Online Tax Preparation Takes Off
Web-based tax software is rapidly gaining in popularity. Intuit, whose TurboTax is the best-selling shrink-wrapped and online tax prep software, says that 3.6 million returns were filed via TurboTax on the Web last year, up from 1.4 million just three years earlier.
Many Choices
Other online tax prep vendors include H&R Block and TaxAct (both of which also have shrink-wrapped versions), and the online-only CompleteTax and TaxBrain. Overall, we recommend using TaxAct for simple returns and TurboTax for more complex ones; see our in-depth review of desktop tax programs, and our review of Web-based options.
Perhaps the biggest appeal of Web-based tax software is that it tends to cost less than boxed software, and doesn't involve you in the irritating rebate structure that commonly afflicts desktop software. H&R Block offers a new Web-only deal under which an H&R Block tax pro will review your return before you e-file and sign off as your tax preparer, accompanying you to an IRS audit if need be--all for $80. (The same support would cost you $130, on average, at an H&R Block office.)
Travelers can work on tax returns anywhere they can access the Web. Most tax prep sites don't charge anything until you're ready to file, so you can try out the service before you buy. In addition, software changes are immediately posted to the Web server, so you don't have to download patches. Web-based software is also a good way to go if you don't use Windows and therefore have few or no commercial shrink-wrapped alternatives.
When to Say No
But desktop tax software has its advantages, too. All of the major commercial packages let you import the previous year's tax file; in contrast, only H&R Block allows you to upload TurboTax or TaxCut data files to its Web software. If you prepared last year's return on your PC and now want to switch to the Web, you may have to retype lots of information from that return--a time-consuming job if your return is complex. (However, you can import data from a previous year's return if it was prepared on the same Web site.)
Web software resembles its desktop counterpart, except that navigation options tend to be more limited: People who revisit forms find that moving around within a return is faster with desktop software.
Security Matters
Web-based services generally follow good practices such as limiting FTP access to their servers (leaving one less opening for intruders), displaying current security certificates in the company's name, and encrypting cookie file data such as passwords. Web servers are professionally managed, and security fiascos are relatively rare. But read the company's privacy policy and be sure to opt out of newsletters or marketing e-mail you don't want.
A complicated return, or the need to import data from a previous year, might keep you tethered to desktop products. Otherwise, though, I'd recommend trying a Web-hosted product--both for the convenience and to save money.
