Battle of the Taxes: H&R Block vs. TurboTax

Jocelyn Baird for NetAdvisor writes: 

The time has arrived! Tax Season 2014 officially opens today. By now you should be receiving your W-2s and other pertinent forms. If you're not one for procrastinating, then you are probably gathering everything together to sit down and complete your return. Even if you are a procrastinator or need to wait to finish filing while you accumulate information, it doesn't hurt to decide which online tax preparation service to use and get started. Filing your taxes online is not only the best way to ensure a speedy refund, but it can help alleviate some of the hassle, since you will be using intuitive software vs. printing and filling out the forms on your own. We decided to pit our top two tax prep services — H&R Block vs. TurboTax — against one another to determine which is the best choice for you.

H&R Block vs. TurboTax: Which is better?

Price: Of course, both services let you file simple 1040EZ returns for free. But if you need to upgrade because your taxes are more complicated, then you'll probably want to know which offers the best price.

H&R Block has the cheapest package prices, with three different options — Basic ($16.99), Deluxe ($25.49) or Premium ($42.49) — depending on what type of return you need to file. These upgraded packages include the ability to import forms and prior year tax returns, plus offer enhanced support options and extra guidance for specific situations, such as rental property income. The cost to file state taxes is $27.99 for those using the free federal file option or $36.99 when combined with one of the upgraded packages. H&R Block offers NextAdvisor users a special 15% discount that is applied automatically when you visit through one of the links on our site.

TurboTax offers package options similar to H&R Block but at steeper prices. The upgrades offered are Deluxe ($29.99), Premier ($49.99) or Home and Business ($74.99), and you can also get the Basic package for $19.99 if you want extra guidance and support in addition to access to prior year returns as a free filer. However, TurboTax is currently running a special 50% off discount on filing state taxes for free filers, making the cost just $14.99/state — a great deal when compared to H&R Block. If you are a premium user, the cost is $36.99/state.

Useability: Both services feature intuitive, easy-to-use interfaces that guide you through the process of filing step by step. While TurboTax is more streamlined and puts an emphasis on how little time you'll have to spend completing your taxes (they boast 10 minutes tops), H&R Block wins with an interface that offers up detailed help along the way and makes it easy to import documents to help speed up the process. 

Support: H&R Block beats out the competition when it comes to support hands down. In addition to guided online support and an extensive resource section called The Tax Institute, it offers the ability to consult with tax professionals both in person and online. Block Live online connects you with a tax professional via a real-time, secure video conference or chat, and you can also schedule an appointment at your closest H&R Block office for an in-person consultation. While lacking the benefit of in-person support, TurboTax also offers robust support options with phone and web-based chat with certified tax professionals as well as its AnswerXchange community forum, populated by a mixture of experts and other TurboTax users.

Audit Assistance: Both H&R Block and TurboTax offer excellent audit support, but H&R Block's Worry-Free Audit Support guarantee puts them ahead of the game. With this guarantee, you receive assistance from an H&R Block tax professional in the case of a federal or state audit of your tax return — from preparation to attending the audit with you — completely free. TurboTax provides free one-on-one audit consultation year-round, including access to their Audit Support Center program. If you want representation, you can purchase their Audit Defense program for $39.99.

Bottom Line: When it comes to support — especially in the case of auditing — as well as price, H&R Block reigns supreme. However, if you're planning to file multiple state returns alongside your free federal return, you might want to take advantage of TurboTax's 50% discount on each state return. Both services offer impeccable guidance and intuitive, well-designed interfaces to make the process of filing your taxes less of a burden. No matter which choice you make in the battle of H&R Block vs.TurboTax, you're going to come out on top.

The top 5 tips to avoid a tax audit; Know how to report accurately with these 5 tips

Mike Trim for WPTV writes: It doesn't matter if you file your taxes with a professional tax preparation service or electronically file yourself, if you don’t file correctly an audit could be on the way.

Tom Grochowski of Star Tax Recovery said, "It's a very serious thing, people are afraid of the IRS."

Grochowski has more than 10 years of professional tax filing experience and helped NewsChannel 5 create the top 5 tips to avoid an audit.

#1 Don't underreport

Leaving earnings off here or there could spell trouble. "They'll get a notice saying all right we see some income on our end that we don't see on your end, we need to take a look at that," said Grochowski.

He says he sometimes sees this in filings with a lot of brokerage transactions.

#2 Don't report large deductions based on your income

Grochowski gives this example: If your household has a combined income of $45,000 but you report $25,000 in Schedule A itemized deductions, that's going to throw up a red flag.

Grochowski said he sometimes sees people explain the gap with large amounts of home mortgage interest or large charitable contributions.

"Doesn't pass the smell test on the IRS level and it may lead for your return to be subject for review," said Grochowski.

#3 Legitimize your home office deduction

Make sure you really use your home for an office. Grochowski gives the example of a hairdresser renting a chair at a local salon then claiming a home office deduction. That’s a corner cut that could lead to an audit.

#4 Be careful of small business losses for several years

Be prepared to answer to the IRS if you show big losses for 3 years or more. Unfortunately, those trying to evade taxes might label something as a small business simply as a shelter to defer taxes.

#5 Be thorough with reporting foreign bank accounts

Grochowski says the IRS is looking at this much closer this tax season than in previous years.

Purposely sheltering money in a foreign account carries big penalties.  "Penalties up to one hundred thousand dollars. They're taking it very seriously," said Grochowski.

A Way to Make Tax Season Easier / The IRS's 'Free File' Could Save You Time and Money

Tom Herman for the Wall St Journal writes:   Here is a suggestion for many taxpayers searching for free help: Consider "Free File."

This refers to an offer, available through the Internal Revenue Service website (irs.gov), of free tax software by private-sector companies participating in a "public-private partnership." This freebie is available to households with income of $58,000 or less, or 70% of the nation's taxpayers, the IRS said in a recent statement.

"If you want to save money and time, just use Free File to prepare and e-file your federal return at no charge," IRS Commissioner John Koskinen says.

To check it out, go to the IRS site (IRS.gov/freefile). Each of the participating companies has "specific offers—generally based on income, state residency and age—to use their software," the IRS says. "If your income is $58,000 or less, you will find at least one, if not more, offers available to you." These programs are for federal returns, but "most companies also offer state tax return preparation, some for free," it says.

Regardless of income, everyone can use "online Fillable Forms," the IRS says. This is the electronic version of the IRS's paper forms. However, this option "helps with math but not with step-by-step assistance," the IRS says. See the IRS website for instructions. State tax return preparation "is not available using this option."

The IRS said the participating companies are part of a group known as Free File Alliance. This Alliance "has partnered with the IRS for 11 years to make these commercial products available for free to taxpayers who don't earn high incomes. You must access these products through IRS.gov to be eligible for their free offers."

Warning: Even if you qualify for free software, you may not find answers to all your questions, and you may need expert help. Tax-preparation software has improved significantly over the years, but our tax system is extraordinarily complex.

Reporting and Analytics for Intacct You Can't Afford to Ignore / A Free Webinar

Armanino writes: There's no better way to add a competitive advantage to your business  than by implementing the Adaptive Planning-Intacct Integration tool. Whether you have Adaptive Planning already or are looking for a powerful reporting  and analytics tool for Intacct, you'll immediately see the value of both in this webinar.  Armanino leveraged our experience as a top accounting and consulting firm to develop  the Adaptive Planning-Intacct Integration tool, a reporting, budgeting and forecasting  all-in-one solution. Our experts will demonstrate the tool and cover deployment options  to get you up and running quickly and efficiently. Tuesday, Feb. 4, 2014 10:00 - 11:00 am (Pacific) click below to register https://www2.gotomeeting.com/register/184686122 IN THIS WEBINAR Recognize the power of automated data between Adaptive Planning and Intacct. Implement rolling forecasts to optimize decision making for better sales  planning, analysis of key performance metrics and creation of "what-if" scenarios. Explore the myriad of powerful reporting and forecasting functionality  offered by the combined solution. WHO SHOULD ATTEND CEOs, CFOs, Finance VPs, Finance Directors, Controllers,  Accounting/Finance/IT Managers and others involved in accounting/finance/IT SPEAKERS Scott Schimberg Director, Consulting, Armanino Scott has more than 20 years of financial executive, operations and experience in public and private companies and has hands-on experience managing equity administration programs. John Dunican Partner, Armanino John leads Armanino's Adaptive Planning practice and brings 25 years of experience as CFO, VP of Finance and other finance and operations roles at public and private companies. His background includes all financial functions, process re-engineering, information systems, SEC and investor reporting, mergers and acquisitions, divestitures and cost-reduction programs.

2014 Tax Filing Deadline Calendar

2014 Tax Filing Calendar

2014 Tax Filing Deadlines

On or Before…

January 15, 2014

• Pay the balance of your 2013 estimated tax.

February 1, 2014

•  Make sure you have received a Form W-2 from each employer for
  whom you worked in 2013.
• Make sure have received all 1009′s for any contract work you were compensated for.
• Make sure you have received all 1099′s for any interest, dividend , RMD withdrawals.

April 15, 2014

•  File your 2013 tax return and pay the balance of any tax due.
•  You may file Form 4868 to obtain an automatic six-month filing extension (this is not, however, an
  extension for payment of taxes due!).
• Pay the first installment of your 2014 estimated tax.

June 16, 2014

• Pay the second installment of your 2014 estimated tax.

September 15, 2014

• Pay the third installment of your 2014 estimated tax.

October 15, 2014

• File your 2013 return if you received an automatic six-month
  filing extension using Form 4868.

December 31, 2014

• Last day for the self-employed to establish a Keogh plan for 2014.

This report should not be used as a substitute for professional advice from an attorney, accountant or other qualified  financial professional.

401k: Mutual Fund based vs. ETF based

Over at Bogelheads we came across the following discussion:   401k: Mutual Fund based vs. ETF based

by DireWolf » Sat Feb 01, 2014 8:04 pm

So our group has been advised by our 401k custodian that it might be beneficial to convert our 401k plan to an ETF based plan as opposed to our current Mutual Fund based plan. Of course I haven't heard any reasons why.

Does anyone have opinions on the potential pros and cons of either type of plan?

Thank you.

DireWolf

Re: 401k: Mutual Fund based vs. ETF based

by livesoft » Sat Feb 01, 2014 8:05 pm

I see only negatives. Why does the custodian say this? And I love ETFs, but not for a 401(k) plan.

Negatives:

Confusion by employees. Their plan will be difference from the spouse's plan.
Costs will probably not be so transparent.
Will fractional shares be allowed?
Can one look up the prices the shares were purchased at? Since ETFs are not bought at end-of-day like mutual funds, this could be very confusing.
Too many choices. The tyranny of choice is a big deal.
How do you do target retirement and balanced funds with low expense ratio ETFs?

I don't see any pros that cannot also be had with low-expensive ratio passively-managed index funds.

I suppose if there are only 3 employees that they can be educated about ETFs and make do.

It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.

livesoft

Re: 401k: Mutual Fund based vs. ETF based

by JamesSFO » Sat Feb 01, 2014 8:54 pm

livesoft wrote:I see only negatives. Why does the custodian say this? And I love ETFs, but not for a 401(k) plan.

Negatives:

Confusion by employees. Their plan will be difference from the spouse's plan.
Costs will probably not be so transparent.
Will fractional shares be allowed?
Can one look up the prices the shares were purchased at? Since ETFs are not bought at end-of-day like mutual funds, this could be very confusing.
Too many choices. The tyranny of choice is a big deal.
How do you do target retirement and balanced funds with low expense ratio ETFs?

I don't see any pros that cannot also be had with low-expensive ratio passively-managed index funds.

I suppose if there are only 3 employees that they can be educated about ETFs and make do.

Our new provider suggested considering an ETF-based plan recently I was told you get the closing price (not the NAV) for 401K purchases/sales, it was a finite list.

I didn't drill down further, but given that the price is known I would assume you can end up with fractional shares.

Anyhow, there are target retirement ETFs (e.g. iShares has them) -OR- the provider will aggregate some of the ETFs into a bundle. I didn't go with it so I don't know more.

JamesSFO

Re: 401k: Mutual Fund based vs. ETF based

by in_reality » Sat Feb 01, 2014 8:56 pm

livesoft wrote:I see only negatives.
Costs will probably not be so transparent.
Will fractional shares be allowed?
Can one look up the prices the shares were purchased at? Since ETFs are not bought at end-of-day like mutual funds, this could be very confusing.

I don't see any pros that cannot also be had with low-expensive ratio passively-managed.

I like to be positive so here goes:

IShares and wisdomtree both claim their etf fees are fully transparent in 401ks
The fractional share issues appears to have been solved by executional parties which also solves the settlement date issue if you are switching between holding a mutual fund an etf.

A plan may report an average cost to solve the price issue

Etfs won't have a cash drag on performance as they can stay 100% invested since there are no requirements to hold cash for redemptions

Etfs have no 12b-1 marketing fee

Etfs can be traded on an omnibus basis to pool transactions and lower costs.

Re: 401k: Mutual Fund based vs. ETF based

by DireWolf » Sat Feb 01, 2014 10:38 pm

I like the fact that ETFs traditionally have low fees, but the fee structure can be harder to understand. I also don't understand ETFs as well as I do mutual funds, so there is some anxiety.

DireWolf

Re: 401k: Mutual Fund based vs. ETF based

by JamesSFO » Sun Feb 02, 2014 12:21 am

DireWolf wrote:I like the fact that ETFs traditionally have low fees, but the fee structure can be harder to understand. I also don't understand ETFs as well as I do mutual funds, so there is some anxiety.

How is the fee structure harder to understand? Each ETF in the offering will have an ER and each mutual fund in your current line up has an ER?

I'm not claiming that you should make the switch but I'm not sure what fee structure you think will be more complex?

JamesSFO

Re: 401k: Mutual Fund based vs. ETF based

by DireWolf » Sun Feb 02, 2014 12:57 am

JamesSFO wrote:

DireWolf wrote:I like the fact that ETFs traditionally have low fees, but the fee structure can be harder to understand. I also don't understand ETFs as well as I do mutual funds, so there is some anxiety.

How is the fee structure harder to understand? Each ETF in the offering will have an ER and each mutual fund in your current line up has an ER?

I'm not claiming that you should make the switch but I'm not sure what fee structure you think will be more complex?

The bid-ask spread in particular.

DireWolf

Re: 401k: Mutual Fund based vs. ETF based

by NightOwl » Sun Feb 02, 2014 1:52 am

DireWolf wrote:So our group has been advised by our 401k custodian that it might be beneficial to convert our 401k plan to an ETF based plan as opposed to our current Mutual Fund based plan. Of course I haven't heard any reasons why.

Does anyone have opinions on the potential pros and cons of either type of plan?

Thank you.

Hi DireWolf,

I have a question: does an "ETF-based plan" require your employees to go online and actually trade ETFs in order to get their money invested monthly (assuming that's what they are doing), or is there some kind of automatic investment opportunity?

If your employees have to go online and enter an order, I'm with livesoft: disaster. I have been reading this forum for years now, and I make maybe one or two ETF trades per year; I'm still hesitant to trade on the open market. Sending employees who are not familiar with limit vs market orders and bid/ask spreads into the market to purchase or sell ETFs monthly would be a very bad move, IMO.

Also, to be clear for everyone, most 401(k) committee members are functionally barred from offering any kind of advice to their peers, lest they be accused of violating their fiduciary duties.

NightOwl

"Volatility provokes the constant dread that some investors know more than we do, making us fearful of ignoring such powerful price movements." | Peter Bernstein, "The 60/40 Solution."

NightOwl

Re: 401k: Mutual Fund based vs. ETF based

by JamesSFO » Sun Feb 02, 2014 2:39 am

NightOwl wrote:[
I have a question: does an "ETF-based plan" require your employees to go online and actually trade ETFs in order to get their money invested monthly (assuming that's what they are doing), or is there some kind of automatic investment opportunity?

Not the OP, but I will answer, it works just like a MF based 401K, you pick a default contribution and it gets auto-invested in those choices. It isn't a no holds barred ETF supermarket, but a defined list of choices they are just ETFs instead of MFs.

EDIT: This article shares some insight, it works just like a MF you invest exact $ and the custodian handles the details and allows fractional shares:http://www.etf.com/sections/features/20 ... -live.html

Last edited by JamesSFO on Sun Feb 02, 2014 2:49 am, edited 1 time in total.

JamesSFO

Re: 401k: Mutual Fund based vs. ETF based

by JamesSFO » Sun Feb 02, 2014 2:46 am

DireWolf wrote:

JamesSFO wrote:

DireWolf wrote:I like the fact that ETFs traditionally have low fees, but the fee structure can be harder to understand. I also don't understand ETFs as well as I do mutual funds, so there is some anxiety.

How is the fee structure harder to understand? Each ETF in the offering will have an ER and each mutual fund in your current line up has an ER?

I'm not claiming that you should make the switch but I'm not sure what fee structure you think will be more complex?

The bid-ask spread in particular.

Thanks for clarifying, and I think overall that is reasonable, but if you stick to heavily traded ETFs like say the iShares core holdings in your lineup what do the bid-ask vs. NAV spreads look like? EDIT to fix to an iShares example, ITOT has a bid-ask spread of around 0.05%, but also EDIT to point out, isn't the premium/discount to NAV more relevant? +0.03% premium to NAV btw?

Again, I looked at the iShares ETF lineup and went with the VG signal shares mutual funds for my company, but I think given the processes in place the ETF offering could be quite competitive on expense ratio overall except for degenerate cases where bid-ask comes apart or the the unit redemption mechanism comes apart and the NAV goes to heck.

I think it is totally reasonable to focus on it and pick the mutual fund line up.

This WSJ article has some more info (google ETFs in 401K and it was a top result): http://online.wsj.com/news/articles/SB1 ... 0035464136

Here's a completely ungated article talking about some of the issues: http://www.etf.com/sections/features/20 ... -live.html

JamesSFO

Re: 401k: Mutual Fund based vs. ETF based

by livesoft » Sun Feb 02, 2014 7:42 am

Since many 401(k)s have funds wrapped in annuities or use collective trusts that folks don't really understand and cannot look up prices online except at the 401(k) website, I suppose that ETFs could be just one more of that kind of thing. And now I see that the price that one would buy/sell at in the 401(k) is some end-of-day fixed price, I would not have any objections to an ETF-based 401(k) plan.

Indeed, the 401(k) plan of ETFs would not even have to call them ETFs or even reveal that ETFs were being used. They could invent some new term for them such as CIAs (collective investment annuities) and charge extra fees for all their cleverness.

It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.

livesoft

Re: 401k: Mutual Fund based vs. ETF based

by JamesSFO » Sun Feb 02, 2014 10:14 am

livesoft wrote:Since many 401(k)s have funds wrapped in annuities or use collective trusts that folks don't really understand and cannot look up prices online except at the 401(k) website, I suppose that ETFs could be just one more of that kind of thing. And now I see that the price that one would buy/sell at in the 401(k) is some end-of-day fixed price, I would not have any objections to an ETF-based 401(k) plan.

Indeed, the 401(k) plan of ETFs would not even have to call them ETFs or even reveal that ETFs were being used. They could invent some new term for them such as CIAs (collective investment annuities) and charge extra fees for all their cleverness.

Live - Ever the cynic? TD Ameritrade seems to be doing this to be able to offer smaller plans lower cost options. My guess is they make some $ off the proprietary trading plus acting as a market maker of sorts on fractional shares and/or the marketing $ from the ETF sponsors.