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Tax preparation software has been in existence for over a decade and has become a cheap and easy way to complete and file your tax returns without having to hire a professional. These programs translate the complexities of the tax code into a series of questions that they ask you, and then use your answers to automatically complete your tax return. But there’s more. In addition to filling out your tax forms, and allowing you to file your returns electronically, tax software offers detailed information on the tax code, multimedia help, advice by tax experts and planning tips for next year’s returns. And new features, like TurboTax's Deduction Maximizer, are being added every year. We review the three most popular tax preparation programs: TurboTax by Intuit, H&R Block’s TaxCut and TaxAct by Second Story. We also briefly look at reference books that can provide help for consumers who do not have access to a computer. Of these tools, we believe that TurboTax and TaxCut Deluxe provide the best, most comprehensive assistance to taxpayers in preparing their returns, with TaxAct a close third. Because each program includes slightly different features, you may want to choose your product based on what features you need. TaxAct, for example, is the only product that includes information (and the necessary form) for completing a Federal Application for Federal Student Aid (FAFSA) form, which will be a big help to parents with college-age children or graduate students. TaxCut, the software developed by H&R Block, is the only program that offers free assistance in the event your tax return is audited and TurboTax remains the most user-friendly program and is the most thorough in finding specific deductions. Our full reviews of these products follow below: Click here to see our review of Turbotax
Click here to see our review of TaxCut
Click here to see our review of TaxAct
Click here to see our recommended reading list
TurboTax Deluxe With Deduction Maximizer (New version every year)
Intuit, Mountain View, California
CD-ROM for Windows & Mac, $44.95
(Available as download with E-file, $59.90)
(800) 446-8848
www.turbotax.com |  |
TurboTax Deluxe has been a consistent HALT Do-It-Yourself Best Buy, and contains virtually every tax form and worksheet you’ll need for preparing your federal and state tax returns. It provides a well-organized process for completing and filing your returns with both the IRS and your state tax authority. The program also includes instant access to official IRS publications and helpful video clips from tax experts. New this year is the integrated Deduction Maximizer which looks for deduction opportunities and tracks your savings. A disappointment for 2006 filers is that the CD-ROM no longer includes free e-filing; it now costs an additional $15.95 per filing. This tax software provides thorough, accurate and up-to-date information including the latest changes to the tax code. The program automatically checks for updates based on recent changes to the tax code that might affect your return, and downloads them from the Intuit Web site. | Comprehensiveness | Grade: A |
A very thorough product, TurboTax features every form and worksheet you are likely to need, as well as a comprehensive library of IRS tax publications, its own answers to frequently-asked questions, and video presentations from tax experts. It also includes a Life Events Planner that helps you plan for your future taxes and a Deduction Maximizer to ensure that you take every possible deduction on your return. State tax downloads are available for every state that has a state income tax. TurboTax uses plain language throughout. On the rare occasion that it uses tax terminology, it allows you to click on the tax term to reveal a definition or explanation. Its help section also explains tax terminology in greater detail. TurboTax takes only a few minutes to install, including a brief download of a state tax program if you need one. The program itself has a well-polished layout that is intuitive and easy to use. You can automatically transfer information from the previous year to this year’s return. A tabbed window takes you through the process of filling out and filing your tax returns in a step-by-step fashion by prompting you for information at every step. Throughout the process, the product displays frequently asked questions so you can click for more information. You can also access IRS publications or other items in the tax library at any time. First, there is the Personal Information tab, where you input your name, address, Social Security number and other relevant information. At this point, you can also import your financial information from personal finance programs such as Quicken, QuickBooks and Microsoft Money. Next, the program takes you through the process of entering your income, deductions and credits for your federal return. During this process, the program keeps a running total of the amount you owe or will be refunded. It also lets you view the actual IRS forms that the program is completing. On more complicated questions (for example, availability of a home office deduction), those with some knowledge of the tax rules may answer with a simple yes or no, while those who are unsure of the correct answer may use a “Guide Me” feature to complete a more detailed set of questions that will determine the final answer. At any point in the process, you may return to a previous page using the Easy Step Navigator menu. The new Deduction Maximizer walks you through deductions in 10 broad categories such as Your Home, You and Your Family and Charitable Contributions. Next to each subheading—Real Estate Taxes, for example—is a “Do I Qualify? link. When you click on that link, you get a plain-language explanation of the deduction. A nifty feature of the Deduction Maximizer is the Federal Refund box in the upper left hand corner of your screen, which tracks how much money you might get back. You can almost hear it go cha-ching! After you have entered all the information for your federal return, TurboTax reviews your return for errors and entries that might trigger an audit. It will also compare your return with national averages and suggest ways to reduce your taxes in the future. If you have downloaded a state version, the program then transfers relevant information into your state return, asks a few more questions, and completes your state tax returns. Finally, TurboTax also guides you through the filing process. At this point you may either print your returns to mail them to the IRS and your state, or file electronically for an additional fee of $15.95 for each filing. After completing the filing stage, you have the option of using the program to plan for the next tax year. If you don’t think you’ll be able to file your taxes on time, you can click on the Miscellaneous Tab and get help with filing an extension. There are other helpful forms under this tab as well, including reporting a change of address and amending a return. TurboTax automatically flags possible trouble areas as you complete the interview. TurboTax also checks your return for errors and entries that may trigger an audit by the IRS. | Quality of Legal Forms | Grade: A |
TurboTax contains every form and worksheet you’re likely to need to file your return. The forms are clear, and look exactly like those supplied by the IRS. None. For $44.95, TurboTax is a great value, although it is the most expensive of the popular tax preparation software choices available and that price does not include the cost of e-filing your return. Those small caveats aside, TurboTax is a comprehensive, state-of-the-art program that has served consumers well for several years, allowing people to easily complete and file their tax returns, no matter how complicated their tax situation may be.
H&R Block’s TaxCut Premium Federal + State (New version every year)
H&R Block Digital Tax Solution, Kansas City, Missouri
CD-ROM for Windows & Mac $29.95
(Available as download with E-file, $39.95)
(800) 351-7627
www.taxcut.com |  |
TaxCut Premium Federal + State continues to be a great, user-friendly program to complete your taxes. Designed by the tax service H&R Block, TaxCut is also the only product that provides audit representation and assistance in the event your e-filed return is audited. If you like knowing that you have access to support in case of an audit, you’ll like this program. TaxCut contains the most recent and accurate information about the tax code and tax forms. With an Internet connection, you can easily update your program at any time, ensuring that your return will be calculated with the most current information and forms. | Comprehensiveness | Grade: A |
This tax software includes a very comprehensive selection of tax forms and worksheets. Additionally, the program provides a library of IRS tax publications, its own answers to frequently asked questions, interactive video presentations from tax experts, and detailed explanations of changes in tax law. TaxCut's “Help Central” contains numerous resources to help you save money on your taxes. It also includes access to the Kiplinger Tax and Financial Planning Library to help you plan for your future taxes. State tax downloads are available for every state that has a state income tax. TaxCut uses easy-to-understand language for its interview questions. When tax terminology is used, you can click on the term and it will give you the definition from the “Help Central” glossary. TaxCut installs easily and provides simple and user-friendly onscreen instructions for using the program. Before you start, it allows you to quickly download a state tax program from H&R Block’s Web site. As in TurboTax, the basic format is a questionnaire that takes you step-by-step through the process of filling out and filing your tax return. Throughout the process, frequently asked questions are displayed on screen for you to click for more information. At any point, you may return to a previous page using a menu of steps that doubles as an interactive checklist, or you can access IRS publications and other items in the tax library. The program begins by gathering your background information including your name, address and Social Security number. In addition, it asks for an update on life events since your last return: new marriage, baby, house or job. Then it allows you to import information from previous returns. You can also import your financial information from personal finance programs such as Quicken, QuickBooks and Microsoft Money, which can save you a lot of time. Next, the program takes you through the process of entering your income, deductions and credits for your federal return. Additional help is available at anytime through explanatory videos. As you answer the questions asked by the program, you can have the software display the actual IRS forms that the program is completing. It also keeps a running total of the amount you owe or will be refunded, allowing you to track the direct impact that each piece of information you input has on your wallet. After you enter all of your information for your federal return, TaxCut reviews your return for errors, deductions you may have missed and entries that might trigger an audit. If you have downloaded a state version, the program asks a few more questions, and completes your state tax returns using the information from your federal questionnaire. TaxCut gives you the option to file either by mail or electronically, although e-filing will cost you $15.95 each for your state and federal filings. The last section of TaxCut covers planning for next year’s taxes, your children’s education, and retirement. The retirement section includes a helpful comparison of traditional and Roth IRAs and is written so that even financially-challenged users can understand. TaxCut's help even extends into the real world; if you e-file your return, H&R Block offers free assistance in the event you’re audited. They provide free access to a registered representative who can help you prepare for the audit hearing and will attend the hearing with you. You simply need to keep your e-file confirmation page and call 1-800-HRBLOCK to access these services. TaxCut has Smart Alerts that ask you to recheck your Social Security number or other important information before continuing the questionnaire. In addition, the Smart Alerts tell you when you should gather more information before making a particular filing decision—for example, “Should your parents claim you as a dependent?” The program automatically notifies you of areas that may cause additional IRS scrutiny as you complete the interview, and also checks your return for errors and inconsistencies that may trigger an audit. | Quality of Legal Forms | Grade: A |
TaxCut contains every form and worksheet users will need to file their returns. The high-quality forms look like those supplied by the IRS. None. TaxCut Premium is an exceptional value at $29.95, although you should keep in mind that there is an additional cost for e-filing . This software has the added benefit of being backed up by H&R Block’s tax expertise; if you e-file, H&R Block will guarantee assistance in case of an audit. TaxCut is comparable to its competitor, TurboTax, and either program would be an excellent choice for most consumers. We are pleased to recognize it as a HALT Do-It-Yourself Best Buy.
TaxAct Ultimate Bundle (New version every year)
2nd Story Software, Cedar Rapids, Iowa
CD-ROM for Windows, $19.95
(Available as download, $15.95)
(800) 573-4287
www.taxactonline.com | | |  |
TaxAct Ultimate Bundle has improved its program for the 2006 tax season by including both federal and state tax forms in its bundle and expanding its library of IRS tax forms and instructions. In addition, it is the only software package that includes a Federal Application for Federal Student Aid (FAFSA) form for college age students or graduate students doing their own taxes. Although the interface is not quite as fancy as that provided by its competitors, the format is easy to use. The ability to file federal and state returns online for only $19.95 makes this a significantly less expensive program than the others. Similar to the other tax software, TaxAct allows its users to check online for updated information including the latest changes to the tax code. | Comprehensiveness | Grade: A- |
TaxAct includes the comprehensive array of state and federal forms that those with more complex tax situations might need, as well as a library of IRS tax publications as extensive as its competitors’, although it does not offer video clips of tax experts. It also offers a Life Events planner similar to those available with TaxCut and TurboTax, includes a tax planning calculator to help you plan for next year’s taxes and a FAFSA form for college or graduate students to complete. J.K Lasser Expert Tax Help lets you access answers to tax questions while you’re completing your return. TaxAct uses plain language. While its help menu explains most terms, it does not have the hyperlinked terms that its competitors feature for further information. TaxAct has a simple, brief installation process, which includes a download of a state program if needed. While TaxAct includes most of the same features and step-by-step instructions as TurboTax and TaxCut, its design is not as visually appealing as either of its competitors. That criticism aside, once installed the program is easy to use and guides you through the completion of your tax return by prompting you with questions about your income and possible deductions. Additional help and instruction is provided at any time through “frequently asked questions,” IRS form instructions and a J.K. Lasser Expert Tax Help menu. Like its competitors, TaxAct first asks you to enter your name, address, Social Security number and other relevant information and allows you to import information from previous tax returns. Unlike its competitors, the program does not allow you to import information from financial software, such as Quicken or Microsoft Money which means you’ll spend more time entering your financial information. Your next step is to enter your income, deductions and credit for your federal return. During this process, the program keeps a running total of the amount you owe or will be refunded. It also lets you view the actual IRS form that the program is completing at the bottom of the screen. You may return to a previous step using the program’s sitemap. After you have entered all of your information for your federal return, TaxAct reviews your return for errors, deductions you might have missed and entries that might trigger an audit. It will also compare your return with national averages and suggest ways to reduce your taxes in the future. The program will transfer relevant information into your state return, asks a few more questions, and completes your state tax returns with a similar review process to the federal return. After your return is complete, TaxAct guides you through the filing process, giving you the option of filing by mail or electronically, for free. After completing the filing stage, you may use the program to plan for the next tax year. When you are finished filling in your federal tax return, the program will check the accuracy of your return. The Alerts Review Process uses a traffic light icon to indicate levels of warning. A red light means that the information for a particular question is incomplete or inconsistent. | Quality of Legal Forms | Grade: A |
TaxAct contains the forms and worksheets you’ll most likely need to file your return. The forms are clear and look exactly like those supplied by the IRS. “2nd story software, inc. is providing this web site and its contents on an "as is" basis, and makes no warranties of any kind including, but not limited to, any implied warranties of merchantability or fitness for any particular purpose. 2nd story software does not guarantee the accuracy, completeness or timeliness of the data contained in this web site. 2nd story software, inc. shall have no liability for any errors, malfunctions, loss of data or defects resulting from or related to the use of the information (including software) in this web site. “2nd story software, inc. shall not be liable to you for any indirect, special or consequential damages or loss of profits arising from or related to this web site or the information (including software) contained herein, even if 2nd story software, inc. has been advised of the possibility of such damages.” TaxAct Ultimate Bundle is a bargain at $19.95. This is the only program whose CD-ROM version includes free e-filing. The program does not have quite as many bells and whistles as other tax preparation software, but it has the unique feature of the FAFSA form and information summary sheet. If you don’t need tax tip videos and need to complete a FAFSA, you’ll be happy with TaxAct Ultimate Bundle.
Recommended Reading J.K. Lasser's Your Income Tax 2007: For Preparing Your 2006 Tax Return, John Wiley & Sons, Inc., 111 River St., Hoboken, NJ 07030. 2006. 848 pages plus forms. $17.95.
Now in its 70th edition, Lasser's Your Income Tax 2007 is the standard, comprehensive reference guide that has everything you need to prepare and file your taxes. In a user-friendly format, this guide includes expert tax advice, practical examples, money-saving tips, tax planning strategies, illustrated forms, and special tax planning sections for the self-employed, investors, senior citizens, homeowners and families. The Ernst & Young Tax Guide 2007, CDS Books, 425 Madison Ave., New York, NY 10017. 2006. 755 pages. $16.95.
With offers of hundreds of ideas and unique, money-saving tax tips, Ernst & Young Tax Guide 2007 makes it easy to save on your income taxes. It also includes information about changes to the tax law and explains how to meet any new requirements for deductions and exemptions. Taxes 2007 for Dummies, by Eric Tyson, David Silverman and Margaret Atkins Munro. John Wiley & Sons, Inc., 111 River St., Hoboken, NJ 07030. 2006. 530 pages. $16.95.
In the familiar, light-hearted style of the For Dummies series, Taxes 2007 covers comprehensively federal taxes. It takes readers step-by-step through the tax filing process, with helpful margin notes and illustrations to guide filers through various topics. This year's guide now features information on the Alternative Minimum Tax and Roth IRAs, as well as helpful hints on topics such as selecting a tax preparer and avoiding an audit. Tax This! An Insider's Guide to Standing Up to the IRS 2007 Edition, by Scott M. Estill. Self-Counsel Press, 1704 N. State St., Bellingham, WA 98225. 2007. 354 pages. $21.95.
Although aimed primarily at those facing an IRS audit, Tax This! does have some information about filing your taxes so as to avoid an audit. It takes readers through each step of an audit with numerous tables and diagrams to provide guidance, explaining the rules that the IRS must follow and the strategies you can use to fight them. New for 2007 is information on the IRS "dirty dozen" tax scams and how to avoid them, and dealing with the new aggressive audit strategies of the IRS. 422 Tax Deductions for Businesses and Self-Employed Individuals, by Bernard B. Kamoroff. Bell Springs Publishing, P.O. Box 1240, Wilitis, CA 95490. .2006. 219 pages. $18.95.
Written specifically for business owners, 422 Tax Deductions begins by explaining terminology applicable to business taxation. It goes on to cover tax strategies that may be useful for sole proprietorships, partnerships, and corporations. The bulk of the book consists of an alphabetical list of the 422 deductions mentioned in the title, with a description of each. The book's lighthearted tone makes this aspect of tax law more palatable, yet the book still covers its subject matter comprehensively. The TurboTax 2007 Income Tax Handbook: The Complete Guide to Tax Breaks, Deductions, and Money-Saving Tax Tips, by Intuit and the Tax Professionals of Weiser LLP. St. Martin's Griffin. 175 Fifth Ave, New York, NY 10010. 2006. 368 pages. $14.95.
From the makers of TurboTax, The TurboTax 2007 Income Tax Handbook explains how best to maximize your deductions by providing hundreds of money-saving tax tips. It also includes information on determining your filing status, dealing with retirement accounts and investment income, understanding the Alternative Minimum Tax and more.
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