I Hate Doing Taxes (Still)! TurboTax 1, IRS 0: Once More Into the Breach!

Another year, another copy of TurboTax... That'd be OK by me if it didn't translate to "another year, another 1040." But here I sit (a lot earlier than usual, if I do say so myself), armed with my copy of TurboTax Deluxe with State 2007, my W2s and 10-whatevers, my lists of deductions real and imagined, and the bar of soap I'll eventually need for washing out my mouth: I think I'm ready to go.

Intuit, maker of TurboTax, has thrashed around a lot in recent years. There was that anti-piracy fiasco in 2002 (the nasty little Cdilla license monitor they included really peeved some people). For a few years they gave away free eFiling after a rebate. For a couple of years, they threw in a "free" copy of ItsDeductible, a gift that seemed to keep on giving in its own little way. This year, however, there's nothing to sweeten the deal: you buy the Deluxe package and you've got TurboTax and nothing more - heck, if you get the CD or download TurboTax, you can't even get it without the state tax module. That's pretty useless for people in Wyoming, Texas, Alaska and... is it New Hampshire? That Deluxe copy will set you back a MSRP of $45, plus any fees incurred for e-filing. Well, at least it's tax-deductible.

Of course the question is, is it worth it? After a decade of filing with Turbo Tax and almost twenty years using Quicken (I'm on Quicken 2008 now), I'm a fan - and I say yes. Here's why:


"Help Me! Help Me!" you cry...TurboTax Deluxe walks you through filling out a return step-by-step, just like doing it on paper (except that you don't erase holes in the screen). The process works like an interview, with Intuit asking the questions and you giving the answers. You'll inform TurboTax about yourself; things like "I bought a new home... got married... changed jobs... started a business... in 2007." You'll give it information about earnings and expenses. You'll find lots of simple explanations along the way, like "Some examples of medical expense that are NOT deductible are: special health foods... athletic club dues... cosmetic surgery that is solely for improved appearance..." You can quit in disgust at any time, then come back and pick up where you left off after you've stopped gnashing your teeth. If you want, you can march through the entire process at a single sitting. Even after you're done, as long as you haven't filed yet, you can go back and update any entry. Changing one number ripples through every form or schedule that involves the info. For example, if you find a missing receipt for a charitable donation, updating that line also changes the bottom line on Schedule A which changes your AGI which changes your total tax due which changes your refund or amount due - all without making you type one additional keystroke. Gotta love it!

As you step through the forms, a real-time number display keeps track of your current bottom line - the dollar amount you owe or the refund due you - based on the amount of withholding that you entered with your W2 information. And if you get nostalgic for paper 1040s and Schedule A's, you can pull up an image of a filled-in form whenever you want.

That real-time update allows filling in all the blanks and doing the math in a far shorter time than in a paper world, and more accurately, too. I was also able to do sensitivity analyses, like experiment with the effects of different funding of the Ms's IRA. The speed, accuracy, and productivity pay for the software all by themselves!


Interfaces: TurboTax has plenty of online features, too, beside help. You can download W2 and 1099 info across the web, and grab information like mortgage interest and property taxes, too (if your lender supports it, which many do). Importing detailed financial information from Quicken takes a single click, or you can skip import and enter the numbers by hand. Intuit's ItsDeductible product - now on-line - allows direct import of charitable (and other) deductions as well. Again, you can skip the download and fill in the blanks by hand. When the time comes to enter your information from last year's tax return, TurboTax automatically pulls that data from either TurboTax 2006 or from TaxCut. I know that the former works invisibly, but have can't speak to the latter. If you filed an electronic return last year, TurboTax also automatically grabs the bank routing information for the EFT (electronic funds transfer) to or from your bank by polling last year's return.


Help! There's context-sensitive help everywhere you turn when filling out the return. The Deluxe version has direct linkage to an "Ask the community" tab off to one side. This is also context sensitive: when you're entering information about mortgage interest, five or six "popular" questions asked by TurboTax users show on your screen (with the answers). You can ask your own question, too; "experts" can answer the questions (that scares me a bit...). The questions run the range from "where do I put helth insrance [sic]?" to "where do I enter loss of wages related to an organ donation?" Fork over an additional $30, and you can get your questions answered by a "real live tax pro."

The built-in context-sensitive help is fairly basic, and it includes a lot of language that only CPAs and tax geeks understand - just like all the IRS publications, which is where the majority of it comes from. Still, though, it's easier to use than finding the publication in question and then thumbing through forty pages of smeary newsprint looking for an answer. The contextual words are hyperlinks, and definitions (often with their own links) pop up in a new window. There's also a glossary buried in the tool box, which can be a great help.


The Process from Top to Bottom: Installation from a CD-Rom takes just minutes. It'll have to download updates: the software is almost always made before the tax code is fully updated. That takes a couple of minutes over broadband, but will take much longer over dialup. Filling in all the forms took me perhaps two hours, mostly because I opted not to import directly from Quicken or use ItsDeductible, which would be a lot quicker. I've already set up my ItsDeductible files for 2008's filing - it's free, so why not?

Filling in the information is a linear process: you provide your personal info, then income information, then work on deductions. The deduction section gives you the option of just entering your own deductions (assuming you've traced your income with Quicken, for instance) or using the tool Intuit calls "Maximize Your Deductions." That latter is a good process for people who are a little foggy about what's deductible and what's not. I sure used it!

Once you're done, TurboTax runs a check on your return to look for errors, and then looks for those infamous "audit red flags" like home office expenses. They'll give you an estimate of the likelihood of being audited (exclusive of those random audits the IRS does). Electronic filing the federal forms will cost you $17.95 (plus tax), or you can print and snail mail. The rebate TurboTax used to give is long gone (but the eFile cost is tax-deductible next year)


Doing State Taxes: Deluxe includes one state filing. If you need to file in two states, you have to "unlock" a second state, which costs another $17 dollars or so. Once you've chosen a state, the program must download the necessary forms and help, which will take a couple of minutes. Once that's done, the process (at least in the state where I live) is pretty painless and very much like doing the federal forms. For states with simple income taxes, it might be less expensive to just get the paper forms. You can eFile at most states (usually for an additional fee) or print and mail - your choice.

As noted above, there is no Federal-only version of Deluxe for CD/Download. There is a Federal-only on-line version, however, or you can use TurboTax Basic (CD/Download or on-line).


Bottom Line: Will I Buy TurboTax Again Next Year? Almost certainly. Using it makes completing and filing a return almost foolproof, even for those of us who habitually add two and two to get ninety-four. You can also test things like filing jointly vs. two wage earners filing separately, or dumping additional contributions into an IRA before the filing deadline. You can also use the software later in the year to get a feeling for how shifting income and deductions will change your tax liability in the following year, though of course upcoming tax law changes make this a bit of a guessing game. Now whether you should buy the product is another question. Here are some things to continue (points I make every year):

• Shelling out the MSRP $44.99 would be a waste of money if your tax situation is dirt-simple. If you have a few deductions to apply, the basic version would be better, but if you don't itemize it makes no sense. Besides, if you can't fill out a 1040A or a 1040EZ without this kind of help, you probably can't install and run the software, either.
• TurboTax Deluxe can be indispensable if you have complex income and deductions, including entries for self-employment or farming/ranching. If you have lots of income from investments or you're a slumlord with a bunch of rental properties, you may want to step up to the Premier edition (n additional $20 or so).
• You can easily save the software's cost by finding a single missed deduction - especially with the "Maximize Your Deductions" interview process.

I've used both Basic and Deluxe, and they're both worth having on your side. If you buy Basic, it gives you the option (on several occasions) to upgrade to Deluxe - the code's already on your CD-ROM, you just have to pay to "unlock" Deluxe features. They also advertise for Quicken and refer you to the free online version of ItsDeductible. All that advertising gets a little irritating - sort of another form of spam or pop-ups.



Closing Recommendation: In truth, I don't know what I'd do without Turbo Tax - and it's a good bet that I'll buy it again next year. Highly recommended. Happy Tax Day!



Related reviews include:

Quicken Deluxe 2008
Online Filing with H&R Block's TaxCut

For more on the CDilla fiasco, see Turbo Tax Basic (2002)