Top Tax Software

Desktop or online tax prep?

The three main tax software competitors -- TurboTax, H&R Block At Home (formerly TaxCut) and TaxACT -- offer their products as boxed software, downloadable software or online. Each style has its pros and cons.

With online tax prep, you don't download or install any software onto your computer (so you avoid the buggy install problems some users report). Instead, you log into the company's website and work on your tax return over the Internet. With TaxACT, prices are comparable -- you save only a few dollars by choosing the online version. With TurboTax and H&R Block At Home, online versions can save you as little as $5 or as much as $40 over the download/boxed versions of the same software. However, online versions of TurboTax and H&R Block At Home levy a heftier charge for e-filing a state return – $15 to $17 more than the boxed/download versions. This evens out any price differences for H&R Block software, but with TurboTax, the total cost of the online version often is cheaper. TaxACT does not charge to e-file a state return regardless of whether you use the online or boxed/downloaded editions.

Shelley Elmblad, About.com's guide to financial software, likes the online versions of the various tax preparation software products better overall: There's nothing to install, plus updates and backups happen automatically. Furthermore, you can work on your taxes from any Internet-connected computer, and Elmblad says these websites are very secure. About.com, PCMag.com and MarketWatch all use online services in their reviews.

Still, buying a hard copy or downloaded copy of tax preparation software has advantages. Working off your hard drive is faster (even if you have a broadband connection) than working online, and you'll be able to work on your taxes offline as well. Plus, you can use the TurboTax or H&R Block At Home software to e-file returns for several family members -- up to five federal returns at no extra charge (TaxACT includes one free federal return and charges $8 each for additional tax returns). If you are audited or you need to file an amended return in a future year, you have easy access to the tax software and whatever forms you may need.

Note that while you'll usually pay full price to download tax software directly from the maker's website, you can often save $5 to $20 on the identical boxed version. That's because many major retailers offer tax software at a discount.

TurboTax is pricey, but still the best tax software

TurboTax, H&R Block At Home and TaxACT are the three leading tax software packages. For most, reviewers say that TurboTax is the best choice all around.

However, H&R Block At Home is a bit less expensive and a fine choice if you've used it successfully in the past. TaxACT is a lot less expensive, and the best choice if you have a simple tax return -- for example, if you have a couple of W2's, some interest income, a couple of kids, plus some deductions for child care or an IRA. And if you don't need a lot of extra help, you can even opt for these companies' free basic versions. They make federal filing free for everyone (state returns cost extra), unlike the government's IRS Free File program, which is only available if your adjusted gross income is $58,000 or less. For more information about these free and cheap alternatives, see our sections titled Best for Simple Returns and IRS Free File Program.

If, however, your tax situation is more complex -- say you are self-employed, have income from real estate investments or have capital gains or losses (for example, you sold stocks, mutual funds or a home), nearly all reviewers say you should turn to TurboTax. The cost of TurboTax Deluxe 2010 (*Est. $50) includes the preparation and online filing of your federal tax return, as well as preparation of one state tax return (e-filing the state return costs $20 extra). Preparing and filing extra state returns can be done for a fee ($40 per state). The Premier version of TurboTax 2010 (*Est. $70) provides additional help for those with investments and rental-property income, while the Home & Business version (*Est. $80) is meant for those with full-fledged home businesses.

Reviewers who test tax preparation software with complex returns, including editors at PCMag.com, About.com and CNET, all find TurboTax a bit more robust. Kathy Yakal at PCMag.com says she actually uses the less expensive TaxACT for her own relatively uncomplicated taxes, "but when I'm asked to recommend a tax prep Web site to someone else, it's still TurboTax. While it's not as fast or inexpensive as TaxACT, it does everything else better" -- and that means a nicer interface, clearer instructions and more helpful guidance. Yakal says TurboTax is "the master at rewriting dry, technical text to make it more understandable, faster." TurboTax can also import a broader range of W-2 and 1099 forms from participating employers and banks, CNET's Jessica Dolcourt points out.

Runner-up H&R Block At Home does offer a couple of advantages over TurboTax. It's cheaper -- you'll spend about $10 less for H&R Block At Home Deluxe 2010 (*Est. $40) or H&R Block At Home Premium 2010 (*Est. $60) than for comparable TurboTax products. You can also buy some additional perks from H&R Block. For instance, with all paid H&R Block At Home products, a tax professional will provide individual support in case of an audit; that kind of service costs $40 extra with TurboTax. The H&R Block At Home Premium edition includes one free in-person tax-advice session with an H&R Block consultant. Tax advice with TurboTax costs $30 and up per session. If you're nervous about doing your taxes on your own, you can opt for the unique H&R Block At Home Best of Both online edition (*Est. $80), which guides you through your return online; an H&R Block pro then reviews, corrects, certifies and e-files your return for you. This package includes unlimited, year-round live professional tax advice – a terrific deal, says Kathy Yakal at PCMag.com, and one she recommends for "people who want to tackle tax preparation but who also want a tax professional to have their backs."

Ron Haynes at TheWisdomJournal.com has used H&R Block tax software for 13 years with no problems -- but when he tested it head-to-head with TurboTax this year, he discovered that he likes TurboTax better. Both programs calculated his return exactly the same, but TurboTax "just felt more user-friendly and natural to use, plus their phone support answered a lot more quickly." Haynes particularly appreciates TurboTax's audit-trigger meter and text bubbles that explain "crazy tax jargon."

TurboTax wins The New York Times' test, too. "Block At Home worked just as well as TurboTax -- in most cases," tester Tim Gray says. But when Gray does his family's taxes, TurboTax Premier smoothly handles a deduction for Gray's new lean-burn Volkswagen; H&R Block At Home Premium makes him hunt for information on the IRS' website. To import investment numbers, TurboTax simply asks for Gray's investment account username and password; H&R Block At Home also advertises this capability, but it couldn't find Gray's accounts, even though TurboTax did.