Online Tax Filing
Tax season is upon us. It means either getting a nice refund or paying the government through the nose. Through the years, I have been content with doing my taxes using various software programs. Prior to 2003, I used Intuit’s Turbotax program. In 2003, Intuit’s use of Digital Rights Management (DRM) caused a major controversy and I abandoned the program to H&R Block’s TaxCut program.
This year, H&R Block decided to discontinue Mac support for their software product. When I emailed them regarding this issue back in September, they stated they regretted the problem and suggested I use their website to file my taxes.
I really didn’t have much choice. Turbotax was now the only software solution for filing my taxes. In my usual method of shopping I decided to research before purchasing. So, instead of blindly going to the TaxCut online site, I instead went to the IRS Free File Alliance Company List and cross-indexed it with the Massachusetts Department of Revenue Commercial Software and Service Providers list. This gave me eight companies to look into for online filing.
I went to each company and started a tax return, proceeding as far as I could through the website. I stopped when I received either an error message, the site stopped working for me, or when I received both a Federal and State tax return result. I have not yet filed with any of these sites. In actuality, since I owe money on my state tax return, I will probably file my federal taxes online and paper file my state returns.
The following sites have been reviewed for overall usability and cost versus return. Bells and whistles are not everything and a site with a fancy name and flash program might get a lower result than a solidly programmed linear site.
All sites reviewed returned the same Federal refund for me. The difference came when I attempted to file my state taxes. Given how I owe the state some money, some of the sites were wildly different on their response on just how much this was to be. I’m going to report this by using the median value returned and noting how far off the median value each other site was.
I was initially very interested in TaxSlayer. They had a robust looking website and I was hoping to get right into it. I went to sign up for an account to start my taxes and filled in all the information required. Unfortunately, when I went to submit this information, nothing happened. This is a classic example of a Javascript incompatibility with Firefox, which has become a pretty standard browser. I emailed their support center about this issue. They stated it would take 12 hours to receive a response with their automated system. I have heard nothing on the issue in over two days.
* Since I was unable to access this site, I am listing the price as the advertised price on their main page.
Rating: 
0 out of 5
TaxAct Online
Cost: $9.95 Fed, $6 State (Total $15.95)
I’ve heard about the TaxAct product for several years now. It’s always had good reviews and press, so I didn’t expect to have many problems accessing the site. TaxAct supports Firefox, Safari, Internet Explorer 5.0+ and Opera for both Windows and Mac OS and AOL 6.0 for Windows.
The user interface for TaxAct was easy to use and fairly intuitive. Like many of the online sites, it does display some ads for TaxAct related products as you work on your return, but they are fairly unobtrusive and don’t interrupt the entering of information.
The main deficiency with the site was how when I attempted to navigate through the site with their previous and next buttons, I lost the information I previously entered in the form. This made it highly difficult to review information.
Another problem with the site was the entry of post-Katrina charitable contributions. It was a bit convoluted. Other programs just asked you to identify the date of the contribution or asked if the contribution was made before August 27, 2005. TaxAct doesn’t explain this deduction difference at all and seemed to expect the user to know how to enter the information. Help text was sparse indeed. As this was the first site I managed to get my tax information into, it wasn’t until reviewing H&R Block’s site that I realized how this information was to be entered. I then had to go back to TaxAct’s site and fix what I had entered originally.
TaxAct’s review process simple and easy to understand. It was also quite complete allowing you to enter your 2004 tax data to compare to your 2005 data so you can easily look for discrepancies and errors.
My state tax costs came to $7 over the median cost.
Rating: 
3 out of 5
H&R Block Online
Cost: $19.95 Fed, $24.95 State (Total $44.90)
This website had all the bells and whistles. The program launched a very dynamic interface in a separate window. This interface allowed easy navigation. You could backtrack without destroying your current data. This program was so impressive, it nearly mimicked the offline TaxCut software exactly, which might have been a bit of overkill and probably resulted in some of the rendering issues I experienced. The questions asked were easy to understand and allowed for anyone to fill out their tax return.
H&R Block is the only site I reviewed which gave me the option to not just import my previous year’s TaxCut data, but also offered me the option to import data from Turbotax or TaxNet.
The one negative feature of the user interface was some of the graphical buttons were rendering properly using Firefox 1.5 on my Mac. Only the very top of the graphic was visible. Some users might find this to be a difficulty. It was a major impediment to reviewing errors, as even clicking on the top of the buttons incorrectly rendered had no result, requiring me to use the ‘Go to’ feature in the sidebar. This was the only other occurrence of the rendering issue I saw past some of the initial interview questions.
I would be remiss if I didn’t mention the cost of this site. H&R Block is $10 more expensive than the Turbotax site. As far as I can tell, it does not offer anything different than Intuit’s site.
As of this date, the Massachusetts state return was not available. It will supposedly be available on the day this article will be released. This was the only site I was able to get full results in where I couldn’t fill out a state tax form. When I used the software offline, I remember I always had to wait until mid-February (and sometimes later) for the Massachusetts returns to be available. This has always been a downside to H&R Block’s programs. There’s no discernible reason for this delay as the other sites all have it available at this time.
Rating: 
3.5 out of 5
TurboTax
Cost: $9.95 Fed, $24.95 State (Total $34.90)
Turbotax was the most impressive online forms available. Its easy to use interface was beyond expectations. They asked simple questions and they kept a tally of your payment/refund as you entered data, so you can see how your deductions or incomes effected the final outcome. They were also very up front, letting the user know which forms had yet to be finalized. They would not let you file if you required a form not yet finalized. They also let me know right away if my adjusted gross income (AGI) disqualified me for a benefit, rather than have me fill in the information and then tell me I wasn’t qualified for a deduction.
Turbotax was the only online service which had the option to let you complete your return first and then create an ID later. This means they retain no information in their systems about you unless you decide to create an ID and save your data.
The system would allow you to import your data from a desktop version of Turbotax, but not from any competitor products, such as TaxCut.
One of the more obnoxious features of this application were the advertisements they interrupted you with. Before proceeding into each section, they’d try to either sell you on their gift card option for your refund or have you pay for upgraded services. Their base product, however, is complete enough, there’s no reason to increase to more expensive services. There’s also a catch if you get a gift card for your refund. You have to use your refund at various, limited retailers and can’t use it, for example, to pay off credit card debt. This increases consumer spending, but does not help the consumer debt index. You also have to pay shipping and handling on your gift card. Other tax programs offer this feature as well, but none pushed it right as I logged into the program like Turbotax.
The state tax owed was $1 less than the median result.
Rating: 4.5 out of 5
eSmartTax.com
Cost: FREE Fed, $9.95 State (Total $9.95)
This site was perhaps the most frustrating to navigate of all the sites I tried, proving the saying, “You get what you pay for.” eSmartTax advertises free Federal filing with no income limits and state tax filings at $9.95. This was by far the cheapest site I found meeting my initial requirements.
I was able to sign in without a problem. The forms seemed simplistic with no bells and whistles, but they were easy to understand and get through, having the user answer a sequence of yes or no questions.
I was initially put off by the first page, decreasing my initial impression of the site. The form asks the user to input a social security number as well as basic personal information. Once this is entered and the ‘Next’ button is selected, the form refreshes, and shows a box on the top of the page indicating you should check your data prior to continuing as changing a social security number would not be permitted after this point in the form. The original ‘Next’ and ‘Previous’ buttons still appeared, but the data would not actually submit unless you selected the ‘Next’ button within the box itself. This is unclear and could be considered confusing.
As soon as I tried to enter any form data, such as 1099-INT forms or my W2, I found the server would consistently time-out and prevent me from submissions. Just about every time this happened, I would lose my session and have to sign in again, navigating back to the form to try to enter my data again.
The slowness of the site forced me to give up after the first hour of simply trying to enter my income data. I never got beyond entering my 1099-INT forms. There is no excuse for this behavior in a site, especially since heavy use won’t even begin until April.
Rating: 0.5 out of 5
CompleteTax.com
Cost: $24.95 Fed, $9.95 State (Total $34.90)
Considering this is not a “big name” site, such as TaxAct, Turbotax, or H&R Block, I was highly impressed by CompleteTax. Considering it costs as much as Turbotax, I suppose I should have been. I had no problem navigating the simple and complete interface. I never felt the site was anything but a full-blown, professional application.
The site initially asked me a series of yes or no questions to determine which parts of the form I was required to fill out. This means I completely skipped over sections I didn’t need, streamlining the process of filling in my information.
CompleteTax was on par with Turbotax for usability and professionalism.
This site reflected the median for the cost of my state income tax.
Rating: 4.5 out of 5
TaxEngine.com
Cost: $19.95 Fed only, $29.95 Fed and State (Total $29.95)
This site was lightning fast and mostly easy to use. While there were no problems with the technical aspects of the site and the results were quite comparable to other, high-end sites, I had my hopes this site might prove one of the better values for my dollar. Unfortunately, this site has some major usability issues.
The first issue which I found to be glaringly obvious, was the forms being very non-dynamic. For example, I was filing as an unmarried, single taxpayer. The subsequent forms still asked me to enter spousal information, although the program already had asked my tax status. It’s this basic type of feature I come to expect from sites with even just basic data collection abilities.
The next issue was more an annoyance than anything else, but was a major strike against basic usability. Most sites ask a series of yes or no questions to determine which forms you’ll need to fill in to file. However, TaxEngine requires you check each individual tax form you’ve received without describing the form itself. You simply had to have all your W2s, 1099s, 1098s, etc. on hand to know. However, if a novice investor who knew they had investment income and had not received their 1099-B, has no way for to intuitively figure this out.
Finally, in the final strike against usability for this site, the state form requires you go into the individual tax form beyond the interview questions and fill in figures. It doesn’t ask pertinent questions and it is not at all intuitive. It’s quite possible to lose some deductions this way, as well. For example, I get a deduction on home heating fuel purchased between 11/1/2005 and 12/31/2005. I had to find it in the forms. If I hadn’t known it was there from filling out several previous online forms, I’d have missed and potentially paid a higher tax.
The final result of the state tax program had me pay $1 more than the median.
Rating: 2 out of 5
Online Taxes
Cost: $7.95 Fed, $7.95 State (Total $15.90)
Online Taxes was the most impressive low-cost filing site meeting my requirements. The form was easy to navigate and asked pertinant questions. Unfortunately, it was not always accurate. For example, when asking for information off my 2004 tax return, it told me to look at line 39a in my 1040. There is no 39a. Through some work, I figured out they meant line 38a. The mistakes I found were minor and text-based, but could add to some extra frustration when attempting to fill out the form.
Another minor user interface issue appeared when enterting tabular data, such as listing various charitable donations. The page required you to enter the data, select you had another charity to enter, then you could enter the data. It would be nice if they had a tabular field with multiple selections or asked on a single page, so you didn’t have to hit two forms when entering the data.
Overall, the site was well built and solid. It was slightly easier to navigate than TaxAct, but lacking the bells and whistles of more robust sites such as Turbotax and CompleteTax. I found this site to be the best value for my dollar.
This site’s computation of state tax owed was the median value.
Rating: 4 out of 5
UPDATE!!!! - February 4, 2006
I tackled my state taxes on paper and my initial results were an eye-opener. First, I’d like to give you some background. Massachusetts (sometimes known as Taxachusetts) borders a state (New Hampshire) where you can go and buy all you’d like (mostly) for no sales or use tax. Partner this with tech-saavy Massachusetts residents purchasing online, and you have a commonwealth nervous about its use tax collection. As such, they explicitly ask about your use tax on your income tax form, and since about 2002, they mean it.
The programs I used above all asked about my use tax and consumption of tax free goods. Here’s the caveat. The commonwealth has a safe harbor value you can used based on your AGI. If you get audited, the auditor can’t challenge your use tax if you use this figure. Of the programs listed above only H&R Block, which finally made their state tax forms available and had a result of median + $34) offered me the option of picking the safe harbor value, none of the others even calculated it for me. Instead it’s figure out your actual consumption or put in $0. The safe harbor figure comes to approximately 5% of 1% of my AGI, which adds $45 to my amount owed to the state. In terms of ethics, I felt it was important to claim this figure. So, my end result was median + $45.
Also noteworthy was the difference of using the rounding method versus the exact method. All the programs above round to some degree to give you a whole number value. The difference is about $.70 for me, which isn’t significant, but it’s still money I don’t owe the commonwealth. If I were getting a refund, using the rounding method would definitely be in my favor, but I’m not planning on giving Massachusetts one penny more than it’s actually owed!
Overall, the accuracy of H&R Block, the only program which asked me about the safe harbor is suspect given the safe harbor value of $45 and the median otherwise being quite correct as the amount owed to the commonwealth. None of the programs were terribly accurate and even with long term capital gains, I felt the state tax form was straight forward enough to do by hand, especially with money owed. Massachusetts still offers telefile options for refunds, also making it worth doing the forms by hand, for accuracy.
In terms of my federal return, I ended up filing with Turbotax Online for $9.95. My first inclination was to use Online Taxes, but they had a hidden fee for electronic deposit of $14. Thanks to chanman83 for pointing this out! I choose Turbotax since I was not using them for state and their program rated high with me. When I filed, it cost $9.95 and I choose to electronically deposit the funds in my account with no additional or hidden fees. Online Taxes hidden fees knock them down a notch in my opinion. I’m not going to revise their rating, but it’s an important point to note.
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January 31st, 2006 at 10:47 am
Are Massachusetts taxes particularly complicated? I’m just kind of surprised to hear the varying results. PA’s are extremely straightforward. I seem to remember NJ’s being, as well. FL didn’t have any (even better, nothing more straightforward than that!)
Was the median result the correct result?
It’s a shame there aren’t many options other than online for the Mac. I’m using the PC version of TaxAct, but I also received, out of the blue, a cd for TaxCut in the mail. Everywhere I go that sells software has their tax program displays up already. You’d think that there’d be a good Mac market now.
January 31st, 2006 at 11:01 am
MA taxes are pretty damn straight forward, which is why I was confounded by the results. I’m pretty sure the median is correct and the ones that are $1 off are all results of rounding. Massachusetts allows you to either round or use exact calculations when figuring out your taxes. I haven’t sat down with the paper forms (because I can’t get to the library or post office to pick them up before Saturday) yet to calculate them myself, but when I do, I’ll update the article with an addendum indicating the actual result by hand.
I’m very disappointed when companies discontinue Mac support on their products. With the new Intel Macs being released, the system is more attractive than ever. They’re really quite beautiful, and I’m not talking in a physical way. The FreeBSD backend was a wonderful addition to the Mac product and made it very attractive to computer geeks. I can do so much with my Mac and run so many wonderful programs. It really is a shame when companies corner themselves out of such an interesting market share.
January 31st, 2006 at 8:16 pm
It’s important to note that the IRS is now attempting to ramp up their efforts to direct people to e-file.
One way they’re doing it is by slowly phasing out their free distribution of tax forms to local libraries, post offices and banks. Our library received far fewer forms this year (we’re already running out) and many of the smaller towns in NH were dropped altogether from the distribution program. The town’s post office also has no forms available. (So E, if you’re going to pick them up, you might want to call and make sure they have them first.)
So everyone’s left with the option of either calling the IRS to get them to send you a form, or going online to download them, both of which are a hassle for the taxpayer. Printing them out at home seems easy, but that’s not really a reasonable alternative for the -instruction- booklets, which can run hundreds of pages. And this presupposes you’re able to find them, which, if you can barely use a mouse, is unlikely.
January 31st, 2006 at 8:24 pm
Are you finding it’s the same with the state tax forms? I’m getting a refund for federal, so I’ll likely eFile those. It’s the state taxes I’m going to take my time with.
January 31st, 2006 at 10:04 pm
We do have a limited number of MA forms at the library, though NH seems to have jumped on the non-distribution bandwagon — we’ve got nothing from them at all. (No income tax on regular earnings, but you do have to file for dividends and the like.)
It’s possible MA hasn’t started cutting back yet.
February 1st, 2006 at 11:41 pm
We got a book in the mail for PA before the end of 2005. E-filing is free on the state’s website, which I like. We also have local taxes to fill out forms for. Blahsuck, I say to 3 tax returns to do each year!
PA is pushing online and telefiling. Actually, from looking at the book, it doesn’t have a form to mail in, just an envelope for payments if your telefiling says you owe money.
For local taxes, I think we can only do them on paper. How progressive, huh? No telefiling or anything.
Oh well. I finally got the last W2 in the mail today and now I’m done all 3 tax returns. Hooray!
February 2nd, 2006 at 12:18 am
Heads up for anyone who wishes to use Online Taxes. They will charge you for direct Deposit fee of 14 bucks for this. Just letting everyone know.. Thanks Elana for the article helped me out a bunch!
February 4th, 2006 at 10:01 am
I’ve updated this article with further information. See above!
February 19th, 2006 at 12:40 am
The additional 14 bucks in online taxes is only if you wish to pay the online taxes fee with the federal refund amount. If you pay with credit card or paypal it is $7.95 Fed, $7.95 State (Total $15.90)
Admin Edit: User identifies as an employee of Online Taxes
February 20th, 2006 at 4:06 pm
I agree. I used Online Taxes to file my taxes and was charged nothing for my direct deposit. The charge came as an option in using your refund to pay for your federal and state fees.
Admin Edit: User identifies as an employee of Online Taxes