TAX-PREPARATION software usually makes an onerous task easier. It doesn’t make doing a tax return fun, but it does make it far less frustrating and time-consuming.
Tax-prep programs guide you through the minutiae of the tax law. That’s no small feat: reading the Internal Revenue Code may seem like trying to decode a cipher written solely for the benefit of lawyers and lobbyists. If deciding whether to use software is simple, picking among the three leading programs is tougher.
For people with straightforward finances — a salary and some investment income, a mortgage and common deductions — any of the leading ones should work. All three — TurboTax, H&R Block at Home and TaxAct — use a question-and-answer format to guide you through your return and then plug your responses into the appropriate places on the I.R.S.’s many forms.
Each has its advantages. TurboTax offers the best overall experience — the easiest and speediest — but, with nagging about buying additional software and services, it occasionally annoys. Block at Home is just as good at handling the basics and gives an unbeatable guarantee. TaxAct is the cheapest.
TurboTax can retrieve data from more than 250,000 employers, banks and investment companies, and Intuit, its maker, continues to add more. The most confusing pitch embedded in TurboTax is the one that pops up once you finish the federal section: “It says, ‘Would you like a professional preparer to look over your return?’ For a fee of $39.95, of course. Didn’t I buy the software so I don’t have to worry about that? Doesn’t this suggest that TurboTax doesn’t believe that I should be doing my own return?”
If you don’t want to pay extra, the program offers gratis guidance via pop-up boxes and links. Users can also pose questions online through TurboTax’s Live Community. Intuit staff members and TurboTax users provide the answers. It’s like a Facebook page for tax nerds — and a test of one’s belief in the wisdom of crowds. Would you take the home-office deduction because “Volvogirl” or “Texas Roger” explained it online?
Block at Home works just as well as TurboTax — in most cases. Most of its explanations are just as clear, and its interview process is just as efficient. If you have your paperwork ready and you’re a filer with common deductions, you can probably complete your return using either brand in less than two hours.
Block isn’t able to pull in as much financial information as TurboTax. It fails to grab statements from investment accounts. In theory, the program has that ability, and Block has links with the bigger companies.
When it’s time to file, Block does offer up a reminder of a difference between it and TurboTax: Block users are entitled to in-person audit support. A Block enrolled agent will advise you if you’re audited and accompany you if you have to appear at the I.R.S. It’s as if Block is kicking in an insurance policy at no extra charge.
TaxAct is the Wal-Mart of tax software; its virtue is price.
Prices for all three brands can vary, depending on where and when you buy. But in general, the online versions, where you prepare your return via a Web browser, are cheaper than the CD and downloadable ones, which you copy onto your computer. But the CD’s and downloadables allow completion of multiple returns.
At $34.99 in the store, TaxAct Premier Federal + State was less than half the price of TurboTax Premier, which cost $79.99. H&R Block at Home Premium was $59.99.
TaxAct even offers a free federal return online to anyone, regardless of income or age.
People who use TaxAct’s free service shouldn’t expect the same level of guidance that they’d get from the company’s paid offerings. For that, they have to upgrade, with the cost rising with the level of guidance.
But don’t discount the quality of TaxAct’s offerings.
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