Guide to Web-Based Tax Software
A bewildering array of eight leading income tax packages awaits this season, to help with your bewildering taxes. Each offers a different mix and level of services and does some tasks well and others badly.
Your first decision is whether to use a packaged product that runs the application on your desktop or to try a Web-based service. We review five Web sites and three shrink-wrapped packages to help you decide. The Web sites are CompleteTax from CCH, H&R Block from H&R Block, TurboTax by Intuit, TaxBrain from Petz Enterprises, and 2nd Story Software's TaxAct.
Three have corresponding packaged products: H&R Block's TaxCut, TaxAct from 2nd Story Software, and Intuit's TurboTax are reviewed separately.
The short answer: If you used tax software or a Web site to file your 2002 taxes and were reasonably happy with it, use the same package for 2003. Each program imports its own data from the previous year's return with no problems. Importing a competing program's data ranges from impossible (with most of the Web sites) to error-prone. Unless you were very unhappy with the program you used in 2002 or your tax situation has changed dramatically, stick with what you know.
Here's an overview of our conclusions: If all you file is Form 1040EZ, head straight to TaxAct. Even though the site is sometimes painful to navigate, you can't beat the price--free to print and mail a return, or $8 to use electronic filing. However, if you have complex taxes, you should carefully consider which IRS schedule will cause you the most difficulty and choose the program most adept at handling that form.
Overall, TurboTax is the most thorough of the five. It charges a sliding scale from $20 to $60 for the federal return only, depending on how many forms you use. H&R Block starts at $25. TaxBrain fees start at $20, again depending on the forms. CompleteTax costs $30, including state returns.
Each site has positive aspects. The one to pick depends on which hoops Uncle Sam is making you jump through this year.
Snapshot of a Choice
It's good that the five sites vary, because everyone's tax return differs. Figuring out which (if any) is right for you means comparing your tax return with the features and deficiencies of each site. Here's a quick guide.
- Return is little more than Form 1040EZ or 1040? You can't beat 2nd Story Software's offer: Prepare and print your return using TaxAct for free. But beware a badly designed user interface that will force you to view many more screens than necessary.
- Complicated return? Intuit's TurboTax is for you. Its interview is the most detailed and complete, but it's much too detailed for simple tax returns.
- Want a pro to review your return? H&R Block's Signature Service will do just that for $80. The reviewer will sign your return and accompany you to any resulting audit. TurboTax offers a similar service for a variable fee, but only for a review.
- Know your way around IRS forms and rules, and already know the line items? Try TaxBrain from Petz Enterprises--its site serves up the IRS forms and does the math.
- CCH CompleteTax works best if you want details, from queries to help you determine appropriate categories, or to view multiple levels of input. But it's a strange interview that wants last year's data even before you start.
Is your return complicated? Consider how programs handle the following items:
- Mileage deductions, particularly in several categories, such as medical, charitable, and business (yours or as an employee).
- Depreciation expense--which you can claim on Schedule C or Form 2106 or both. Depreciation is more complicated if it involves still expensing items purchased earlier.
- Noncash charitable contributions exceeding $500 or a large contribution to a single group.
- Anything that might trigger the Alternative Minimum Tax (AMT).
- Asset sales or complications created by the ever-changing treatment of stock sales and dividends. (For example, selling shares that you purchased at several different times; only TurboTax will calculate your cost basis.)
Site Features: Good, Bad, Ugly
The more complicated your return, the more important it is that you choose carefully.
If you prepared your 2002 taxes on any of these sites, you may want to return to the same site this year, because four of them will import older data only from their own site. Only H&R Block lets you upload a return created with TurboTax or TaxCut. However, both H&R Block and Intuit accept data from Quicken or Microsoft Money.
Some specialization is fairly narrow; if you've used the CCH GainsKeeper to track stock purchases and sales during the year, you can transfer that data directly into CompleteTax or H&R Block, automating Schedule D.
Both H&R Block and TurboTax offer add-on programs--DeductionPro and ItsDeductible, respectively--to help you put values on donations of goods and services to charity. Both guarantee you'll save at least $300 or they'll refund the purchase price of the add-on. ItsDeductible costs $20 and DeductionPro is a free download under H&R Block's Premium service.
Site Design Challenges
Web-based tax software has two basic problems: information density and navigation.
There's a trade-off between the volume of information on a screen and the number of screens it takes to complete a return. In general, the more you enter on each screen, the fewer screens involved. But some sites make this worse by asking repeatedly for the same information, or by not structuring the interview to reduce the number of screens.
The best interviews tackle each IRS form by asking a series of yes or no questions to determine which parts you must complete. Yet, each of the five sites repeated the same questions about vehicle expenses for Schedule C, Schedule A, and Form 2106. Note to tax software designers: Why not have a single questionnaire about, say, vehicle expenses that distributes data to all the appropriate forms?
Navigation is a Web-specific problem. When you're running tax software on your own PC, the entire program is available so you can jump anywhere within the interview. When you're online, only the parts of your tax return that are relevant to your current task are downloaded. That's a nuisance if you need to return to Schedule A when you're in the middle of Form 2106.