Until recently the two big tax software guys, Intuit's TurboTax and H&R Block's TaxCut, pretty much owned the market for tax software.
But the explosion of the Internet has brought out the entrepreneurs and has added plenty of new choices for people who want to use their computer for tax preparation. A quick search of the Web produced a list of at least 34 tax software purveyors that allow you to prepare your own return either directly through their site or by downloading their software.
We looked at five options, TaxACT, from 2nd Story Software; OneTax, from The Thomson Corp.; SecureTax, part of Universal Tax Systems; TurboTax98 and TaxCut98.
Perhaps the first and biggest advantage of all tax software is that when they add 2+2 they always get 4. When you and I do it, sometimes we get 5. But getting beyond the math, you want software that:
- Is easy to download.
- Provides ease of navigation through your tax situation.
- Is simple to understand so you don't make a mistake.
- Covers all the potential deductions for which you're qualified.
- Is a bargain.
SecureTax and OneTax both provide a service that is rapidly expanding on the Internet - tax preparation right on line. This saves download time but the tradeoff is waiting on the Net while you click forward from screen to screen through the preparation. The speed of your modem with make a difference. Intuit (INTU) also offers WebTurbo online, but our efforts to access it required the very latest browser upgrade; without it, we crashed.
SecureTax and OneTax allow you to prepare, print and electronically file federal and state tax returns. SecureTax has bright lively graphics and a "two-minute refund estimator" that actually takes just two minutes and lets you plug in your income and expense estimates so you'll know where you stand.
The pages are simple question and answer but without the detailed hand-holding of a lot of traditional software. But its simple declarative sentences and instructions are easy to follow. For example, the five-part test for declaring dependents was easy to understand. All the blocks that MUST be filled in are flagged and you can flip from the interview to a forms checklist and answer questions in any order. Special help may cost extra if you need to contact SecureTax for answers to tax questions.
If you used the system last year it offers to plug in last year's information to help you update for 1998. SecureTax also offers a tax organizer online for use during the year and if you just want to download free tax forms they provide that service. Once completed they charge $9.95 to electronically file a 1040EZ and $14.95 for all others, although they do offer discounts. Service is free for active military and Oklahoma residents. The price also includes printig and mailing you a copy of the finished return. (Editor's note: SecureTax is a MarketWatch advertiser, but was given no special consideration by the writer.)
OneTax provides more plain vanilla graphics but it has a detailed "guided entry," instruction process or, for the more experienced, an "independent entry" option.
The program allows you to follow straight through the prepared Q&A format or skip to specific forms. Both OneTax and SecureTax offer unique passwords and user ID protection that allows you to log out even if you're not done and return later to complete your on line return without losing data entered.
OneTax pages seemed to take longer to load in a few different uses but provided good prompts for completing the process. Unlike the downloaded software, you can't see the tax forms as you work through the questions.
OneTax, like SecureTax, allows you to register and prepare your return for free but only charges when you are ready to file electronically. The charge is $9.95 and your return is stored in PDF format.
TaxACT, from 2nd Story Software allows free download of the tax preparation material and expects no payment until you electronically file.
The graphics are friendly but plain. You get more functions here than the SecureTax and OneTax online options. For example, TaxACT allows you to see the actual tax form entries as you answer the on screen questions. The software calculates a running total of your refund in a box on screen as you make entries.
The interview language is not as simple as other programs but is still good. They had a simple depreciation calculator, for example, that was easy to understand. It also red flags potential problems.
The program allows you to flip through a summary of your entries as you go and move from the interview to lists of tax forms you may want to check out before answering.
Having the software on your computer saves on the time you spend waiting for the Web to flip from page to page with the online sites. TaxACT charges $7.95 for electronic filing once you complete the forms.
TaxCut98 and TurboTax98 still have all the bells and whistles and usually you have to pay for that.
TaxCut98, from H&R Block (HRB), downloaded easily in less than 20 minutes although one try ended with a corrupted file. TurboTax98 was another story. Despite multiple tries to download and attempts on both Mac and PC we could never successfully complete the mission.
TaxCut98 allows taxpayers the choice of all forms and a step-by-step Q&A or "fast forms" for more experienced people. The split screen, like TaxACT, allows you to answer questions and see the number input on the actual form at the bottom of the page. Or you can simply enter informatioyourself straight to a full screen form.
The program prompts you to answer "yes" to any question if you aren't sure of the answer, that will take you through the steps to make sure you don't miss a deduction.
The bright, energized graphics offer easy navigation from forms to planning to help to the interview. Help offers not only TaxCut explanation, but Kiplinger's tax tips and the official IRS explanation, among others.
TaxCut98 charges $19.95 to download. It is possible to get mail in rebates lowering the cost to $9.95. That's also the charge for electronically filing.
TurboTax98 this year provides two options for taxpayers, WebTurbo Tax to prepare and electronically file federal and state returns on line for $19.95, or you can download the TurboTax software for $27.95.
Perhaps the best offer this year is from TurboTax. They joined a partnership with the IRS to offer free electronic tax filing to any taxpayer with an adjusted gross income of less than $20,000. This too is done through the Internet site and is called the Quicken Tax Freedom Project. Check the TurboTax Web site for details and requirements.
TurboTax has always had a wide array of options for taxpayers. This year they upgraded their interview navigation and added smart delete to get rid of unwanted forms. The software also provides a running refund total and alerts for potential errors.
Because many of these programs are free to try, you should check out several and see which you're most comfortable with before you start in earnest.
Written By Pam MacLean, CBS MarketWatch