Sunday, February 29, 2004
Play it safe by avoiding Web-based versions of tax software.
SPECIAL TO THE WASHINGTON POST
Snow. Sleet. Freezing rain. Gray, overcast days. Remind you of anything?
Yes, it's tax time.
That, in turn, means it's time to fire up a tax-preparation program. Why? You need to supply data only once for federal and state returns, you'll never make an arithmetic error, you can use information already in Quicken or Microsoft Money, you can play as many what-if scenarios as you want, and you can electronically file your return for a quick refund (assuming the tax gods smile on you).
Your options
The basic tax-preps should be familiar: Intuit Inc.'s TurboTax line, H & amp;R Block's TaxCut offerings, and further back, 2nd Story Software Inc.'s TaxACT.
All of these companies offer Web-only versions of their applications that run in a browser window. But we can't recommend them, knowing the erratic state of online security; stick to software that lives on your hard drive and keeps your personal data at home.
Other factors may further limit your options. If you use a Mac, TaxACT is out of the question (all these programs run on Windows 95 and newer Microsoft operating systems). If you run the latest version of Intuit's Quicken personal-finance software, only TurboTax can import your financial data easily, while TaxCut has the same edge with respect to Microsoft Money.
It also pays to stick with the program you used last year: Each tax application can import prior-year returns prepared with its predecessors, saving you data entry and allowing easy year-to-year comparisons. (TaxCut and TurboTax claim compatibility with each other's 2002 returns, but users have reported problems importing files this way.)
Best bets
Those factors aside, TaxCut and TurboTax are better for most returns than TaxACT, which -- despite a refreshed interface and clearer explanations -- demands more of an acquaintance with IRS lingo.
Both the Intuit and H & amp;R Block programs look and work remarkably alike, with similar screen layouts and a comparable emphasis on short, explanatory videos and Q & amp;A lists, backed up by $19.95-per-issue consultations with tax experts.
TurboTax is our overall favorite by a small margin. Its interface and interview style are a bit more welcoming; it can download salary, interest and investment data from many more companies (60, compared with three for TaxCut); and its advice is a bit deeper and more accessible.
This year's version of TurboTax also abandons the cumbersome "product activation" anti-piracy mechanism introduced last year.
TurboTax does, however, remain relatively costly. The Deluxe edition that best matches most people's needs costs $39.95 minus a $10 rebate; a second rebate coupon covers the $14.95 cost of electronically filing a federal return. (A Macintosh version, for OS 8.6 or newer, costs $49.95.) H & amp;R Block's TaxCut Deluxe, with a similar feature set, costs $24.95 with one free e-filing included, minus a $5 rebate.
Intuit's TurboTax Premier handles complex returns and offers the most help and advice, plus rebates for e-filing and a state program. But its $59.95 price (minus a $10 rebate) outstrips that of Block's TaxCut Premium ($39.95, minus $10 rebate), which also includes one free state tax program plus a rebate coupon for one "Ask a Tax Advisor" consultation. (Its Mac version, for OS 9.1 or newer, costs $5 more.)
No-frills version
For entry-level tax work, we'd skip the basic versions of TurboTax and TaxCut in favor of TaxACT. Its no-frills Standard package can be downloaded for free, so paper filing costs nothing. E-filing costs $7.95, and a state return adds $12.95. For $9.95, TaxACT Deluxe adds tax advice from J.K. Lasser's "Your Income Tax 2004."
Whatever program you use this season, you can simplify next year's taxes if you get in the habit of computerizing your finances. With your income, expense and investment data and last year's return on your hard drive, filling in and filing forms can be almost paperless, and even (somewhat) painless.
Paying what you owe is still another matter.