Looking for a quick, easy, and economical way to prepare your taxes? Then consider looking into Web-based tax software. (For my review of shrink-wrap tax software packages, click here; for a look at some of the glitches that have been found with these packages, go here.) All the major players from last year--CompleteTax, H&R Block's online services, Intuit's TurboTax, TaxAct and TaxBrain--are back, joined by newcomer TaxNet.
I gave each of these online tax prep services a spin (you can do this yourself since none will charge you until you e-file or print your return), and found Intuit's TurboTax to be the best overall, especially if you need more than just the basics. H&R Block's TaxCut and CompleteTax are worthy contenders, however, and TaxAct is the budget option. I was less impressed by the others.
The Best, and the Best Deal
Intuit's TurboTax online remains the champion for both ease of use and thoroughness. Following the lead of its shrink-wrapped counterpart, TurboTax for the Web offers checkboxes that let you bypass major sections of the interview that are not relevant to your return.
However, TurboTax takes a somewhat puzzling approach to asking which version you want to use: The screen in which you must decide has no information about the differences and similarities of each version. This may confuse prospective customers.
At the other end of the spectrum, TaxAct remains the deal of the online tax world if your taxes are simple. You can fill out your return and file the printed version for free (or pay $8 to e-file). Naturally this only applies to the simplest returns. But TaxAct remains the low-price leader.
Unfortunately TaxAct also retains many of the undesirable features it had last year. It just takes too many screens to get through a simple procedure. You need to go through five screens to enter data from a simple W-2. (TurboTax handles this step on one screen.)
H&R Block's Online/Offline Hybrid
H&R Block's online tax prep offerings all get the job done, providing good coverage for most tax scenarios. But the company makes its process more laborious than it needs to be: While the interview questions are solid, they didn't take full advantage of the information gathered.
For example, if you check the box that says your spouse died during the year, the issue is revisited two more times during the interview.
H&R Block does offer two services that leverage its ubiquitous storefront presence. The new Online Drop-off service lets you leave your paperwork at an office (or fax it in) after completing an online interview: One of H&R Block's tax professionals will then prepare your return as if you had actually walked in and sat down for an interview, contacting you via phone or e-mail to resolve any outstanding issues. The company will also e-file your return if you wish.
Costs start at $120 for a federal and a state return, but go up depending on complexity. This may appeal to some, but might not be such a good idea if you have a complicated schedule C or your documentation consists of several thousand receipts in a cardboard box!
The Signature service ($80) lets you prepare your taxes using Block's Web-based software (which this year is also available on CD). Once your return has passed the built-in error checking, you send it to an H&R Block tax professional who will review the return and either e-file it for you or send you queries about outstanding issues.
Most Improved
Far and away the most improved site is CompleteTax. The interview in particular is dramatically better, allowing you to skip many irrelevant screens and combining others into a very nice package.
In addition, CompleteTax has corrected several problems we noted last year. It has added a bulletin board for answers to tax support queries (previously, everything was done by e-mail, which can be a problem if your ISP's spam blocker is overly aggressive). Also, you no longer have to enter the previous year's data before starting this year's return (although e-filers still have to enter the 2003 return data at the end of the process in order to "electronically sign" the return, part of the IRS e-filing procedure).
CompleteTax begins with a series of screens containing tips for working with the program. Unlike many similar cases with other products, these screens actually contain useful information, so be sure to at least glance at them.
Like TurboTax, CompleteTax asks a series of opening questions to cut down the length of the interview. CompleteTax also wins first prize for the best presentation of a W-2. Everything is on one screen and matches up easily with the actual paper form. 
CompleteTax is best for those who haven't used tax software or Web sites. There's lots of help and some very good navigation tools.
Interestingly, CompleteTax is published by CCH, a major clearinghouse for tax information that also publishes Gainskeeper, software that will track your stock market transactions. CompleteTax makes a big deal of the fact that its Web site works directly with GainsKeeper. However, the Web site will export data to most other tax Web sites (though not TaxNet, reviewed below) and to each of the three tax software packages. So using GainsKeeper doesn't mean you must also use CompleteTax.
TaxNet and TaxBrain
TaxNet, founded by some former TurboTax executives, is new this year and it shows. The good news is that TaxNet, like TaxAct, is free. You can fill out and print your federal return at a price of zero. However e-filing costs $10 compared to TaxAct's $8.
Also, TaxNet is very much a work in progress. Income items not supported include farm income; Schedule K-1 (for partnership income information); railroad retirement income; IRA, pension or annuity distributions; self-employment income (Schedule C); or rental income.
In the deductions area, TaxNet doesn't support IRA contributions, employee business expenses, household employee taxes, casualty or theft, investment interest expenses, and a health savings account.
Somewhat annoyingly, each of the above items appears on a list of checkboxes. Only when you click the box for an unsupported item do you learn that it's not available.
Even worse, some navigation aids are also not available. Only two of the four buttons on the TaxNet main screen are working; TaxNet says the other two aren't available. Given these glitches, I'd recommend waiting another year before you give TaxNet a try.
TaxBrain claims to be improved this year, but it still remains little more than a series of IRS forms transferred to the computer screen. For example, this year TaxBrain again starts with a lengthy questionnaire, then uses your responses to these questions to set up a list of forms you'll need. Unfortunately once you get beyond that, the forms are pretty much the same as last year. And it's not cheap. Federal returns cost from $20 to $70, state returns add $20 to $30.
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