By Laura Saunders
Intuit, the maker of the popular tax-preparation software
TurboTax, has infuriated many longtime users by requiring them to
buy more expensive software to do their 2014 tax returns.
Starting this year, people who prepare their taxes on a personal
computer can't use TurboTax Deluxe if they want to electronically
file common tax forms, including Schedule C for a business,
Schedule D for capital gains and losses or Schedule E for rental
property. Instead, they must upgrade to the Premier or Home &
Business versions--which cost up to $30 more than the $50 Deluxe
version as of Friday.
Customers with simpler returns face a similar issue: They can no
longer use TurboTax Basic if they want to itemize their deductions
on Schedule A, such as mortgage interest or charitable donations,
instead of claiming the standard deduction of $6,200 for a single
filer or $12,400 for a married couple. Now, they will need to
upgrade to TurboTax Deluxe, which costs up to $30 more than the $20
Basic.
People who use TurboTax to prepare their taxes online faced
similar issues last year.
As news of the change spread last week, longtime users took to
the Internet to express their outrage, flooding websites with angry
reactions. On Amazon.com, for example, reviewers posted more than
1,200 negative comments, complaining of "bait-and-switch" and
"price gouging."
"The company seems intent on fleecing the customer by increasing
the price with no product improvement," says Don Rickelman, a
retired entrepreneur in Naples, Fla. In the past, he says, he has
used TurboTax Deluxe to report his investments, but now, like many
other users, he is considering alternatives.
TurboTax spokeswoman Julie Miller says customers surprised by
the change can call the company at 800-445-1875 and "we will work
with them on a case-by-case basis."
Several who have called said they were given instant free
downloads of TurboTax Premier.
The exclusion of Schedules C, D and E from TurboTax Deluxe will
continue for software products next year, says Miller says. As a
result, customers who get a free upgrade this year will probably
need to pay more next year.
TurboTax's two chief competitors-- H&R Block and TaxAct--are
using the controversy to try to increase their market share. Last
year, TurboTax filed 29 million returns for people who prepared
their own returns, while H&R Block and TaxAct each filed some
seven million.
H&R Block is offering a free download of software to people
who have already purchased TurboTax Deluxe. (Email
SwitchToBlock@hrblock.com and include proof of purchase of the 2014
software.)
H&R Block's Deluxe software includes both Schedules C and D
but not Schedule E. Jason Houseworth, president of H&R Block's
unit for self-preparers, said that customers can import data
directly from TurboTax into H&R Block products.
TaxAct is emphasizing that its Deluxe version includes all
federal forms that can be e-filed and allows many imports as
well.
The options available to taxpayers who prepare their own returns
have multiplied and become easier to use in recent years. Still,
the percentage of individual returns prepared by paid
professionals--56%--was about the same in 2012, the most recent
data available, as a decade earlier, according to the Internal
Revenue Service.
If you prepare your own tax return, here are issues to
consider:
Online versus software preparation. The three big providers all
offer both online preparation and software to customers. Online
users prepare their returns over the Internet, while taxpayers who
use software install a program on their personal computers.
Taxpayers in both groups typically e-file their returns to the
IRS.
At all three firms, online preparation is far more popular than
using software. According to Ms. Miller, about 80% of TurboTax
customers prepare their taxes online. She estimates that about one
million customers, or fewer than 5%, are affected by the
reclassification of TurboTax Deluxe software.
Customers who prepare taxes online can typically access current
information from all devices--computer, smartphone or tablet--while
software users generally must prepare returns on their
computer.
There can be a cost advantage to using software, however, if a
taxpayer is preparing more than one return. Software users can
generally prepare and e-file up to five federal returns using one
installation, while the fee for online tax-prep is for just one tax
return and e-filing.
Price. There is much to consider. The current list price for
online preparation of one federal return with Schedule D is $40 for
TurboTax Premier, $30 for H&R Block Deluxe and $13 for TaxAct
Deluxe.
The current list price for software that provides Schedule D is
$75 for TurboTax Premier, $35 for H&R Block Deluxe, and $13 for
TaxAct Deluxe.
When checking prices, it is important to factor in extra
charges, such as for preparing a state return and e-filing it. They
vary from company to company and state to state.
Many retailers, such as Amazon, Staples and Costco Wholesale,
offer discounts, as do many investment firms. At T. Rowe Price
Group, for example, customers with more than $1 million of assets
get TurboTax Deluxe or Premier free, according to a spokesman.
Prices tend to increase as April 15 draws near. Check when your
fee is "locked in"--is it when you initiate the return, or when you
print or e-file?
And don't forget that the IRS offers free online alternatives to
paper filing. Taxpayers earning less than $60,000 qualify for free
brand-name tax preparation and e-filing, while people who earn more
still can use the IRS's Free File Fillable Forms. In this format
there is little to no advice, but the forms can be filled in and
e-filed with the IRS. (See IRS.gov for more information.)
Security. Some taxpayers think that by using software on a
personal computer, as opposed to going online, they share their
information only with the IRS. This isn't correct.
All e-filed returns pass through the portal of a contractor to
get to the IRS, even if the portal isn't apparent, an IRS spokesman
says. That firm will typically retain the data to prove the return
was delivered.
The only way to avoid sharing your tax information is the one
the IRS discourages, as it can cause errors and delay refunds:
filing on paper. Last year 84% of tax returns were e-filed.
Email: taxreport@wsj.com
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