Tax Preparation Software: Reviews

TurboTax is the nearly unanimous choice of reviewers as the best tax-preparation software. TurboTax has a more comprehensive interview process than TaxCut, its main competitor, especially for complicated topics such as… multiple stock sales, business deductions, depreciation and mortgage refinancing, as well as rental income and expenses. Reviews say better guidance and more comprehensive support for less common scenarios distinguish TurboTax from competitors. TurboTax Premier includes a federal tax-preparation application as well as the option of preparing a state tax return. You can file up to five federal returns for free, but filing a state tax return costs an additional $20. If you don't need the extra tools for stock sales or rental property, TurboTax Deluxe Federal + State + eFile 2008 (*est. $50) is the better buy. H&R Block's TaxCut is less expensive than TurboTax, but most reviewers and users say TaxCut isn't quite as good.

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If you have a less complicated tax situation, the Deluxe version of TurboTax costs less than the Premier version, yet it still includes applications for both federal and state tax preparation. Like the Premier version,… the Deluxe version lets users file up to five federal tax returns. Features include video tutorials and assistance for itemized deductions (Schedule A) and an application for handling charitable contributions (called ItsDeductible), but no advanced help for investments or rental property income. The cheaper Basic version of TurboTax (*est. $30) is only for federal income taxes and does not include the ItsDeductible application. All versions of TurboTax are compatible with both Windows and Macintosh computers.

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Reviews say TaxACT is quick and accurate, but not as sophisticated as more expensive tax software. TaxACT doesn't offer as much help to users, but if you have a simple tax return or don't require much handholding, TaxACT… is a relative bargain. The Ultimate version includes federal and state tax preparation, along with free electronic filing for the federal return (filing a state return costs $8). TaxACT is available as a download or CD for Windows users only. Mac users can use the online version only.

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The IRS has contracted with tax software companies, including TurboTax, TaxCut and TaxACT, to offer free online federal tax-preparation software and electronic filing for users whose adjusted gross income is less than… $56,000. The service is available only through the IRS website. Preparation of state taxes isn't always free. If you don't want to prepare your taxes online, reviews say your best bet is to purchase TurboTax Deluxe or Premier. Although these cost more, you'll have the software on your home computer, and you'll be able to work on your taxes offline.

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