So you’ve decided to complete your federal income tax return on your own. You can either fill out all of the forms and worksheets by hand or use tax preparation software for your home computer. If you choose to do the later, the question becomes, “Which tax preparation software should I buy?” To help you out, I’ll briefly review software from each of the three main players in the tax preparation software market that I mentioned in blogs earlier today and yesterday. I’ll leave the decision of which program to use up to you, but will give recommendations along the way.
All three of the programs reviewed here are offered in varying versions. My comments are about the software packages in general and not any particular version.
TaxAct is great if you have a pretty simple federal income tax return. TaxAct ranges in price from free to just under $20 and is approved by the IRS (as all three programs here are). If you are filling out a 1040EZ or even the 1040A, TaxAct is probably a good choice for you. In fact, you may think about using the Web-based TaxAct if you’re just filing a 1040EZ. If you are going to need to complete a full 1040, TaxAct may not be the best choice for you. While it’s free and relatively easy to use, TaxAct lags behind the other two tax preparation programs in maximizing potential deductions. Also, in terms of using advertising within the program, TaxAct falls in between the other two programs. In other words, while completing your tax return with TaxAct, you’ll have to deal with some special offers and ads that encourage you to upgrade to other versions of TaxAct or use your tax refund (if you’re entitled to one) to purchase gift cards.
TaxCut is a good choice for those who are new to tax preparation software. The interface is clean and pretty easy to follow as the program will “interview” you in order to get all the information for your tax return. TaxCut is backed by H&R Block and you potentially can talk to an H&R Block tax professional if you are having trouble with your tax return. TaxCut is cheaper than TurboTax, but not as cheap as TaxAct. TaxCut, however, is more powerful at helping you find adjustments and potential deductions than TaxAct. TaxAct has the least amount of advertising of the three programs reviewed here, if you don’t count the fact that the H&R Block logo is stamped all throughout the program.
TurboTax is the most expensive of the three programs reviewed here, but also the most complete income tax preparation package. TurboTax’s strength comes from an included program called ItsDeductible. ItsDeductible is a great little tool for helping you maximize deductions that you can itemize on tax form schedule A. While all three programs reviewed here will perform the same tax calculations, each one differs slightly on how it estimates the value of deductions. TurboTax does the best job at estimating the value of the items you donated to charity, for example. TurboTax has the most advertising built in to its program. You are asked numerous times if you want to apply your refund towards credit at certain merchants or buy other products. You can simply choose “No, thanks,” but it can get annoying after a while.
Conclusion
Which program should you use? It is really personal preference in the long run. I regularly use TurboTax, but that may be due to the fact that I first chose TurboTax years ago when tax preparation software became available for home computers. I’ve always been pleased with TurboTax and you will probably be pleased with any of the three programs reviewed here. At least, you’ll save time (compared to completing the tax forms by hand) and money (compared to paying a tax preparation professional) by choosing to use tax preparation software.