Best for Simple Returns

Don't overpay if you have a simple tax return

If you don't have a home business, income from rental properties or a lot of capital gains/losses, experts say you probably don't need to pay $50 and up for TurboTax software. If you're among the 70 percent of taxpayers whose adjusted gross income (AGI) falls below $56,000, you can file online for free using the IRS Free File program. If you'd rather not prepare your taxes online or your income is higher than $56,000, there are several other options.

If you really want to own the software rather than just using it online, TurboTax Basic Federal (*Est. $30) is available, but TaxCut Basic Federal (*Est. $20) costs less. Both include electronic filing of your federal return, but preparing and filing your state return costs extra. For TurboTax, you'll pay an additional $30 to prepare your state taxes, plus another $20 if you want to file them online. That makes the basic version of the software a poor value if you need to file state taxes; the Deluxe version of TurboTax, for example, includes preparation of federal and state taxes, plus filing your federal return online. For this reason, most reviewers say that buying the basic boxed or downloaded versions of either TurboTax or TaxCut just doesn't make sense unless you live in a state that doesn't impose income tax.

TaxACT is a better deal for simple returns. You can download TaxACT 2008 Ultimate (*Est. $20), the price of which includes preparation and filing of a federal tax return. It also includes the preparation of one state return; filing that state return costs an additional $8. TaxACT is never rated highly for preparing complex returns, but nearly all reviewers say TaxACT is easy to use for those whose returns aren't complicated. If you normally file a 1040EZ, for example, TaxACT should work well for you. Be aware that unlike TurboTax and TaxCut, TaxACT software isn't compatible with Mac systems.

TaxACT is reviewed extensively. PC Magazine's Kathy Yakal says TaxACT is fine for very simple returns, or for those who are confident in doing their taxes without a lot of handholding. Yakal says that TaxACT's help features could be better; she had a hard time finding answers to her questions in the included documentation. Both TaxCut and TurboTax are better in that respect, she writes. Still, TaxACT does include free phone support, including questions about your taxes.

PC World's Tina Orem also reviews TaxACT 2008 Ultimate, largely agreeing with PC Magazine's Yakal. The online version of TaxACT is tested by CNet.com's Don Reisinger. Like others, he finds TaxACT perfectly suitable for those with W-2 income and no big complications like a small business or capital gains/losses.

Online tax preparation

If you don't need to file more than one return, and you don't care about actually owning the software, you can save a lot by doing your taxes online. Again, if you fall under the $56,000 cap for the IRS Free File program, that's the best way to go. Otherwise, you can still save by using online software.

For simple returns, basic versions of TurboTax, TaxCut and TaxACT are available online for free. The free version of TurboTax is for federal taxes only; preparing and filing your state taxes costs an additional $26. TaxCut is similar; the basic online version allows you to prepare and file your federal tax return for free, but preparing and filing state taxes costs $30. TaxACT is the better deal for a simple return. Again, preparation and electronic filing of your federal return is free, but preparing and filing your state return costs $14.

One service that offers online preparation of federal and state taxes is TaxSlayer, a service that isn't reviewed extensively, but does get a good write-up from CNet's Don Reisinger, who says it's a great choice for simple returns, similar to TaxACT. Preparation, printing and electronic filing of your federal and state taxes costs $10. This service hasn't been as widely reviewed as TaxACT, which costs $14 for a similar service.

You can access more robust versions of TaxCut and TurboTax online as well. TurboTax and TaxCut lose points for confusing pricing, however. For example, while the boxed TurboTax Deluxe Federal + State (*Est. $50) and TurboTax Premier Federal + State (*Est. $75) both include preparation of your state taxes, none of the online versions of TurboTax or TaxCut include state taxes. So while the online version of TurboTax Deluxe (*Est. $30) looks like a good deal, the catch is that state preparation and electronic file costs another $35 -- not really a big savings over buying the software. The online TaxCut Premium (*Est. $40) is similar -- not bad if you don't need to do state taxes -- but pricy otherwise since you'll pay another $30 for that upgrade. Buying the software for your desktop would cost less.