Compute your taxes!
Although many software programs are a waste of time and some of the most famous packages are wildly overpriced, preparing your income-tax forms with nothing more than a pencil and a calculator is time-consuming and dangerous because it’s too easy to bumble your arithmetic or miss big deductions, risks that far outweigh the modest cost of tax-preparation software.
What’s more, tax software is now fairly easy to use. You answer questions about how much you earned and how you spent it, then the program digs up the correct forms, fills them in, calculates where necessary, suggests ways to save money, inspects the finished results for mistakes and then prints them for mailing or sends them electronically to the Internal Revenue Service.
The only hard part for you is keeping and adding up your receipts. If you already use a personal finance program, such as Quicken, even this step is a breeze.
If you’re convinced, which tax software for preparing 1998 returns is best? And do you buy your program of choice on CD-ROM, download the software from the Web or run it right at a Web site without downloading?
TurboTax (Intuit, 800-446-8848, www.turbotax.com) for Windows, known as MacInTax in its Macintosh version, has been the perennial best-seller. From the company that makes Quicken, this program has just about every imaginable form, worksheet, option, document and planner, and it offers built-in calculators for working out future taxes, IRAs and related matters.
The two big improvements this year are in the interview that asks you questions and the FAQs, or frequently asked questions, that provide background help information. The interview is smarter this year: It learns about you, then skips items that don’t make sense for your return. The FAQs are easier, too, because they stay on-screen where you can see them instead of disappearing when you want to get back to answering questions.
These aren’t really big changes from last year. But because the tax laws are rewritten every year and must be incorporated into the latest tax-preparation software, you have to upgrade annually.
Surprisingly, for all its features, Turbo is also a fast performer. The basic version of TurboTax/MacInTax 1040 is $30 officially, but after store discounts and Intuit rebates it is under $15. The Deluxe, with IRS publications, tax guides and videos, plus tax planning tools and an IRA planner, is officially $50, but after discounts and rebate should be about $30. A Home and Business version with more business forms and advice runs $70. State versions cost $28 for the first and $20 for each additional; some people earn in more than one state and so must file multiple state returns.
Electronic filing is $10 on the Basic but free for one person on the Deluxe. Telephone tech support is free for issues of installation, printing and e-filing, and there is free automated-voice-recording, fax and Web support for other issues. But telephone tech support on other issues is $14.95 per call.
There’s a freely downloadable version of the basic TurboTax, but not MacInTax, which does everything but display the final forms, print them or file them. You have to pay $29.95 by credit card to finish the process. But I don’t recommend this approach, because for the same amount you could buy the Deluxe CD-ROM with all its extra help and planning tools.
If you’re considering doing without the extra help that a CD-ROM can hold, you should know that you don’t even need to download. You could try the new WebTurboTax instead.
This is a Web site equipped with the basic TurboTax software. You answer the questions there, enter your income and spending, and click a button to file the results electronically. The IRS now encourages such electronic filing, as do 30 states for state income taxes.
You pay $10 for a federal filing and $10 more for a state filing if your taxes fit into the bare-bones 1040EZ form. You pay $20 and $20 for the more complex finances of a 1040 or 1040A filing. But if your adjusted income falls below $20,000, as calculated by WebTurboTax using official standards, you don’t pay anything to file federal or state.
There are other such on-line tax sites, including SecureTax.com (www.securetax.com), and Thomson OneTax (www.onetax.com). The results are either filed electronically or returned to you for printing. Generally they are cheaper than the deluxe version of their competitors on disc, but typically about the same as the basic versions at around $15.
In their favor, the Web sites don’t charge an additional $10 for electronic filing. However, the Web sites don’t have all the helpful information and planning calculators of deluxe software, which for $30 or so also includes the e-filing fee. And the Web sites may not have the state form you need. Check to make sure.
The other long-established name in tax-preparation software is Kiplinger TaxCut (Block Financial, 800-235-4060, www.taxcut.com). It has much the same forms, features and abilities as TurboTax/MacInTax.
TaxCut isn’t as fast, and doesn’t pull in Quicken data as easily, but it is fast enough and is a little easier to use for the tax fearful or computer novice. New and improved this year are the “auto update” Internet feature that lets you keep the program current during this tax season, more help with the Roth IRA, capital gains, educational tax credits and other tax law modifications, and a constant “Refund Monitor” that stays on screen to show what you owe as you fiddle with forms. Like the latest TurboTax, the interview has also been smartened up so you can choose to be asked every detail under the sun or skip those you know don’t apply to you.
The full Basic version costs $15 after discounts, but is available only for Windows; the Deluxe version for Mac or Windows is about $30 after discounts.
That $30 includes the right to freely download as many state versions as you want–all states for Windows and California, Georgia, Illinois, Maryland, Massachusetts, New Jersey, New York, North Carolina, Pennsylvania and Virginia for Macintosh.
Or you can buy a single CD-ROM with all the states for just $6. TaxCut also comes in a business version for $70. Telephone tech support, for any issues, is free, and there is on-line and fax support as well.
Block Financial is also taking a tentative step onto the Web with TaxCut 1040EZ Online (www.taxcut.com). It is free, though only for those with the simple 1040EZ to complete.
Finally, there’s a new competitor named TaxACT (2nd Story Software, 800-573-4287, www.taxact.com) for Windows. I’m glad to see competition and I like the low prices: The basic version is free to download, though it lacks forms I need such as Schedule C for home business. The Deluxe version is $10 to download or $28 if you want to order it on CD-ROM, and e-filing for $8 more. Versions for 21 states are available at $13 each.
Which way should you go?
It isn’t easy to decide, as the programs keep stealing each other’s best features and so look more and more similar. If you have a lot of time, you should probably try all three, starting with their free on-line or downloadable trial versions. That’ll give you the flavor of the interface.
If you don’t have that kind of time, I’d start by passing on TaxACT. I’ll be more comfortable with this newcomer when it has a track record for good analysis and accuracy.
Then if you’re a 1040EZ filer, or make less than $20,000, I’d go with Web TurboTax for free filing.
If your taxes are more complex, I’d go with TaxCut Deluxe. It generally matches TurboTax’s features, doesn’t cost extra for the state version and doesn’t limit telephone tech support. I prefer the Deluxe over the Basic because that extra help might provide the edge needed to save a hundred here and a thousand there.
Besides, the e-filing fee is included.
