This review incorrectly referrers to "Kiplinger" TaxCut. H&R Block publishes TaxCut. Also, this review incorrectly says that users of TurboTax have to go to Intuit's Web site to get estimates for the value of in-kind charitable donations. Though that can be done, it is not required. TurboTax includes its own tools for this function.
Do-It-Yourself Help for Filing
Sunday, March 9, 2008
What's worse than paying your taxes? Spending money on a program to tell you how much you'll pay in taxes. But when the alternative to buying a tax-prep application is hours of mind-numbing mathematical toil, most victims of the tax code will ante up $20 or so to automate part of this annual ritual.
These programs work in the same basic manner, interviewing you about your financial situation before feeding your answers into electronic versions of the usual IRS forms. When you're done, they can file your returns electronically; for an additional fee, they can polish off your state forms, too. The downside of this convenience is that you'll probably have to take the programs' word for what you owe.
A major payoff of tax-prep software comes with repeat patronage: If you do your taxes for a second year in a row with the same company's program, it will remember your info from the previous year, saving you a great deal of typing as you fill out your W-2s, 1099s and Schedule As. So unless you've grown seriously disenchanted with a tax application, stick with it for this year.
If, however, you've never used one of these before, here's how the desktop versions of three of the major contenders -- TurboTax, TaxCut and TaxAct -- compare. (All three can also be purchased as cheap or even free Web-only versions, but you must be comfortable with storing your tax data on the venders' computers.) Consider your overall tax scenario before deciding which of these products to buy.
Win 2000 or newer, Mac OS X 10.4 or newer: $19.95 to $89.95 for disc or download, free to $74.95 for Web-based service
Win 98 SE or newer, Mac OS X 10.2 or newer: $14.95 and up including one eFile
Intuit's TurboTax can save you time in two ways: It can automatically extract tax-relevant information from Intuit's Quicken personal-finance program, and it can download some of your tax forms if employers and financial institutions have made them available through the right data networks. It's a clean, smooth program, with one of the simplest auto-update procedures around. It also found a previous year's return automatically, while other programs asked me to locate it on the computer for them.
TurboTax's best moment came when it walked me through a recalculation procedure that zeroed out the tax liability I would have incurred from getting a refund on my state taxes last year. But not all of its advice panned out: Its invitation to claim a tax credit for putting a new front door on a house did not mention the energy-efficiency requirements attached to that offer.
Having to switch to an Intuit Web site to get estimates of in-kind charitable donations seriously prolonged the agony of tax prep, and TurboTax is also one of the pricier software contenders.
Win 2000 or newer, Mac OS X 10.3 or newer: $19.95 to $69.95 on disc, $14.95 to $44.95 for Web-based service, $14.95 to $69.95 for download
TaxCut advertises its affiliation with the H&R Block tax-prep service -- a good fall-back if you can't figure out your way through a form. TaxCut can't, however, match TurboTax in ease of use. TaxCut can't download data to the forms the way TurboTax can. So you'll have to type out every last "ordinary" and "qualified" dividend figure on your own.
TaxCut handled most financial situations about as effectively as TurboTax, but in some cases it can leave you stranded. Last year's version of TaxCut made a mess of some stock-option sales; this year's offered no help with my state-tax-refund liability, suggesting only that I "Use IRS Publication 525 to determine the taxable amount of your refund."
The worst part of TaxCut, though, was the separate DeductionPro application bundled with it. This extra program can generate estimates for all those clothes you dropped off at Goodwill but only if you're willing to put up with a sluggish, buggy interface that flickered and turned to gibberish when I scrolled up or down.
2nd Story Software TaxAct
Win 95 or newer, Mac OS9 or newer: Free to $19.95 for download or disc, free to $16.95 for Web-based service
TaxAct is uglier and less helpful than either of the big two, but it is much cheaper -- its free versions aren't limited to 1040EZ forms but can handle the real thing, too. TaxAct also runs on much older computers than either Intuit's or Kiplinger's offering: Its Windows-only desktop software still supports Win 95, and its Web version expands on that support by also welcoming Mac users running versions as relatively ancient as Mac OS 9.
Then again, TaxAct also looks a great deal like a Win 95-vintage program, with a distinct lack of polish or hand-holding. If you don't know your way around most IRS forms, TaxAct doesn't provide much of a map. Its interview takes a plodding, literal approach, forcing you to click through multiple screens of data entry to get through a single W-2. Even by the standards of tax-prep software, this is a singularly joyless program -- not least when it's handing out cheery advice such as "If you suspect that your spouse is evading taxes and may be liable on a joint return, you may want to file a separate return."