is the sort of thing people buy tax software to avoid. So TurboTax definitely wins here. In fairness to H&R Block both companies have a range of programs of varying cost and capacities and possibly a more expensive version of the H&R Block program would have handled this.

Overall this H&R Block program seemed similar but a bit inferior to TurboTax. So given my familiarity with TurboTax I see no compelling reason to switch.

3 comments:

  1. H&R Block tax program so I decided to compare the two programs. This proved somewhat painful as although the H&R Block program is able to import TurboTax data from 2013 easily as best as I can tell there is no way to import the TurboTax data from 2014.
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