Why desktop tax prep beats online tax prep
(Credit:
CNET)
Preparing your taxes online offers some advantages over doing them on the desktop--you don't have to wait around for installations and updates, for one--but for taxpayers like me, there are certain rewards to desktop tax apps like TaxCut (review) and TurboTax (review). As part of CNET's tax coverage this year, we wanted to compare not just TaxCut and TurboTax, but also the benefits of filing taxes online versus filing with desktop software.
The benefit of desktop tax software boils down to two points: the number of e-files you get for your money and where the software stores your return. Desktop tax software offers the greatest flexibility on both accounts.
Storage
Storing your tax return on your computer means that your paperwork is always accessible, no Internet connection required. Saving the return locally also makes it easier to import the previous year's information into a competing tax-prep app, which can cut back on retyping the same information year after year.
TaxCut Online offers options for importing last year's return. Most rivals' online returns can't be included.
(Credit: CNET)TurboTax Online does let you save your tax return to your computer's hard drive, a perk that makes it easy to import a TurboTax return of any sort to competing software the next year. TaxCut Online, however, saves your return only on its secure servers (or as a nonimportable PDF document). To switch tax brands, you would need to start a return from scratch.
How e-filing affects price
At first glance, desktop tax apps appear to cost more than the online versions, but the list price typically only includes the federal return. Once you add the price of a state return and the value of multiple e-files, you may find the boxed software to be a better deal. Both TurboTax Deluxe and its online counterpart cost $60 for the federal and state returns combined. The difference between the two? You get five free federal e-files with the desktop version, and one federal e-file plus one state e-file with the online software.
Similarly, TaxCut Premium + State + E-file costs $50 for the federal and state return on the desktop and $70 for the online version. If you were to pay to file your state return electronically with the desktop software, the price would even out. TaxCut mirrors TurboTax's e-file allotments.
Households can share a single state return without an additional charge.
(Credit: CNET)With either tax brand, households can get greater value from desktop software when you account for those five free federal e-files included in both TurboTax and TaxCut's desktop software. If you prepare taxes online, you must pay for each federal and state return before you can file. On the desktop, you can prepare multiple federal and state returns with the same software, saving money if you split the cost among a few people. (The majority of users filing in multiple states will need to buy an additional state return.)
For example, Grandma needs to claim her Social Security income, Mom and Dad need to file their joint return, and Jr. has to report earnings from his after-school job. With one desktop app, the family can file its respective federal returns electronically and can share the state return software. They can save themselves an additional $20 per head if they snail mail the copies of their state return instead of paying an e-filing charge. (Note: The family in question would have to create and file their returns on the same computer to share the state return.)
The reusable nature of the desktop tax apps make splitting the cost a better deal for a household filing two or more federal returns. However, single or married taxpayers who only need to file a single federal and single state return can benefit from online tax-prep, especially since the included e-filing will save them from having to print, compile, and sign a small pile of paperwork.
Look for these stories in CNET's Tax Guide:
-TurboTax Deluxe 2008 in-depth review
-TaxCut Premium + State + E-file 2008 in-depth review
-Photos: TurboTax versus TaxCut
-Video: TurboTax versus TaxCut
-Comparing the online tax apps
-Photos: Throw your own tax party
Jessica Dolcourt reviews the latest and greatest smartphone apps, in addition to a healthy dose of Windows software. E-mail Jessica and follow her on Twitter. 
I've been using Turbotax since 1997, and still have all my media and files. The reason is control. Do you think I trust my personal data to the cloud? No f-ing way.
This year, the 5 free Federal filings is fantastic! Whole family - me, wife, three kids, all done. Snail mail the state returns, who cares, it's only a couple hundred bucks.
Yes too much work. I want it loaded in my browser now. I am not of the 90s CD paradigm and neither are many others. Also I want to work using my Mobile, good luck with loading MS Money onto one of those.
As for my data in the cloud, well there is more chance that my data is hacked on my Windows PC and that is a fact.
Agree 100%. Online is fine if you're a 20-something with little wealth.
It would be naive to think your personal financial, health, SSN, and other information is secure when stored on a third party's system. I would think that misuse of your information, for marketing or even fraud would be likely if you have substantial wealth.
Treating the tax prep software market like it only has 2 options just empowers them to charge more and more for less and less every year. There are other, better, choices.
Plus account for the fact that even less people backup their data. I friend of mine lost all his son digital videos, because he never backup.
Get your facts straight before making your comments.
mjconver likes the control and flexibility and cost advantage of reusing the software for family members. There's nothing incorrect or misleading in that. The only place where he could have gotten his "facts" wrong is his distrust of the cloud. I think his skepticism is highly warranted. mjconver has clearly been around long enough to see many fads come and go and to see lots of neat ideas fall apart for want of proper execution, as have I. The service you describe sounds terrific, but is hardly the norm.
The latest, greatest technology is usually the least safe, regardless of its allure. Skepticism and care are always appropriate.
If I use your analogy, I should not be reading news.com right now. Cnet should definitively consider who they are hiring these days. You are stock in the 90s. The Internet means freedom of movement. I could start my taxes at work, continue at home, change it in the car. You get the idea.
Calling online services 'the cloud' is kind of buzzwordy - they've been around for 15 years, even way back in the, omg, 90s.
Anyway, there are real concerns about keeping your data and personal information in 3rd party online services. If you read the news, you'll routinely see privacy violations, credit card breaches, companies selling your data etc. Take the vaunted google; with new policies, they give you a tracking cookie that monitors every site you visit to create a profile of you such as "sports enthusiast" in order to target advertising. That part doesn't bother me - but what do they do with the data of all the websites you've visited? How long do they keep it? If it's indefinitely and you ever get supoenaed, do you feel comfortable with the inefficient, monolithic justice system having a copy of every website you've visited or has been loaded on your computer?
It's not conspiracy theory stuff, it's just things intelligent, informed people need to be aware of. With your SSN and a few other bits of data, you could get your entire life savings stolen and your CC's maxed. All that info is being stored in these 3rd party tax havens. What are their security practices?
Or more simply - think of DRM. You buy a piece of music, but oh no the license server went away! (This has happened at least 5 times I personally know of). That means the money you spent is down the toliet, and you can't listen to the music you bought online. If that company went under, you have no recourse. Whereas if you had an actual CD, you have the source audio and can rip it into any format for any player, and rerip it if you lose that device or it gets stolen etc.
Old ways aren't always bad ways, and new ways aren't always the best or most sensible.
Using the online service means not having to worry about keeping up with the software. I've been using TurboTax since it first came out on CD. That's a lot of discs to keep track of. I'd actually like Intuit to offer a service where I could upload my old data files and not have to worry about keeping those old discs.
Is the cloud that secure? Sigh. Probably not. It's a risk. But, fire is a risk too. I don't keep the CDs in a fire box. And, if you lose those CDs or they get damage, good luck trying to get a replacement; especially after all that DRM crap they tried a few years ago.
SO, if you do plan to stay with desktop software; remember to store your CD in a disaster safe place too.
It costs me 44cents for the stamp to file my taxes. I download the form in pdf form from irs.gov and fill it out after doing the calculations in a spreadsheet. My state provides a free online service for me to file state taxes. I haven't had to mail a state return for years. I used several of the tax programs, both online and offline for several years, but they kept raising the prices and throwing up roadblocks(DRM) so I stopped wasting my money.
It would be great if we could also upload all past years data and discard the cd's so there is less clutter in our homes. I hope that is possible.
- by jsmumma March 11, 2009 3:12 PM PDT
- Another consideration is availability of software for your operating system of choice. I used TurboTax for a number of years when I was using PCs running Microsoft Windows. I have since abandoned Windows (and all other Microsoft products) and moved to GNU/Linux. I considered trying to run TurboTax with Wine (or CodeWeavers' CrossOver), but I decided it would be much simpler to use an online tax preparation service. The only technical problem I anticipated was browser incompatibility if the service required Internet Explorer (I use Firefox and Opera). Security is always a concern, but any electronic filing has its risks. When you file electronically using TurboTax software installed on your system, your tax information is sent to Intuit before Intuit forwards it to the IRS. Electronic archives of tax records are nice, but PDFs have advantages over proprietary file formats in terms of readability and application independence.
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