TurboTax raises prices and the tax-prep software battle is on

But comparing the three market leaders — TurboTax, TaxACT and H&R Block — isn't easy

Jan 25, 2015 @ 8:07 am

By Bloomberg News

For the second year in a row, TurboTax has raised its prices. At least that's what it feels like to many customers.

Last year, TurboTax changed how it categorized its options for online filing, which looked to many users like a price-hike. A $20 “basic” return was gone. The $30 “deluxe” package no longer worked for filers with stock or mutual fund sales. Customers who'd been using "deluxe" for years discovered they needed to upgrade to the $50 “premier” package. Faced with a $20 charge after spending hours entering their tax information, many just forked over the up-charge.

(More: Tax traps to avoid in 2015)

This year, TurboTax made the same changes to the software it sells in stores. Loyal customers started complaining, loudly, when they realized they'd bought the wrong box. Almost 1,500 negative reviews were posted on Amazon, and H&R Block saw its opening: it made its tax prep software free to anyone affected.

TurboTax apologized and is offering deluxe buyers $25. “While we made the best long-term decision, our good intent was not matched with good execution," says Julie Miller, a spokeswoman for Intuit Inc., which owns TurboTax.

What it didn't apologize for was the fact that the reclassification simply makes it harder to compare prices. The three major players online – TurboTax, H&R Block and low-cost TaxACT – each divide their tax prep services into different buckets. Here's how it breaks down:

TaxACT is the cheapest option for most people. With only 115 full-time employees, TaxACT spends little on marketing but handles 7 million returns a year. Its pricing is relatively simple: Nothing at all for a basic federal filing tool with all the necessary forms, plus $15 for state filing. A deluxe package — federal return, state return and more guidance — costs $20.

H&R Block claims the cheapest option – $20 for a state and federal return. But that's only available to those who fit narrow criteria, homeowners or others who file a 1040 form with Schedule A. And it's only a better deal than TaxACT's $20 option if you take into account H&R Block's “in-person audit support.” Other H&R Block federal options cost $30 and $50 online.

TurboTax charges $37 for a state return on top of a federal return (the same as H&R Block). TurboTax raised prices by $5 this year, bringing "premier" to $55, or more than $90, if you include a state return. TurboTax says it can charge more because it's a better product than its rivals; Intuit's Ms. Miller cites the software's “intuitiveness.”

TurboTax does offer one bargain. For a limited time, people with very simple taxes – using 1040A or 1040EZ forms – can file for free. That includes a state return, which competitors' "free" options charge for. This is an effort to grab more share in the slow-growing tax prep market, Oppenheimer & Co. analyst Scott Schneeberger says.

An in-person preparer, meanwhile, will cost $200 or more. Last year, the U.S. Government Accountability Office went incognito to 19 tax prep offices. In one scenario, a “waitress” was charged fees ranging from $160 to $408. A fictional “mechanic” was charged $300 to $587.

One more tip: File early. The earlier you file, the cheaper it tends to be. (The IRS started accepting returns Jan. 20.) Early filers tend to be lower-income Americans getting big refunds, and special offers aimed at them, like TurboTax's entirely free returns, often disappear by late February, Mr. Schneeberger says. Prices jump again in the last week of March. Procrastinators, don't say we didn't warn you.

0
Comments

What do you think?

View comments

Recommended for you

Upcoming Event

Apr 30

Conference

Retirement Income Summit

Join Mopedia at the 12th annual Retirement Income Summit - the industry's premier retirement planning conference.Much has changed - and much remains to be learned. Attend and discuss how the future is full of opportunity for ... Learn more

The client experience is becoming richer thanks to so many technological advancements. Industry experts share their insights on this digital evolution.

Video Spotlight

Sponsored by Prudential

Recommended Video

Channels

Latest news & opinion

Merrill Lynch releases new compensation plan

Advisers bringing in enough accounts will be rewarded, those falling short will see compensation cut.

Brian Block sentenced to 18 months in prison

The government had sought a sentence of at least seven years against the former Nick Schorsch colleague.

Clayton: SEC targets 'complex, hidden fees'

Putting clients in expensive share classes instead of lower-cost ones hurts investors, chairman says.

LPL says it's on track to recruit 70% of National Planning Holdings revenue

Rivals have picked off some big NPH teams, but LPL said it is getting the lion's share of revenue from the acquisition.

Philip Palaveev on how firms should be recruiting young talent

Next generation needs and deserves more attention and training.

X

Subscribe and Save 60%

Last News

new york 529 plan vanguard aon hewitt financial advisors reviews tax on early distribution from ira fdic 250000 401k withdrawal laws franklin templeton roth ira usaa 529 college savings plan 401k withdrawal age without penalty td ameritrade holding mutual fund ratings lipper social security widow's benefits rules widow benefits for social security what is social security wages on w2 social security surviving spouse benefits eligibility virginia society of certified public accountants rollover from 401k to roth ira conseco life insurance company phone number max contribution to roth ira and 401k cashing in whole life insurance policy metlife long term care insurance reviews how much is a 1943 penny bank of america merrill lynch salary resource real estate diversified income fund whole life insurance vs investing fisher investments performance history first edition charizard value social security widow benefit rare and valuable pennies vanguard money market funds wells fargo advisor search dividend focused mutual funds hsa deductible limits 2014 married to a widower blog