Tax Preparation Software Review

Comparing tax-software options

More and more people are using tax-preparation software to complete and file their tax returns. In contrast to a tax-preparation service like H&R Block or Jackson Hewitt, buying software and doing it yourself costs around $50 to $70 for state and federal software (depending on the version) plus electronic filing for both. Getting your taxes done at a franchise usually costs at least $150. ConsumerSearch has a separate report on tax preparation services.

We found the best coverage of 2008 tax software at PC Magazine, About.com, PC World and CNet.com. In a detailed multi-page comparison review of TurboTax, TaxCut and TaxACT, PC Magazine's Kathy Yakal reviews each program's interface and major features as she completes dummy tax returns. Two knowledgeable About.com guides also conduct annual in-depth analyses of the tax programs. (Note: ConsumerSearch is owned by About.com, but the two don't share an editorial affiliation.) PC World has a good review of online tax-prep services, but no coverage of desktop tax software. CNet's Jessica Dolcourt compares the two main tax-software competitors in detailed articles.

The initial release of Intuit's 2008 version of TurboTax (*Est. $30 and up, depending on version) set customers into an uproar over unscrupulous pricing. Not only did Intuit increase prices, they also began charging $19.95 for each additional federal return prepared with the software. In reaction to the hundreds of scathing reviews at sites like Amazon.com and other sites, Intuit reversed course, dropping the charge for preparing more than one return. In the intervening period, many former TurboTax users defected to H&R Block's TaxCut (*Est. $20 and up), TurboTax's main competitor.

Of those who switched, some say TaxCut's user interface and online support is inferior to that of TurboTax, while others say both programs are remarkably similar in accuracy and ease of use. Experts, however, concur that for most filers, TurboTax is worth the price premium.

If your return is straightforward, you might not notice a big difference between the two leading tax-preparation software programs, and if you've already been using TurboTax or TaxCut, there's no need to switch for the 2008 tax year.

For the 2008 tax year, all taxpayers can complete and file taxes for free online using government electronic forms. Be aware, however, that you only get the blank forms -- merely a digital version of paper forms and instructions. However, if your adjusted gross income (AGI) for 2008 is below $56,000, you are eligible to complete and file your federal taxes using one of the participating software programs for free. The IRS Free File Program allows users to choose from dozens of software programs available online through the IRS website, including versions of TurboTax, TaxCut and TaxACT.