TurboTax vs. Tax Cut - Making Deduction Decisions for a Small Business
How do you want your tax software to interact with you? Do you want it to take the lead and make the decisions for you? Or do you want the software to show you the options so you can make the decisions? Consider this question and read my comments as you make your decision on which to choose: TaxCut or TurboTax.
Several weeks ago I wrote about the cost and feature differences between TurboTax and TaxCut. Today, an update on how they differ in preparing taxes for a small business:
Preparing a Schedule C
I installed Turbo Tax Home and Business and TaxCut Home and Business and I have been working with both of them to prepare a Schedule C for a single-member limited liability company (LLC). I found both easy to work with and both of them lead you through the process with questions, so you don't miss anything. TurboTax has a "community" feature, where you can ask questions about the topic you are on, and see common questions that have been asked about this topic. Both programs provide brief additional descriptions of topics. The only complaint I had about either program was that it was hard to find the Business tab on TaxCut, while on TurboTax this tab was visible from the main menu.
Determining Depreciation Deductions
- TaxCut determined the maximum deduction automatically. It didn't ask me whether I wanted to depreciate the computer entirely in 2008 or take depreciation deductions over the life of the computer (5 years). I was told that the purchase qualified for the Section 179 deduction. TaxCut didn't mention the bonus depreciation.
- TurboTax allowed me to select options (1. Take all of the depreciation in 2008, 2. spread the depreciation over 5 years) and to see the effect of my selections in a bar graph. It also asked me if I wanted to take the bonus depreciation and showed me the effect of taking all or part of the bonus depreciation in 2008.
To be fair, both TurboTax and TaxCut ended up at the same place, with the same amount of depreciation for 2008, but TurboTax gave me more options. You might not want options, figuring that the purpose of the software is to do the work for you. I liked having options and being shown the effect of those options. But I'm not done yet....
My next project is to see how both programs handle a Form 1120, taxes on a corporation.
Comments
Turbo tax sounds like a good program but is it reliable?
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Thanks for the comment, Kyle. It brings up some interesting questions about financial software. I’m assuming when you ask about reliability you’re talking about the accuracy of the advice that the financial software is giving. Both TurboTax and TaxCut have links to the IRS and both say they have the most up-to-date information on IRS regulations. I’ll do some more checking on this and get back to you, through the forum.
There are cases that hold that the taxpayer is still responsible for the return, and blaming (TurboTax, TaxCut, and so on) don’t work.
Kyle, Julie from TurboTax…Just want you to know that TurboTax has a 100% accuracy guarantee for our tax calculations. As Jean notes, we update the software every year with the most recent tax law changes at both the federal and state levels. TurboTax also includes a very robust error-check that will comb through your return to help ensure it’s accurate.
Hope this helps!
The Internal Revenue Code is unbelievably complex and detailed. I would guess there isn’t a tax preparer in the US who hasn’t had something denied by the IRS. TurboTax and TaxCut do a good job with the vast majority of personal and business returns, but if you have a particularly difficult return, you might want to take it to a tax preparer.
Kyle, TaxCut is the software brand from H&R Block. One major difference with TaxCut is personal support – included is one complementary consultation with an H&R Block tax professional to answer any tax question you have. We also have a 100% satisfaction and accuracy guarantee.
David James
H&R Block TaxCut
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Kyle: After doing some research for Is Your Tax Software Reliable?, I was surprised to find that tax software is not tested by the IRS as thoroughly as I thought it would be. However, you will likely file a more accurate return using tax software than doing a return manually.
Steve Odem: Our Treasury secretary said the same thing when asked about his unpaid taxes: he used TurboTax but it was ultimately his responsibility to file his tax return correctly. It seems odd that someone who works in his field wouldn’t also have an accountant look at the return? >>shrug
Kyle: After doing some research for Is Your Tax Software Reliable?, I was surprised to find that tax software is not tested by the IRS as thoroughly as I thought it would be. However, you will likely file a more accurate return using tax software than doing a return manually.
Steve Odem: Our Treasury secretary said the same thing when asked about his unpaid taxes: he used TurboTax but it was ultimately his responsibility to file his tax return correctly. It seems odd that someone who works in his field wouldn’t also have an accountant look at the return? >>shrug