Assessing online tax prep services
Editor’s Note: People who prepare their own tax returns don’t live by software alone. The spread of broadband Internet connectivity and the reach of the Web has helped fuel the popularity of online tax preparation services. What’s more, many of these tax-filing Web sites offer Mac compatibility.
For Mac users mulling the online route, we’re pleased to be able to reprint reviews of popular tax-filing Web services by our sister publication PC World. Be sure to check out this overview of all the online tax services reviewed for PC World by Tina Orem.
TurboTax takes the trophy again this year. Of the online tax services I reviewed, it did the best job of looking out for my bottom line and minimizing the work without glossing over subjects, though the number of options and the high cost can be a turnoff.
I liked the ability to customize the process; proficient filers and speed demons can deal with the areas they choose while novices can inch along. For instance, people who know what they can deduct can select the Find Deductions Myself option; less-confident filers can choose Maximize My Deductions and go step-by-step. I wish backtracking were easier, though; returning to specific screens took several more clicks here than on some other sites.
TurboTax was the hands-down winner in the ability to import W-2s and 1099s. The majority of taxpayers receive these documents every year, and TurboTax can import the data from most payroll providers, most financial institutions, and from Quicken, thereby relieving many users from having to key the information in. TurboTax also allows users to e-file in up to three states (other sites limit you to two at most).
TurboTax was the most proactive of the group in its tax advice. For example, it told me up front that if I answered yes to the question “Did your child provide more than half of his or her own support in 2007?” I could not claim the child as a dependent. Like TaxAct, TurboTax noticed that the Social Security and Medicare taxes reported on my W-2 were too high, but TurboTax took the extra step of telling me that I was entitled to a refund from my employer—and then told me what to do about it (ask my employer for a refund and a new W-2, and then file my tax return).
TurboTax was also the only site to warn me that some of my interest income might be exempt from certain state taxes—-and it provided the rules for each state as well. And through the integrated ItsDeductible program, TurboTax was the only service that helped me assign credible fair market values to donated goods.
The extra features were everywhere. For example, the Live Community feature allows users to ask questions of other users (no substitute for expert tax advice, but a way to do on-the-fly research). People who play fast and loose with deductions will appreciate the Audit Risk Meter, too. And users who don’t want to go it alone can pay a TurboTax Professional $99.95 or $149.95 (depending on the complexity of the return) to finish the job.
Of course, there’s no such thing as a free lunch—the Premier version is $49.95 and state returns are $29.95 each, and people with simple returns may need only a less full-featured, less expensive service such as TaxAct or Tax Cut.
Mac system requirements: The online version of TurboTax runs on Macs with either a PowerPC or Intel processor. Mac OS X 10.5 users can run either Firefox or Safari 3; Mac OS X 10.4 users can only run Safari 2, along with all versions of Firefox. Users running Mac OS X 10.2 or 10.3 must use Firefox. Users should also have Adobe Acrobat Reader 6 or higher for printing, a high-speed Internet connection, and Flash 9.)
Price: $49.95 (state return is a $29.95 option)
What TaxAct does best is offer advice. It’s affiliated with J.K. Lasser, a prominent publisher of tax guides, and the site’s links and tidbits from the J.K. Lasser help/FAQ database are obvious, abundant, and genuinely helpful.
In many instances the site explained the implications of my answers right up front without making me seek out the information. This kept things moving forward, whereas some competitors sent me on tangential research missions. Mini-alerts warned of errors along the way, so I didn’t have to wait for the big error-check at the end.
I liked the site’s intuitive navigation features, and I was a huge fan of the tabs across the top, which reveal menus and submenus that let users zero in on specific input screens quickly. However, the site’s overall tendency to ask just one question per page rather than letting users answer several at once is a big drawback; the setup resulted in a lot of clicking and waiting, but at least I got to see the immediate results of my answers on the federal and state refund tickers.
TaxAct allows users to import W-2 information from Paylocity or W-2 eXpress if their employers are affiliated with those sites. TaxAct doesn’t import 1099 information directly from brokerage firms or financial institutions, but it does support 1099 data imports from the subscription-based investor site GainsKeeper. Everybody else will have to key everything in. The TaxAct Web-based service does not even support data imports from TaxAct desktop software.
I appreciated that TaxAct noticed the obviously fake Social Security number (123-45-6789) I used, reassuring me that the site does some analysis. TaxAct also saw that my Social Security and Medicare withholding taxes were not the correct percentage of wages (which are 6.2 percent and 1.45 percent of gross wages, respectively). But the site was not helpful in determining the fair market value (and thus the amount of my deduction) for donated goods.
Some users will be pleased about TaxAct’s support for e-filing in more than one state (for an extra $13.95), although the page dedicated just to explaining which permutations of part-year-resident filing requirements result in your having to file by hand illustrates how the complex interaction of state and federal laws can convolute simple ideas.
Overall, though, for the price—$16.95 including one state—TaxAct is the best value of the tax sites I evaluated.
With its plain white background and unfussy layout, CompleteTax is the minimalist’s favorite. The site’s several-questions-on-one-page approach speeds the work along, as do the tabs across the top that make backtracking a little faster.
The Quick Navigation area also helps by displaying a list of completed and uncompleted screens. One feature that slowed me down, however, was the requirement to check a box on every single page to verify that the questionnaire was “complete.”
CompleteTax supports import of W-2s from employers that use the ADP, Ceridian, or W-2 eXpress payroll service. Only Morgan Stanley and Charles Schwab customers can import 1099s; everyone else must type in the data or download it from CompleteTax’s sibling site, GainsKeeper.
I want my tax software not only to ask the right questions and do the math correctly but also to tell me when something seems fishy. As a result, I was concerned when CompleteTax failed to say a word about my obviously fake 123-45-6789 Social Security number. It did point out, however, that I didn’t deduct any property taxes despite the fact that I was deducting mortgage interest and therefore owned a house.
When I indicated that I had sold 100 shares of stock, CompleteTax presented a long drop-down menu for describing what kind of sale it was; choices included “not deductible,” “section 1045 rollover,” “section 1397B rollover,” and other technical-sounding terms. Yet when I clicked on the link for the term “holding period or classification” a pop-up told me that CompleteTax automatically determines the holding period or classification of the sale based on the asset’s acquisition and sale date. This area should be more straightforward. A refund ticker would have been nice, too.
The site offers online chat help, but it costs $4.95 per chat and is available only from 8 a.m. to 8 p.m. Central on weekdays through April 15 (sorry, extension people) and 12 p.m. to 6 p.m. Central on Saturdays and some Sundays. It isn’t available on holidays.
As is the case with most of the tax sites I reviewed, I couldn’t see my actual Form 1040 until I paid for the service and indicated exactly how and where I wanted to receive or send refunds and payments. CompleteTax was priced in the middle of the bunch—$29.95 for a federal return and $14.95 for one state—but that seemed high given the dearth of tax help.
Mac system requirements: CompleteTax requires Mac OS X and runs on Firefox 1.0 and higher and Safari 1.2 or higher. The system requirements page lists other browsers but notes that they’re still undergoing testing and have not been fully endorsed by CompleteTax.
Price: $29.95, federal; $14.95, state
H&R Block’s TaxCut is a solid contender. The good-looking interface is colorful and organized (although CompleteTax and TaxAct make backtracking in as few clicks as possible easier), and its arrangement of multiple questions on each page made things move along faster. The refund ticker tracked both my federal and state refunds (some rival services track just the federal), and I liked the “percent complete” bar that indicated how far along I was in the tax-prep process.
TaxCut users can import prior-year information from TurboTax, but TurboTax contends that TaxCut imports only “very basic information.” That’s about what I got when I imported a 2006 TurboTax file: names, Social Security numbers, addresses, employer IDs and addresses, and other primarily nonfinancial information. It did save a little time, though. In any case, I was surprised that such a prominent site couldn’t import 2007 W-2 or 1099 information from payroll providers or financial institutions.
Like TurboTax, TaxCut gave me strategic as well as tactical advice. The site’s cost/basis calculator does a good job of determining the basis for complex investment disposition situations, and the FAQ pages were more thorough than most in covering topics related to capital-gains matters.
TaxCut was the only one of the tax sites I reviewed to point out that even though my itemized deductions exceeded my standard deduction, I might want to claim the standard deduction anyway to capitalize on offsetting effects in my state return. The Deductions and Adjustments summary also provided explanations of the differences between what I input and what I could deduct. Such information is helpful for people with deductions that phase out according to income, such as student loan interest.
The site also showed some awareness when it flagged my fake Social Security number, though it gave the interesting response that the IRS had already processed a return with that number.
But my TaxCut experience wasn’t all wine and roses. When I changed my noncash charitable contributions to $400 from $500, the tax summary still showed $500 (and again, I received little guidance about the value of those items). While I edited and re-edited the information to no avail, the site froze several times, forcing me to close my browser and log back in. Also, users can’t e-file in more than one state.
Human backup is a huge selling point, though. TaxCut offered plenty of help and FAQs—even videos—tailored to the task at hand, and one personalized ‘Ask a Tax Advisor’ phone or e-mail session is available with the service.
But at $19.95 a pop thereafter, that help can get pricey; users with complicated tax situations might be better off heading to an H&R Block office to have their taxes done the old-fashioned way. The federal-state package cost of $44.95 (instead of paying $19.95 for TaxCut Premium and $29.95 for one state return separately) makes TaxCut cheaper than TurboTax and TaxBrain, and it’s a better value than the similarly priced CompleteTax.
Mac system requirements: Tax Cut runs on Netscape 7.2, AOL for Mac OS X, and Mozilla Firefox 1.5 on OS X 10.3. OS X 10.4 can use those browsers as well as Safari 2. OS X 10.5 users can use Safari 3 in addition to Netscape, AOL or Firefox.
Price: $19.95 (Premium with a state return costs $44.95)
Tax Brain Deluxe
Though TaxBrain launched in 2000, it still has work to do. I liked the service’s format, but for the high price, I expected better help, more data-import capabilities, and more strategic advice.
The site’s multiple-questions-on-the-same-page format saved time. In some cases, however, I would have been better off with fewer questions and more information on the page to help me answer correctly. For example, on the first page, the tenth question (not actually posed in the form of a query) stated: “You may be able to itemize your deductions if you paid any: (Schedule A) large medical bills; real estate or personal property taxes; home mortgage interest; contributions to charities; business expenses as an employee.” Only after clicking on More Info did I discover that I should answer yes to the question if I had a home office.
TaxBrain’s tidy list of worksheets sped up navigation, but any time saved was lost to the site’s inability to import W-2s, which meant I had to key all of the details in. At least the screen looks like an actual W-2, minimizing the chance of error. Similarly, TaxBrain imports 1099 information only from GainsKeeper.
TaxBrain’s Form 8283 for determining deductions for charitable donations provided little guidance in determining the fair market value of my donated items (and thus how much I could reasonably deduct). I wanted to consult TaxBrain’s free Live Chat support, but when I logged on at 10:30 on a Friday night, I was out of luck: During tax season (January 1 through April 20), help is available only from 8 a.m. to 8 p.m. Pacific Monday through Saturday and 8 a.m. to 4 p.m. Pacific on Sunday.
At the end, I was pleased to see PDFs of my completed return before paying—a rare feature for tax sites, it turns out. But I could not drill down on the forms to check the calculations, and I discovered that TaxBrain does not support electronic filing of nonresident state returns.
TaxBrain offered more paid options than other reviewed tax sites did ($19.95 for bound copies of my return, $9.95 for archiving, and $34.95 for audit support). But considering the costs of the Premium service ($69.95) and state return ($29.95), I wasn’t interested.
Mac system requirements: TaxBrain runs on OS X with the following browsers: Firefox 1.5, Netscape 7, Safari 2, Mozilla 1.72, Internet Explorer 5.2, and Opera.
Price: $39.95 (state return is a $29.95 option)