Taxes aren't most people's idea of a good time. That means when it comes to
getting them done, the main goal is usually keeping the pain to a minimum.
Reducing the pain factor of the annual ritual of doing taxes is the top job of a
battery of tax-preparation software programs. The big dogs of the do-it-yourself
tax world, Intuit's TurboTax, H&R Block At Home and TaxAct, make big promises
that they can help maximize refunds, save time and save money, as opposed to
hiring an accountant.
That may all be true, yet each of these software packages comes with a morass of
complications, including convoluted pricing, a confusing array of different
versions and lofty fees to electronically file state returns.
With April 15 looming, the options for consumers looking to use their computers
to file are dwindling.
Taking the time to understand tax-preparation software, though, can bring
consumers huge savings.
Rather than paying $400 or more to hire an accountant to put together a tax
return, most consumers can easily use software to whip out their own.
Here are a few key rules of thumb:
--Understanding whether to use software or the websites. The biggest decision
people must make when using tax-prep software doesn't have anything to do with
1099s or W-2s. The decision is whether to use the software or the Web version of
the products.
TurboTax, H&R Block At Home and TaxAct all run either as software on your
computer or on their websites. Which one is best is largely a personal decision,
as the basic functions of the software installed on the computer are nearly
identical to the Web-based offerings.
The decision is important as it will determine the price, how many returns can
be filed and on what types of devices consumers can work.
Taxpayers who use the online versions for tax prep benefit from the convenience.
There's no software to install and no worries about saving the data on your
computer hard drive.
Plus, the tax information can be accessed from any computer or mobile device
that can run an Internet browser. Roughly 75% of TurboTax customers use the
online products, Intuit's Bob Meighan says.
On the other hand, taxpayers who download the software gain control over their
data. These users can work on their taxes on a computer even if it's not
connected to the Internet and can keep the data file stored safely on their hard
drives.
With TurboTax, taxpayers get more control in that they can call up electronic
copies of the IRS documents and edit them.
Generally, the downloaded software works out to be the best value for anyone who
is preparing other returns, such as for family members, in addition to their
own.
Most retailers also run pretty big discounts on the software in the stores.
--Mind the costs. Tax-preparation costs typically come in well below $100 for
most taxpayers, including all the add-on costs including state calculation
modules and e-filing. But the fees can vary widely and can be a big
consideration for taxpayers where price is the most important consideration.
Nearly all the tax-preparation providers offer a free Web tax-preparation
system. But when using the free options, expect just the basics. The free online
services for TurboTax, H&R Block and TaxAct each let you prepare a federal tax
