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Taming the Paper Tiger Income Tax Software Eases Annual Filing to IRS
Review
By Kathy Yakal
PC Magazine
Feb. 2 — How much better can they get? That's what we asked ourselves about the leading tax preparation software packages this year, given the depth and approachability we saw in the category last year.
But indeed they've managed to improve, incrementally at least, delivering plain-English help on a broader range of topics and offering live advice for users with questions.
As in the past, these packages provide the tools you need to complete federal and state tax returns, doing all of the calculations required and nudging you to lay out all of your income and deductions. If that sounds pretty basic, it's anything but.
Software companies have bent over backwards to ensure that your path through the 1040 is paved with a ton of help and interpretation. Specifically, they offer the option of a step-by-step interview that asks you questions and puts the answers in the right place on forms and schedules.
And when you think you're done, the software does a sweep of your return and highlights answers that may be problematic. You are then ushered to planning tools that give advice on how to minimize your tax burden for next tax year.
Help abounds, and it comes in several flavors. Unfamiliar terms are hyperlinked to explanations. Context-sensitive FAQs dot most screens, and IRS instructions — with intelligible interpretations of them — are available for each topic. Additional helpful text and tips flesh out puzzling content. And all of the tax law changes that have been incorporating since last year are built in.
If you're still unsure of something, the leaders also offer access to tax pros who can answer a specific question or review your entire return.
Read about online tax help here.
This year's crop of PC-resident packages — 2nd Story Software's TaxACT, H&R Blocks's TaxCut, and Intuit's TurboTax — have improved in subtle ways.
Click here to read the review of TaxACT 2003 Deluxe.
Click here to read the review of TaxCut Premium 2003.
Click here to read the review of TurboTax Premier 2003.
Navigation is better, and the depth of questioning in some topics has been increased. In many cases, the programs' "voices" have become friendlier and less jargon-laden. These and other, smaller changes make your apprehensive journey through the 1040 a little more palatable.
Each company (not to mention a host of smaller players) also offers an online-only version for users comfortable with an ASP model. (But these services typically don't go live until January; hence they couldn't be tested for this story.)
The bottom line: The vast majority of filers will do very well with tax prep software, unless they're dealing with thorny topics like depreciation and the sale of securities, which require more acumen.
If you used either of the leaders (TaxCut or TurboTax) last year and were comfortable with it, there's no compelling reason to switch to the other this year, as they are very evenly matched.
But if you are new to such packages, our favorite (and Editors' Choice) this year, by a nose, is TurboTax. While TaxCut will more than meet the needs of the vast majority of users and is the better bargain ($20 less expensive, not counting the free advice call buyers are entitled to), we slightly prefer the interview process and overall feel of TurboTax this time around.
TaxACT 2003 Deluxe
Over the last few years, TaxACT has built a reputation as a viable alternative to the top two tax programs. It's sleek, fast, and provides a respectable amount of guidance to taxpayers. Tax advice has been expanded this year, and the interface revamped.
TaxACT 2003 Deluxe starts out by asking about taxes already paid in, then moves into the "Life Events" screen, which asks what significant changes have occurred in your life since your last tax return. For each event checked, TaxACT generates informational screens describing its tax implications and how it is handled in your return. No other program is so thorough up front.
We also like TaxACT's new interface, which is now a close match for those of its better-known competitors. A drop-down box serves as a navigational tool, listing program topics and letting you jump to any of them. Buttons on the side also provide navigation as well as links to Help tools. A pane across the screen's bottom lets you toggle between the current form/instructions, your return history, and tax help.
Unlike TaxCut and TurboTax, though, the program doesn't hyperlink unfamiliar terms or provide FAQs. But navigating around TaxACT is faster than in its competitors.
TaxACT's Q&A has grown over the years to its respectable current state. It's thorough and explains tax topics clearly for the most part in the Q&A, though we still encountered too much jargon.
There are other quirks. In more than one instance, TaxACT asks you to enter a number manually from elsewhere on the return rather than pulling it in itself as the others do. Another possible drawback: On some screens, TaxACT directs you to an IRS publication. These instances are rare, though; the bulk of the Q&A is very capable.
Help is good, but it can't match that of its competitors. IRS instructions and excerpts from the well-respected J.K. Lasser income tax guide provide supplemental help within the Q&A, but we'd like to see more. And TaxACT's search functions do not dig as deeply as its competitors do. Live tax advice is offered by financial professionals for a $19.95 fee (up to 10 minutes).
TaxACT's review process flags three types of items that may need your attention. One identifies entries that may render your return incomplete or may trigger attention from the IRS. The second looks for problems that may require additional attention. And the third offers suggestions for tax savings. Additional reports let you compare filing jointly vs. separately and compare your return to national averages.
We can recommend TaxACT for taxpayers who are perhaps a little more tax-savvy than the average bear, have fairly straightforward returns, or whose software budgets are strapped. But keep in mind that if you need to add a state return program and some live advice, there go your savings.
Product: TaxACT 2003 Deluxe
List Price: $9.95 (includes one federal electronic filing)
Requires: 16MB RAM (32MB recommended); 30MB hard drive space; Microsoft Windows 95, 98, 2000, NT, Me, 2000, or XP
Company Info: 2nd Story Software Inc., 800-573-4287, www.taxact.com
TaxCut Premium 2003
H&R Block's TaxCut Premium 2003 has seen more changes than its competitors since last year's version. Some of the changes are cosmetic, including a welcome overhaul of the program's look. Other changes are more substantive, clarifying various elements of the 1040. In some places, steps and assistance were added; in others, they were streamlined.
If you import data from last year's TaxCut or TurboTax, a report lists all of the related entries. You can make changes directly on the screen, go to the form, or wait until you get to the proper point during the interview process. You can also import data from programs like Microsoft Money and Intuit's Quicken. Other types of data can be downloaded into the program from participating financial institutions, like some retirement and investment information and W-2 info from leading payroll services.
At each new content area of your return, TaxCut displays a list of the documents you'll need for those issues. You'll also be asked to indicate which tax topics in that area apply to you so that TaxCut will visit the applicable screens. New navigational markers at the top of the screen make it easier to get where you're going quickly.
Several kinds of help and search tools are available. Related FAQs appear on most screens. Clicking the Help button opens a dialog box with several kinds of assistance. There's program help, tax tips and advice, IRS instructions and publications, and explanations of form. The Search box displays matching forms when you enter a topic, and the "shoebox" helps you search by a document's originating source.
TaxCut also does a good job of hyperlinking unfamiliar language to more thorough explanations.
And for $19.95 per incident, no matter how complex, you can use the company's "Ask a Tax Advisor" service, which connects you with an H&R Block professional by phone or e-mail. Even better, the Premium package includes a mail-in rebate coupon for one such call. And if you're so inclined, you can have an H&R Block tax professional review your self-prepared return to help ensure you've taken all the deductions and credits due you ($29.95).
In all versions, technical support (for help with the program itself) is free via e-mail or phone.
What makes or breaks a tax program is the depth of 1040 coverage and how friendly and informative the interview's "conversation" is. TaxCut has made some good changes here this year, including more guidance in areas like capital gains, home sales, self-employment, and tuition expenses. New context-sensitive tax tips flesh out the details of thorny tax topics.
But TaxCut has some room to grow internally. We found that some interview topics (such as the Fuel Tax Credit and Ammended Return areas) are not completed, forcing you to open a form and fill it out manually.
TaxCut has always done a good job of occasionally flagging questionable entries and encouraging you to check your answers. But you'll still want to take advantage of the final error-checking and planning tools that the program offers. This segment offers two levels of feedback: errors that must be fixed before filing (like missing required information) and warnings (like a figure for state taxes paid).
As usual, when you're finished, you can either print your return or file it electronically. You can also take advantage of H&R Block's post-return planning tools. You can estimate your 2004 taxes and plan for payments, use the program's Alternative Minimum Tax Planner, and generate a tax planning report based on the return you've just completed.
H&R Block has made some good changes this year, and the program is a close match for TurboTax. It's also cheaper, especially when you consider the Premium package's included tax advisor call.
Product: TaxCut Premium 2003
List Price: $39.95 (before a $10 mail-in rebate). Includes one federal electronic filing, one state software program, and one Ask-a-Tax-Advisor solution (each free after a mail-in rebate)
Requires: 64MB RAM; 150MB hard drive space; Microsoft Windows 95, 98, Me, NT, 2000, or XP
Company Info: H&R Block e-solutions, 800-457-9525, www.taxcut.com
TurboTax Premier 2003
A decade ago, Intuit pioneered its EasyStep interview, which greatly simplified the process of preparing and filing personal income tax returns. The company has continued to hone that innovative tool and build more depth, guidance, and usability into the program every year.
This year's enhancements focus on several areas, like customization, data import, and more interactive interview topics. These subtle changes help make TurboTax our favorite tax preparation package.
Intuit touched off a firestorm last year when it introduced product activation into TurboTax. After installation, you had to enter an activation code, and you couldn't load the program onto more than one PC (say, at home to do your taxes and at work to print them out) without getting an additional code from Intuit tech support. But the company heard users' complaints, and this year's TurboTax has no such limitations.
Getting started can be easier if you're able to import at least some of your tax data. This can come from financial (Quicken, QuickBooks, and others) and tax software (TurboTax or TaxCut). In addition, TurboTax also downloads data for your W-2 (salary information), 1099 (investment data), and 1098 (mortgage interest). The list of participating financial institutions has grown this year and is listed in the program.
Two of this year's changes are evident early on. Taxpayers who have imported data from the previous year's version are presented with a special "Welcome Back" interview. This multiscreen process displays information as it is carried over from the prior year for your approval, then asks if you've experienced any significant life events over the last year that would affect your taxes. These include starting a business, refinancing or purchasing a home, and receiving an inheritance. Based on your answers, TurboTax modifies the interview to include those topics.
At the beginning of each section, TurboTax asks you to check off tax issues that are germane to your financial situation, so that it displays topics you must complete. Intuit has shaved off the number of screens you must go through this year to save you time and annoyance. Though TaxCut is very competent at this task, we like TurboTax's structure and approach to conversing with taxpayers better. Several "experts" have been added this year to walk you through complex topics, and videos present information in a welcoming multimedia format.
Little has changed cosmetically or in terms of navigation, and that's a good thing. Buttons and menus at the top of the screen help you get where you're going should you choose not to move through sequentially (which is recommended for all of these programs) or need to back up. Click on a button and TurboTax Navigator — an index arranged by content topics — opens.
Help tools are thorough. FAQs appear on almost every screen to deal with context-sensitive questions, and hyperlinks take you to explanations of unfamiliar terms. You can type entries in plain English or, if you click the "Help & Info Center" link, a dialog box displays links to instances where that topic appears. "Topic Search" — unfortunately hidden up in the Tools menu — asks for a word or phrase, then takes you to the correct screen.
For tax-related questions, you can talk to one of Intuit's in-house experts for $19.95 per solution. As far as technical support goes, you can enter a live chat for free, but a phone call will cost you $19.95 for 24 hours of access to the phone techs.
Whether you've been using TurboTax in the past or are a newcomer, we can recommend the program without reservation. It costs a little more than TaxCut, but the streamlined interview process is a real timesaver, and the help topics and tools are exemplary.
Product: TurboTax Premier 2003
List Price: $59.95 (before a $10 mail-in rebate). Includes one free federal electronic filing and one state software program (each free after a mail-in rebate)
Requires: 32MB RAM; 85MB hard drive space; Microsoft Windows 95, 98, Me, NT, 2000, or XP
Company Info: Intuit Inc., 800-335-1348, www.turbotax.com
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