Knocks The Block Off Tax Prep

Intuit TurboTax

Tax law changes for 2001 were not sweeping enough to change most people's lives despite advertising from tax preparation firms, but the process is convoluted once a citizen moves beyond a mortgage and other basic deductions. Do-it-yourself software developed with the personal computer became ubiquitous, and millions of taxpayers now take advantage of these programs to electronically file their own returns.

I remain a proponent of these software packages, frequently found for less than fifty dollars with all sorts of rebates and goodies. The simple truth is that one can struggle with paper forms and a calculator or invest in some software that can save you several hours of manual calculations and crosschecking. The value issue boils down to a simple question: Are those two or three hours of reading instructions and double-checking your numbers worth the $50?

As grist for the mill, I will excerpt an IRS love note masquerading as a February 14, 2002 press release. The agency reported "more than one million returns" have been found with errors, delaying or changing refunds. The error is traced to the handling of those pesky little advance tax refunds many folks were mailed last year. The actual release is at the bottom of this review for those who remain committed to filing their own returns. That site also contains information on other tax problems this year, including people who believe con artist claims that they are due reparations for centuries-old slavery claims or how to claim parts of your home as business deductions.

So What About The Program?

Intuit, maker of financial software giant Quicken, is the publisher of TurboTax. Although Microsoft Money continues to erode the market share of flagship Quicken, the TurboTax franchise continues to lead the pack.

The program comes in many flavors: basic, deluxe, premier, business and more. All handle the simple stuff, but as with Quicken, the deluxe versions features video help, statistical models and more comprehensive information. Given the price differential - basic starts at $29.95 retail and each succeeding version raises retail by $10 - one would expect diminishing returns to occur at some point. For me, that point is in the deluxe version, which is reviewed here.

The program first checks for previous tax returns, and after being prompted last year, my 2000 tax data was still on the hard drive. The program imported key data points from the data it developed last year (social security numbers, names, addresses and more) and used its intuitive and well programmed interview session to make any necessary changes to that data.

All data collection occurs through this process, a simple step-by-step system that talks to users in terms of documents received and activities performed, not the tax forms. Using this method allows the software to determine what forms are needed and which data should be transferred to each. Besides personal information, information is gathered regarding income, deductions and taxes paid already. By answering questions, the program continues to drill for more data, eventually allowing the user to enter a final review phase.

This review phase, which includes one more check of the Intuit web site for form and program updates, is relatively benign and seems to exist to correct the errors of those who skip around the program rather than those who use it in a linear manner. Still, TurboTax identified that I had used one set of incomplete numbers as a placeholder and not input all of the data from that tax form. Such crosschecking is TurboTax's strong suit. Not only does it understand the tax laws, but the software makes sure that you don't have to know them yourself.

Good Things About The Program

Consumers of every level of ability will find using TurboTax is easy. Simply collect all your tax-related forms, sit down at the computer and start keying data. Most folks will be done within the hour and ready to submit their returns electronically or print and file paper returns. Downloading an optional (but free after rebate with the deluxe package) state tax module takes slightly longer, but allows information to flow from federal to state form and be submitted simultaneously. Filing fees are also free after rebate with the deluxe purchase package, making the entire process net closer to thirty or forty dollars.

The program also allows an easy import of Quicken data, but my experience over more than a decade of Quicken use and two years of TurboTax is that doing so can actually slow you down. Most Quicken users are not disciplined enough to have meticulously categorized every tax-related item and data from your tax forms still needs to be keyed. A better solution may be to run a Quicken report to check, for example, your medical expenses and see if they qualify for a deduction.

TurboTax also includes a lavish library of tax-related documents and video help from well-known names who decipher tax issues into plain speech. Several models also show you how to reduce tax liability for the coming year or how to maximize your take-home pay if you find you're due a refund.

Not So Good Things About The Program

One imagines a horde of marketers crowding an Intuit conference room, all clamoring for the opportunity to add links to their partners' services. As with the 2002 Quicken release, TurboTax is filled with support and ancillary add-on services that can substantially increase your costs. The strategy is sound; with millions of copies in circulation, one needs only a small response rate to generate large amounts of revenue. That is my first caveat - be careful and only buy add-ons if you need them.

The second surrounds Intuit's support of the product and some context may prove useful. The company's customer and technical service was the industry's gold standard for many years. Then a move that some may say was inevitable occurred and self-service ruled the day. If the online FAQ didn't help, your choices were limited to asking someone else or paying for support. The company seems to be migrating from that strategy, although it naturally and reasonably encourages online self-service first. When that fails, web chat sessions are available. And although the rep handling my particular questions was friendly and helpful, the queues were long and he was not informed about the processes. In fact, he offered to email me a zipped version of the state module because the web site was down, but then returned and said that he couldn't send free product. One might be willing to ignore the encounter as the product of an enthusiastic, but new and untrained rep, but posts to Usenet and the web show my experience is not unique.

The Bottom Line

Buying a bundled software package makes good sense for everyone except 1040EZ filers and tax accountants. In less than an evening, you can complete your taxes and file them electronically. The program methodically checks and crosschecks data in the background. Your only role is to accurately complete the survey. When you're done, be sure to leave the data on your hard drive for next year, print a hard copy of the forms for your files and sit back. Our federal refund was direct deposited in two weeks after spending less than two hours on the program. I can't understand how this can be anything but an annual purchase.