[Editor's Note: It has been fun the last year or two to go back and update some early posts on the blog. Most of you have never read them, so they're new to you. Some require almost no changes as they're quite evergreen. Others require a fair amount of updating or they don't make sense to current readers. This one is from 2012 and is somewhere in between. I'm still using Turbotax, but I certainly don't harbor any ill will toward you if you choose to use one of their competitors or even hire a great professional tax preparer.]Turbotax for the last decade to do my taxes and this post explains why I like it so much. But before we go on, you need to be aware that I get a buck or two from Turbotax if you buy it using links on this page. That's called “affiliate marketing”, but this partnership hasn't been too profitable for us over the years. I bet we haven't made $200 in 7 years from it.
7 Things I Still Love About Turbo Tax in 2020
#1 Easy to Re-do forms
I used to do my taxes by hand. That was a wonderful way to learn the tax code and become familiar with the 1040 and the various schedules and forms. But every time I remembered something new I could deduct, I had to go back and re-do at least one form. That was getting to be a serious pain. With Turbotax, I just log-in, change one number, and the program changes a half-dozen other forms instantaneously. Very cool. In fact, this simple feature allowed my state tax return(s) to be done in something like 2 minutes. Too bad they couldn't do that with my very complicated federal tax return.
#2 Imports Last Year's Tax Return
I've used Turbotax multiple years in a row. I'm surprised how much stuff you get to skip after year one: Addresses, sources of income, deductions, bank account numbers…anything that remains the same year to year is imported directly in.
#3 The “Pro” Option
Turbotax allows you two options as you go through their “Income” section and their “Deductions” section. You can either have them lead you by the hand and ask you dozens of questions about each item, or you can “explore on your own.” If you already understand the basics of the tax code, that's a real shortcut. I don't use Turbotax because I don't know what's deductible. I use it to speed up the process and make it more accurate. But either way, Turbotax has an option for you.
#4 Computers Add Better Than I Do
It's not that I'm bad at math. I always received good grades in math, at least until college calculus (it was still a B, but I'm not sure I deserved even that.) But when you have dozens of calculations, all dependent on one another, one little error screws up everything else. It shouldn't surprise you that Turbotax makes fewer math errors than I do. Aside from having an inaccurate return, possibly losing me money or even triggering an audit, miscalculations also mean I have to do re-do more forms, which can be immensely time-consuming.
It's no secret that the IRS and your state tax commission wants you to e-file. It's easier for them, easier for you, more accurate, and you get your refund faster. That process is literally a click of the mouse with Turbotax. You don't have to deal with your state website, or fill out any new online forms. No printing, stamping, addressing, walking out to the mailbox, etc. If for some reason you WANT to paper file, you still can. Perhaps if you owe money you might be able to delay their withdrawing it from your bank account by a few days by doing so. Turbotax even has an option where you can do your tax return now, and have Turbotax file it automatically in April without you ever thinking about it again (which I recommend if you owe money.)
#6 You May Only Need the Basic Version
Turbotax makes a lot of money off up-selling. They used to have a Basic Version. But they've basically replaced that with a free version. The next step up is “Deluxe”, for those who itemize their deductions (Schedule A.) They have a Premier edition aimed at those with rental property or investments. They even have a Home & Business edition for small business owners. Guess what? Back in 2012 when I had rental property, investments, and a small business I was still able to use Deluxe. So start there and upgrade as needed. The free version won't import last year's data, and if you need to file Schedules C (small business), D (Capital gains and losses), or E (Rental Property) you can't use it. But it's a great option for many filers.
So what does Turbotax cost? Here are the online version prices through our affiliate link (sale pricing as of 2/4/2020):
- Free Version – $0 Federal, $0 State
- Deluxe Version – $40 Federal, $40 State
- Premier Version -$70 Federal, $40 State
- Home and Business – $90 Federal, $40 State
I used to use the cloud version, but due to a need to use “Forms Mode” to make one adjustment each year due to my defined benefit plan, I have had to buy the PC/Mac Download version (also available as a CD) the last few years. However you choose to buy the product, you'll save hundreds compared to hiring a CPA to do it.
Turbotax offers free support and advice both for using their software and calculating your tax bill. There are two things I don't like about online software. The first is that you learn more about the tax code by doing your taxes by hand. You lose some, but not all of that, by using software. But the main issue I have is that when you can't figure out how to do something on the paper forms, you can go to an IRS publication easily with Google and figure it out. Tax software, in trying to make things easier for those who have no clue how the tax code works, sometimes makes it hard to figure out where to input data that I know where to put in on the paper forms. A good example is explained by The Finance Buff where he explains How To Do A Backdoor Roth Using Turbotax. It's actually more complicated to do it in Turbotax than by hand! I had an issue a few years ago with doing an ESA to 529 conversion. It wasn't that I didn't understand the tax code, it was that I didn't understand where to put the information into Turbotax so it would put it on the forms correctly.
So I decided to try out the free support. I started out 120th in line, but within about 20 minutes (which I killed working on another part of my return), I had a CPA chatting online with me who answered my question clearly after just a couple of minutes of research. He had the same problem I did – he understood the code, but not necessarily the software. He even sent me an email a few minutes later with a more detailed explanation.
Turbo Tax Competitors
Overall, I continue to be very pleased with Turbotax year after year. They've been around the longest and frankly are the number one seller for a reason. Most tax-prep services allow you to import previous returns no matter which tax service you have used, so if you want to try something new, give it a go. The usual competitors are H&R Block, Tax Slayer, and Tax Act. I've tried a couple of them over the years, but always came back to Turbotax. Yes, it usually costs a bit more, but frankly, the value of my time is the expensive part of the whole process so I prefer to go with what I know.
If you're looking for the absolutely cheapest way to do your taxes, do paper returns. Otherwise, I don't know that you should really make a decision based on just a few dollars. If you've used any of these tax software solutions recently, please post about your experience in the comments. Online reviews I've seen seem to indicate you get what you pay for here.
Another Free Option
There is another option that has come out since I wrote this post originally. It is a free option provided by the IRS that takes advantage of one of ten commercial software products (including Turbotax). However, there is a catch. You can't use it if you made more than $69,000 (for tax year 2019). I find that really painful. Not only do I pay much more in taxes as a high earner, but I also have to pay more just to file them. At any rate, if you are a med student, resident, or retiree, these might be options for you. The IRS does offer “free, fillable tax forms” but don't kid yourself. This is the equivalent of doing your returns on paper. That's always been free.
The Most Expensive Option
The most expensive option (at least until you consider the value of your time) is to hire a professional to do it. Our Recommended Tax Strategist (more than just preparation) list has been growing over the years. If you hate doing taxes, you might be surprised just how cheap it is to have a real pro do it for you AND give you advice on keeping that bill as low as possible.
What do you think? How are you preparing your taxes this year and why? Comment below!