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Tax Preparation Software

Like crocuses rising from an early spring snow, and as certain as mid-April’s tax deadline, tax-preparation software has begun making its appearance on store shelves. While both Intuit’s TurboTax Deluxe 2004 and H&R Block’s TaxCut Premium 2004 each promise to make your yearly tango with the IRS a little less painful, the question is: are they worth their $40 price tags? More importantly, are you better off using one of these programs, slogging your way through piles of cryptic IRS documentation, or paying for your taxes to be done professionally?

Both TaxCut and TurboTax (which ships on the same CD as the TurboTax Windows version, and is thus easily available) are excellent at the basics, even the complicated basics. So if you file a standard tax return with normal deductions such as mortgage interest, stock transactions, and child-care deductions, the $40 price is peanuts compared to the time—and frustration—of breaking out your pencil and calculator and trying to navigate the labyrinth of IRS tax forms, or the expense of hiring a professional.

But, if you have a more complicated tax situation—you’re self-employed, pay interest on a couple different mortgages, file a Schedule C form, or have deductions you’re not certain whether you can take—both programs can leave you feeling as if you’re in dangerous waters. The reason? Once your tax return begins to get complicated, both programs expect you to have a reasonable understanding of your financial situation, the kinds of forms you need to file, and how you want to handle specialized deductions.

Gathering Information

Both programs allow you to import financial information from Intuit’s Quicken (   , February 2005 ) and, if you used either of these programs for tax year 2003, you can import your data from last year’s tax returns. To get the best results, you’ll need to make sure that you’ve properly assigned tax-related categories to every Quicken transaction.

To gather information about what you owe the IRS, both TaxCut and TurboTax run you through a detailed interview that takes anywhere from 30 minutes to 2 hours to complete. You’ll be questioned about the income you’ve earned during the year, your business expenses, whether you have children, paid for child care, paid or received alimony, made or received interest payments, and more. Each of the programs handles the sequence of the questions in a slightly different fashion. But overall, the questions are substantially the same.

Additional Perks

If your employer uses a payroll service that posts your W-2 information to a server, TurboTax will let you import that information directly into the application. Not only does TaxCut lack this feature in the Mac version (though it does have this capability on Windows), the program literature and documentation are all targeted to the Windows OS, so there’s no indication that this important feature is missing from the Mac version.

TaxCut’s Signature Tax Program lets you use the software on your computer or online, and submit your return to an H&R Block tax professional for review and a professional sign-off. The catch is, it costs twice as much as the program, and you’re still doing all the hard work of entering information yourself.

Both companies offer Web-based tech support, but TaxCut also has phone support for a $10 per call fee. TurboTax charges $30 for tax advice.

Veil of Secrecy

The most terrifying thing about tax season isn’t the IRS; it’s trying to fill out all those forms, or even figure out what some of them are for. Tax preparation software should shield you from tax forms. While both programs do a commendable job of hiding most tax forms unless you ask for them, TaxCut has an annoying habit of leaving the questionnaire and opening a real tax form. I discovered this while attempting to enter information about items stolen from me that were fairly expensive, but less expensive than my insurance deductible. TurboTax simply asked me a couple of questions and moved onto the next section. TaxCut jumped out of the questionnaire and into the real tax form, which I had to read, decipher, and fill out. However, it does this only for forms that the company considers obscure or rarely used.

State of the State

Need to file state taxes, too? TurboTax conveniently includes the state forms as part of the price of admission. All you need to do is download the state form right from within the application. TaxCut says that the state form is free, but to get it you’ll have to download and pay for it and then send in a rebate form to be reimbursed.

Macworld’s Buying Advice

Intuit’s TurboTax Deluxe 2004 is hands-down the easier of the two applications to use. It has a straightforward, non-intimidating interview process, it can import information from an online W-2 form, and you can download state forms free of charge, without mail-in rebates.

Unlike TurboTax, TaxCut will sometimes jump into the real IRS tax forms during the program's interview process, especially if a form is considered obscure or rarely used.The interview process in TurboTax walks you through difficult tax questions with the greatest of ease.
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