The tax preparation software companies already started selling their packages for 2008 tax year. The two major players Intuit and H&R Block both advertise that they include free federal e-file in their software this year.
From Intuit (maker of TurboTax):
NEW! Free Federal Efile Included — There’s no additional cost to efiling your federal tax returns. Efiling your state personal return(s) costs $17.95 per efile.**
From H&R Block (maker of TaxCut):
H&R Block continues to be the industry leader and supporter of e-filing, setting the standard with 100% of its products and services now including federal e-file at no additional cost to the consumer.
* At the time of this writing, H&R Block is an advertiser on this site.
You have to love marketing spins. Neither of them tells you that they increased the product prices to cover the bundled free e-file. Here are the prices of TurboTax and TaxCut “federal + state” products for 2007 and 2008 tax years.
| 2007 without E-File | 2008 with free E-File | |
| TurboTax Federal + State | $45 | $60 (+33%) |
| TaxCut Federal + State | $40 | $50 (+25%) |
You tell me if the free e-file is really free.
When e-file first started, it was offered as a “free after mail-in rebate” option. The products included a coupon. If you wanted e-file, you first pay for it and then you get it back if you send in the rebate. Then last year (or was it the year before?), it became a paid option. No more mail-in rebate coupons. If you wanted e-file, you had to pay for it, either separately or by purchasing a premium package at a higher price. Now this year everybody is forced to pay for e-file, whether you want it or not.
I happen to not like e-file. I stated my reasons in a previous post. Why am I forced to pay for it? Because they can. Customers are like that frog in slowly-heated water. First they got some convenience for free in exchange for some hassle of mail-in rebates. Those who didn’t bother with their rebates paid the price. Then the customers who wanted the convenience were asked to pay. Some balked; some gave up and paid. Now everybody is asked to pay. It doesn’t help we have basically a duopoly in the market. If both players are satisfied with their market share, when one increases their price, another can simply follow. Then both players will be happy financially.
Am I being petty to quibble about a once-a-year $10-15 price increase? Well, part of it is based on principle. Right now state e-file still costs extra. Who knows maybe next year the products will bundle state e-file too and force everybody to pay? Thank God Intuit reversed its decision to charge $10 extra for each additional return printed. But the move to bundle e-file at a higher package price was happily accepted by its competitor. If H&R Block signals it’s willingness to follow the same per-return pricing model, next year both will charge extra for additional returns.
This duopoly is not good for the customers. I’m going to support a 3rd player this year. I will use TaxACT. I will do a side-by-side comparison like I did between TurboTax and TaxCut for tax year 2007 (see previous post).
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thad says
The big downside (for me) is that TaxACT does not support Mac.
Otherwise, I think I’d consider it.
Jeff says
I’ve never liked that e-filing for the yearly income tax involved a rebate—seems like a way to get more money from the consumer. Since I try to arrange owing money on April 15 (or January 15), I always file my taxes through snail-mail.
David James says
I just saw your posting and wanted to respond. Yes, the cost of TaxCut Fed+State+e-file for 2008 is $49.95. However last year TaxCut Federal+State+e-file was $69.95. This year we eliminated the inclusion of state e-file and lowered the product price as many people choose not to e-file their state return. For those people, they actually save $20 from last years price.
Also the Federal+State+e-file product this year now includes 5 free federal e-files and it includes a 1-1 consultation with an H&R Block tax professional, should you have questions.
The TaxCut product line-up also includes Basic for just $19.95 which also includes 5 free e-files.
David James
H&R Block TaxCut
Harry Sit says
David – Yes I agree that for people who are willing to use and pay for e-file anyway, TaxCut’s price this year is cheaper than last year. I still would like to see you bring back the option of federal + state without e-file. I believe there are enough people like me who don’t e-file. If TaxCut has a package option which TurboTax doesn’t have, people like me will use TaxCut.
indexfundfan says
I don’t e-file too. Hell, if the government wants me to encourage me to e-file, they should pay me; afterall they are saving time and money on data entry.
Bob Meighan says
TFB… The tax preparation software/service environment is insanely competitive today. We see three significant players in the software (CD) side and almost 2 dozen in the online tax space. Competition is indeed driving prices down. Already, from the start of the season, we’ve rescinded our fee for additional returns and also increased to five (from one) the number of efiled federal returns included free. Intense competition and feedback from our customers play a huge role in driving prices down.
As for those who believe e-filing is only for those who get a refund, let me offer my own perspective based on my experience. For me, e-filing is all about eliminating the hassles of printing, copying, signing, stapling W-2s, mailing, etc. When it comes to filing and paying (as I always seem to have to do), I can file anytime prior to April 15, BUT schedule my payment for April 15– all automatically from within TurboTax at no additional cost. To me that’s convenience, peace of mind, and fewer hassles. With federal e-filing now included in TurboTax, I encourage you to try e-filing.
Bob Meighan
VP, TurboTax
DJ says
It was hilarious to see TaxCut and TurboTax market spins here. I am completely with TFB. I have zero confidence in data security afforded by corporations. Convenience is nice, but not if your own identity information is on the line.
I guess I’ll just do my tax manually this year, as I did each year anyway, even with tax software. Honestly, I always found tax software failed to accommodate my modestly complicated tax situation and I have to tweak the software printouts anyway. The extra cost is yet one more reason to dump TurboTax and embrace, gasp, Microsoft Excel. I also believe each individual should do their tax anyway, just to understand all the nuances, but I guess I am in the minority.
Harry Sit says
@Bob Meighan – I disagree with your statement saying there is insane competition in tax preparation software. At least in the desktop products, there is not much competition. There are practically two players. The 3rd player TaxACT does not even have distribution in retail stores. Neither TurboTax nor TaxCut imports TaxACT files from the previous year. Why? Because its customer base is too small to be worth the effort.
I understand the convenience of e-filing. I also care about my data security. Between convenience and data security, I choose data security. I will not e-file until I have a direct connection with the IRS.
indexfundfan says
Data security is certainly one big concern. Despite all the assurances, hiccups happen.
indexfundfan says
Looking forward to see your TaxAct review. Do you know if TaxAct will import from TXF file for stock / mutual fund transactions?
Bob Meighan says
indexfundfan… Here is my understanding of TaxAct’s import capabilities with respect to stock/fund transactions. Transactions tracked through Gainskeeper can be imported. Gainskeeper tracks stock prices, splits and other historical data. It is also, for most, a fee-based service. While Gainskeeper doesn’t automatically manage your stock transactions like your broker would, they do a great job based on their offering.
One of the many things that differentiates TurboTax from TaxAct is the fact that TurboTax directly imports financial transactions (like stocks, bonds, funds, W-2 info, etc.) from over 120 financial institutions. That means you press a button and all your stock transactions are automatically imported into TurboTax. Plus, if you don’t know what your cost was for a particular stock, TurboTax’s Cost Basis Calculator determines historical information (including the effect of stock splits, dividends, spin-offs, etc.) to do that for you.
While TurboTax may be slightly more expensive than TaxAct, it offers so much more to save you time, money and aggravation. In the end, the choice is yours.
I hope this information helps.
Bob Meighan
VP, TurboTax
Harry Sit says
indexfundfan – I’m waiting for my W-2 and 1099s before I enter them all into the two programs. I don’t think TaxACT imports TXF files (generated by Microsoft Money?). Maybe you can ask TaxACT customer service and see what they say.