Tax software makes filing your own easy
Do-it-yourself tax preparation is getting easier and
cheaper, even if you have a complex return.
Bankrate.com gave four major tax software packages
a workout: Quicken TurboTax Deluxe,
Kiplinger TaxCut Deluxe, 2nd
Story Software's TaxACT Deluxe and CCH
The personal computer, not Macintosh, versions were
tested to see how they would handle the 2001 tax return for my family
of four -- an employed husband (who happens to be a CPA), two children
(one in college), and me (sole proprietor of my own small business).
Just like the cobbler whose children have no shoes,
I -- not my accountant husband -- have been the family tax preparer
for several years. But he reviews the result and makes changes when
I screw up. I started with TurboTax Deluxe. After my live-in accountant
pronounced the result accurate, I worked my way through the other
three tax packages.
Which one wins? That depends on how you score.
Our tax return is complicated by my small business. To be fair,
none of these packages claims to be for a small business, and both
TurboTax and TaxCut offer upgraded, more expensive small-business
tax software. But all four say they can handle Schedule C, which
a sole proprietor must file. The confusing news was that all four
gave me a different result because each dealt differently with the
home office deduction and accompanying depreciation.
TurboTax had the
smoothest way of walking me through Schedule C and the related home-office
issues. TaxAct's presentation
offered less explanation, and I was forced to make judgment calls
a couple of times that left me feeling uncertain. Ultimately, these
two programs produced tax forms with bottom lines that weren't exactly
the same, but were probably close enough for government work.
offered more-sophisticated options, and I inadvertently chose a
depreciation method different from that used by TurboTax or TaxAct
and got a startlingly divergent result. A representative for TaxCut
says that their tax experts are aware they handle depreciation differently
than their competition, and they believe themselves to be right.
one of the depreciation issues altogether and for that reason also
came to a significantly different bottom line.
If you don't have a small business, none of this matters.
Regardless of which package you use, the results for a more-standard
return will be identical.
But if you must file Schedule C, particularly if you
take the home-office deduction, TurboTax Deluxe is my first choice,
with TaxAct second. If you feel knowledgeable and confident, you
might like TaxCut best. It gives you the most options, but it's
complex. Home-office filers should steer clear of CompleteTax.
Software assets and debits
CompleteTax shines in other
areas. For a simple return, it was way ahead. The display is clean
and easy to read. The help section offers minimal but coherent advice.
Unlike competitors, CompleteTax allows users to opt out of those
tax sections that don't apply to them and speed through the return.
The debits: CompleteTax doesn't offer some of accessories
found in the other software. You can't import data from personal
finance software, although if you used CompleteTax last year,
you can import that data. The program is only available online,
which won't satisfy those people who think saving their tax information
to somebody else's server isn't very secure.
TaxAct is also
friendly, written in simple English on an uncluttered screen, although
the constant pop-up advertising for other products is annoying.
Tax forms can be viewed at the bottom of the screen as you answer
questions at the top. One click and you can maximize the forms to
review your progress. A nice feature is the option to compare the
impact of filing married jointly or separately.
The debits: There's no import of financial information
from other programs. Tax help requires an active Internet link
and downloads slowly even with a DSL connection. If you're a Macintosh
user, you're out of luck. The program doesn't support Mac.
TaxCut has the
most bells and whistles of the four, with import capabilities from
last year's data and financial management programs. You can import
information from W-2s if your company's payroll processor participates.
There's also a feature called a "Shoebox" that will help
you organize your data before you try to enter it into the program.
Personally, I've always found tax organization the toughest part
of filing, even for a devoted financial program user.
Tax Cut is easy to navigate. If you change your mind
about a previous section, it's no challenge to go backward. The
tax forms reside at the bottom of the screen and maximizing them
is a one-click process. If you need tax advice, you can get it instantly
from an H&R Block tax preparer for an extra $20. You also can
decide to give up on the process and for another $79 turn the whole
mess over to a professional preparer. Another option (an additional
$29.99) is a professional review for those in need of reassurance.
The debits: The language is heavy with accountant-ese,
and the program seems to assume a higher level of financial sophistication
than many users have. If you are filing a simple return, you might
be better off with a simpler program.
you through an eight-step process, beginning with the option of
importing your information from a financial management program or
last year's return (even from some competitors' programs). W-2s
and selected financial statements can be imported from the 50 largest
payroll processors. If you're a Countrywide Mortgage customer, you
also can import your mortgage information.
The questioning process keeps even novices from missing
tax-saving (and tax-paying) opportunities. Plus, there's a ton of
tax advice in both video and text, and for an additional fee (determined
by the amount of help you need), you can contact an online tax expert
to pose questions.
The debits: The linear Q-and-A program doesn't allow
for skipping a section, so you spend lots of time clicking "no"
to question after question. You can opt for just filling out the
forms themselves, if you know what you're doing and don't feel
the need for someone to walk you through the steps. On the other
hand, if you're that expert, one of the less-expensive programs,
might suit you better.
Comparing prices isn't as simple as you might think. Each program
offers various levels of sophistication, online and CD options,
rebates and bundled packages.
It is online only and runs $17.95 for federal and state and electronic
filing. Part-year or nonresident state tax filings are not supported.
If you're willing to use the online
version, you can prepare the federal return and print it out
for free. Electronic filing is $7.95 and adding a state return is
$4.95 for a total of $12.90. Additional states are $12.95 with an
extra $4.95 for e-filing.
If you want TaxAct on a CD, it's $9.95 plus $5.95
shipping and handling. Filing one return electronically is included.
It will cost $7.95 each for up to three additional electronic returns.
State tax CDs are $12.95 plus $4.95 for electronic filing. If you
bundle a federal and a state CD, it's $19.95 plus $5.95 shipping
and handling. Printouts are free.
Base price is $19.95 with one state and one electronic filing included
whether you use the online version or buy the software at a retail
store. Pick the right store and you might find it at discount. If
you use the online program after April 1, the price goes up to $29.95.
Quicken offers three versions of this tax preparation software.
TurboTax Deluxe is $39.95 with a $10 rebate. The price includes
material of one state filing. Many stores discount this product.
These also are available as online
versions. The premium model is $29.95 before April 1 and $39.95
after, plus $12.95 for the state. Electronic filing is an additional
$12.95. Online TurboTax regular or CD is $19.95 before April 1.
After that, it's $29.95, plus $12.95 for the state. Electronic filing
Taxpayers who only need the simplest form should check
out TurboTaxEZ. Available only as a download,
this program for 1040EZ filers is $9.95 before April 1, $12.95 after.
It costs an additional $4.95 a state return, plus $12.95 if you
want to file electronically. If you have an adjusted gross income
of less than $25,000, you can use this product free of charge, including
e-filing, though the Quicken
Tax Freedom program.
The bottom line
These aren't the only tax filing programs by a long shot. The
Internal Revenue Service's latest list
of approved e-file partners offers taxpayers 21 computer-assisted
options. Dennis Schmidt, a professor of accounting at the University
of Northern Iowa, maintains a Web page that lists links
to more than 20 online tax-filing sites.
If you're filing a single, basic 1040EZ return, go
the simplest, cheapest route, which may be Quicken's Tax Freedom.
Likewise, if you don't own a home and don't have many other deductions
but make enough that you must file a 1040, then almost any of these
programs will help you create an accurate return quickly.
Taxpayers who itemize deductions will find it gets
more complicated fast. The more advanced programs do a much better
job of flagging potential deductions and keeping you from making
mistakes. They also make it easy for you to look harder at your
numbers and redo sections if you find more receipts hidden in the
bottom of the drawer. Spending an extra $10 on sophisticated software
could be a bargain in the end.
Jennie L. Phipps is a contributing
editor based in Michigan.
-- Updated: Jan. 22, 2002