WCCO’s Tax Test Compares 3 Tax Preparers

By Angela Davis, WCCO-TV

MINNEAPOLIS (WCCO) — When we looked for a family willing to do their taxes three different ways, Dave and Sarah Toews were the first to volunteer. They agreed to do their taxes on Turbo Tax, with a private preparer and with the tax prep giant H&R Block.

“I’m just kind of curious how that comparison shakes out,” Dave said.

“You get the 100 tax forms before January 31st, and you think, ‘Where am I? Where am I even if I enter them online?'” Sarah said. “If I get it wrong, then what happens? I don’t want to see the letter that says ‘IRS’ to come to my mailbox.”

The couple had three chances to get it right by taking part in the WCCO-TV Tax Test. When Dave used Turbo Tax, he was surprised by the results. “It’s telling me that we’re gonna get $1,600 back from the state, and we owe $1,600 to the Feds,” Dave said. It sounded wrong, but he couldn’t find an inputting error.

A few days later, Dave took the family’s paperwork to Fox Tax Service in Northeast Minneapolis. The preparer there told him he owed $1,450 on the federal, $386 on the state.

His last stop was the H&R Block in St. Anthony Village Shopping Center. The H&R Block preparer said the family owed more than $1,900 on his federal return, $545 to the state.

Professor Mark Sellner agreed to judge the returns. A former full-time CPA, he heads up the Masters of Business Taxation program at the University of Minnesota’s Carlson School of Management.

The biggest difference he noticed was the treatment of Sarah’s home office.

“That varies between the returns by almost $4,000 of deductions,” he said.

The Fox preparer found more than $4,600 of home office deductions, far more than H&R Block or Turbo Tax.

“A difference of $4,000 in deductions is a lot of money,” said Sellner. “That’s $500 or $600 in tax.”

So why did Fox Tax Service give the Toews a bigger home office deduction? It all came down to the cell phones Dave and Sarah need for work. The preparer asked about it and ended up deducting the whole amount, not just a percentage.

“The cell phone is a legitimate home office deduction if used for business,” Sellner said.

H&R Block said Dave never indicated he had a cell phone for business use.

Fox also scored best on the child care credit. Block and Turbo Tax combined both Alice and Paige’s childcare under Alice’s name. “But if I treat that as two kids,” Sellner said. “I get a bigger credit. It’s $200 in their pocket.”

Fox wasn’t perfect though. The Toews got new windows and insulation last year. Block and Turbo Tax picked up the $300 energy credit while Fox didn’t.

Some things everybody got right, like student loan interest and charitable contributions. Nobody caught Paige’s piano lessons. That would have been a state tax deduction.

Still, the tax pros beat out Dave’s at-home tax prep a couple different ways. The Toews have two cars, but Dave forgot to write off their tabs on Turbo Tax.

And that big Minnesota refund Dave thought he had coming? Like Dave suspected, it was a mistake—a big one.

“The taxpayer accidentally took a $92,000 subtraction on their Minnesota return,” Sellner said. “And that had to be purely a typo…that’s gonna be big. Minnesota’s gonna say, unless you’re a tax protester, we need to find out what that was.”

When Dave learned about the error, he said, “I really don’t believe I put that in there, or if I did, I got mixed up on the boxes.”

That wasn’t his only mistake. When Sarah and Dave bought their house in 2008, they got a first-time homebuyer credit. Under Internal Revenue Service rules, they have to pay back $500 a year for the next 15 years. “The IRS sent one letter to the husband, one letter to the wife, saying you each owe $250,” Sellner said. “The accountants both picked up that $500, but the taxpayer apparently thought it was a duplicate letter and only picked up $250.” It’s a mistake he’s certain the IRS would have caught.

Who won the Tax Test? Sellner said all three did pretty well, but he gave the edge to Fox Tax Service.

“So your accountant can do a lot more than just your tax return,” he explained. “They can help you plan throughout the year. It’s a little bit like having a sore throat and running into urgent care versus having a long-term relationship with your doctor.”

We also compared price. Turbo Tax cost $50, Fox was $130 and H&R Block was $495.

“I didn’t believe it,” said Dave. “I was absolutely flabbergasted.”

“That’s an insane amount of money to spend for two hours of tax preparation, two hours of anything!” Sarah said.

A spokesperson for H&R Block said the Toews’ return “was pretty much as complex as one could be,” and noted that complexity and the number of forms figure into the final cost.

The family plans to have Fox make a few fixes, then file that return.

As for the Tax Test, they’re glad it’s over. “It was exhausting,” Dave said. “Doing taxes once a year is pain enough.”

More from Angela Davis
  • http://topsy.com/minnesota.cbslocal.com/2011/02/14/wcco%E2%80%99s-tax-test-compares-3-tax-preparers/?utm_source=pingback&utm_campaign=L2 Tweets that mention WCCO’s Tax Test Compares 3 Tax Preparers « CBS Minnesota -- Topsy.com

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  • Michael Clark

    I had Turbo Tax do my return online and e-filed it through them; also, they gave the option of paying for it by subtracting it from my refund. I’m happy with the way they handled my return, since I’m single, no kids but I use my vehicle for my job, and they walked me through the deductions really well.

  • Paul Jones

    So had they not made so many errors themselves (Cell Phone deduction, data entry, license tabs) Turbo Tax would be far be the way to go.

    • Kevin N

      Exactly what Paul said. I’ve used Turbo Tax myself for the past five years or so, and because I’m detail oriented, I haven’t made any major mistakes.

      I get that not everyone wants to do their own taxes or can be picky enough to do them correctly, but I don’t think it’s fair to blame the software for operator error.

      Something to consider — H&R Block offers a “second look” service where for a small fee (very small compared to what they charge to actually file your taxes), they’ll plug in all the data and compare it to your self-prepared return. My taxes are complicated, so for the past two years, I’ve done them myself using Turbo Tax and then brought them in to H&R Block to make sure that I didn’t mess anything up. Both times my results were within a couple of dollars of H&R Block’s findings. This method saved me hundreds versus just bringing them to H&R Block to have them do it all.

  • Tax

    Hard to call them mistakes if you don’t know about them.

    • Kevin N

      Turbo Tax specifically prompts for licence tabs — if they missed it, it’s because they weren’t following the directions on the screen. You can call that a mistake or an oversight, but you can’t claim ignorance when the software asks you specifically about that.

  • Linda

    Turbo Tax has been advertising that it does simple returns free. My 20-yr-old son (no itemized deductions, just basic return) was charged $90 by them. Not what I would call free!

    • Kevin N

      Linda- Your son likely qualified for free filing through the State of Minnesota’s partnership with Turbo Tax (and other providers). If he hasn’t paid yet, you should be able to go and re-do them for free (no filing fee). The link is on the state’s tax website, but here’s the direct link:


      (Here’s the state’s site, which lists other providers available for free, too: http://taxes.state.mn.us/e-file/Pages/other_supporting_content_free_providers.aspx )

    • Kim

      You have to go to the FREE Turbo Tax site. My son, and his girlfriend, and my mother all have lower incomes and they all qualified for free federal and (I think) state filing with Turbo Tax.

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  • Kyle B

    Like all online tax filing sites that offer free returns for using the EZ form. It’s only the federal that is free, the state costs you, and if you don’t pay attention when you’re filling things out, they love to have little check boxes and larger buttons for non-free options. I’ve used Turbo Tax, Tax Slayer, and one other service, and so far Tax Slayer was the best and if you can get away with an EZ form then yes the fed will be free but state will cost somewhere between 15 and 30 dollars.

  • Kim

    Always go to a PRIVATE Tax Preparer! It costs less than H & R and if there are ANY mistakes, the tax preparer will deal with the IRS to resolve the problem. It saves you the headache of dealing with the IRS or State. Be cautious tho, always find a recommended preparer. Ask friends, family, etc. who they use and how many years they have used them as some ‘so-called’ preparers just know the basics.
    I strongly recommend Mohs Tax service for personal or business taxes!

  • Steph

    We use H & R Block Best of Both. Basically I use there software to input all the info and then one of their tax professionals double checks it for us. Total cost including all of the e-filing is $110. Last year they got us an extra $4000 in returns! This years they agreed with the way that I did it. But included in this program is that they will back you up if you are ever audited, and help you through that process. Sort of a happy medium between did it yourself and and a professional do it!

  • bruce george

    The next time you do this don’t use people that have so much going on(cell phones, work at home etc)like to see people that have jobs like target,fleet farm, homedepot . like to see how they get money back. I use HR software and love it.

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    […] WCCO’s Tax Test Compares 3 Tax Preparers « CBS MinnesotaFeb 14, 2011 … MINNEAPOLIS (WCCO) – When we looked for a family willing to do their … They agreed to do their taxes on Turbo Tax, with a private preparer … […]

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