Taking TurboTax, TaxCut and TaxAct for a test drive
— -- Time flies, unless you're circling O'Hare Airport, stuck in traffic or waiting for your tax software to install. But taxpayers who persevere can prepare taxes for a fraction of the cost of hiring a tax preparer. And if you file electronically, you can get your refund in about 10 days.
How much you'll save depends on the software program you buy. Prices range from more than $80 to less than $20. The doggedly thrifty can even prepare and file a federal tax return for free (see box).
Many do-it-yourself taxpayers stick with the same software program for years. But in these tight-fisted times, it's important to weigh the virtues of software programs against the costs. In our annual test drive of tax software, TurboTax was again the winner, offering superior navigation, clearer instructions and more useful import features. But its competitors are worthy of consideration, because they do a competent job at a lower cost. Here's what we found:
TurboTax
TurboTax is the Lexus of tax software programs, with legions of longtime users. The program is easy to navigate and allows users to import W-2 and investment information from more than 100,000 participating employers and financial institutions.
Users who want a lot of hand-holding can get line-by-line assistance by selecting "Guide Me." Experienced users can shorten their journey by clicking on "Select Specific Topics."
Some users may be annoyed by frequent suggestions that they should upgrade to a more expensive version. One of our testers said the Premier program was so comprehensive — it helped him calculate depreciation on a computer, for example — that he saw no need to upgrade to TurboTax Home and Business, despite repeated reminders that he should.
In the past, some users were surprised and dismayed to discover, after they finished their return, that they had to pay an additional fee to e-file. This year, the price for TurboTax's desktop products includes the cost of e-filing your federal return. However, you may still need to pull out your credit card if you want to e-file your state return. For example, with TurboTax Deluxe, you can prepare your federal and state return, and e-file your federal return, for $59.95. However, e-filing your state tax return costs an additional $19.95. That brings the total cost of preparing and e-filing federal and state tax returns to nearly $80.
The price goes down if you're preparing more than one return. All of TurboTax's desktop products allow you to prepare and print an unlimited number of federal returns and e-file up to five federal returns at no extra cost.
If you're a TurboTax fan who needs to prepare and file only one tax return, you can reduce your costs by using the company's online product. TurboTax Deluxe Online costs $29.95, and includes one federal e-file. If you want to prepare and e-file a state return, you'll pay an additional $34.95, for a total of $64.90.
There are other advantages to online software. Some older computers lack the specifications to run desktop software. (One of our testers, who has a 5-year-old computer, had to abandon his TurboTax desktop program in favor of the online version for this reason.) Online software also saves you time: It doesn't have to be installed, and you don't need to run an update every time you revisit your tax return.
H&R Block TaxCut
Like TurboTax, TaxCut's 2008 desktop software allows you to e-file up to five federal returns at no extra cost. TaxCut Premium Federal + State costs $49.95. E-filing your state return costs an additional $19.95, for a total of $69.90.
Navigating TaxCut was fairly painless, although we found ourselves spending more time than seemed necessary answering questions about foreign trusts and hurricane damage.
TaxCut doesn't import 1099 data from financial institutions or W-2s from employers. If you have multiple W-2s and numerous taxable investments, TurboTax is probably a better choice.
Both TurboTax and TaxCut are designed to import each other's tax returns. In our test drive of TaxCut Premium desktop, we had to go to the help section to figure out how to import information from last year's TurboTax returns, possibly because they were stored on a flash drive. But the instructions were clear, and after a few keystrokes, our vitals — name, Social Security number, employer — magically appeared.
If you're considering purchasing one of TaxCut's online products, make sure you read the fine print. TaxCut Premium + E-file Online costs $39.95, which sounds like a great deal until you realize the price doesn't include a state tax return. Preparing and e-filing a state return costs an additional $29.95, for a total of $69.90 — the same price as the desktop version. If you're preparing more than one return, the desktop product is a much better deal.
TaxAct
TaxAct bills itself as "Your Affordable Solution For Tax Software," and they're not kidding. The TaxAct Ultimate Bundle desktop program, which includes a federal and state tax return and one federal e-file, costs $19.95. E-filing a state return costs $7.95. The online version is an even better deal. The TaxAct Online Ultimate Bundle, which includes a federal and state return and e-filing for both, costs $16.95.
TaxAct's program doesn't look pretty, but it offers some of the same bells and whistles — such as a box at the top that tracks the size of your refund — as other software programs, for a third of the cost. You can import your W-2 if your employer participates in W2 eXpress, but you can't import information from Microsoft Money or Quicken. You can also import information from previous TaxAct returns, but TaxAct doesn't support returns from its competitors.
On the plus side, the desktop program installed in a couple of minutes. And if you don't need a lot of hand-holding, you can't beat the price.