Guide to Do-It-Yourself Tax Sites
Conventional wisdom says you'll get lots of tax breaks this year. All you have to do is find them hiding in plain sight among the 441 new wrinkles added to the tax code.
You could throw up your hands and throw your receipts at an accountant. But she'll just throw them back at you along with a questionnaire, and then she'll drop the answers into tax preparation software. Why not save a couple hundred bucks by plugging the numbers into an online tax program yourself?
The leaders among the online selection are TurboTax for the Web from Intuit, H&R Block's Online Tax Program, and TaxACT Online. All will identify Tax Relief Act changes that apply to you for 2001 and will help you plan for the other changes taking effect in future years.
Newer sites like CompleteTax may be able to get the job done more cheaply for some taxpayers. However, it lacks the ad hoc Tax Relief Act help.
In general, though, even a novice can follow the interviews on the above tax sites, which deliver more control and less hassle than schlepping your receipts down to an accountant's office. You pay (by credit card) only when you're ready to file your return. Also, you can log on and off to complete the project as your schedule permits.
You can even save money compared with these vendors' desktop software. You won't need to go shopping, install the software, or cough up $25 to $120 up front. Doing your taxes online will probably cost about half what you'd pay for the same provider's comparable desktop tax program.
TURBOTAX FOR THE WEB.
The grand old man of Web-based tax preparation is TurboTax for the Web, which is available in three different flavors this year. All have the same interface as Intuit's desktop tax software.
If you don't have any deductions, TurboTax for the Web 1040EZ will let you file federal and state taxes, including e-filing, for $15 or less. In fact, Intuit will file returns with under $25,000 in income for free.
I used Intuit's new Quicken TurboTax for the Web Premium, which is only $10 to $15 more than standard TurboTax for the Web but adds several helpful analytical and planning tools related to the Tax Relief Act. Specifically, Premium's new Tax Law Advisor pops up here and there to advise you of tax law changes that affect you personally, suggesting action items and links to expanded explanations of your tax options.
The premium version also will display deductions you're planning to take this year right next to the amount you took last year (if you import that data from last year's TurboTax). Once all your forms are complete, any TurboTax version (as well as TaxACT and H&R Block's online program) compares your deductions to the U.S. averages and points out any area where you're being a little too aggressive. If you have a refund coming, the premium version's 401(k) Maximizer will show you how to turn that interest-free loan to Uncle Sam into a larger retirement nest egg and lower your future tax obligation.
Finally, TurboTax for the Web Premium will show how your tax obligation will change over the next nine years as different changes in the tax code take effect. This will help you see in which year a particular deduction might do you the most good.
The minor kinks TurboTax had importing data from Quicken last year are gone. Imports from Quicken or last year's TurboTax for the Web return happen in the blink of an eye--a huge timesaver. You still can't import last year's tax data from any desktop tax program or Microsoft Money, though.
All versions of TurboTax keep a Live Tax Advice link close at hand, so if you get stuck, you can ask a live tax professional a question by phone or e-mail. You can even get your completed return reviewed. Fees are negotiable.
H&R BLOCK'S ONLINE TAX PROGRAM.
If you think you might need that kind of handholding, H&R Block's Online Tax Program probably offers the better safety net. Click the program's Live Advice link and you can query one of Block's in-house tax preparers. The charge is $20 per solution--and another $30 to review your completed return.
Option number three is to fill out an online questionnaire and have a Block preparer call you and fill out the tax forms for you. That'll cost $80 before March 31 and $100 afterward for most returns, plus $30 for your state return. That's more expensive than the Online Tax Program, but still cheaper than most walk-in accountants.
Beyond the context-sensitive FAQs on each screen, help is weak. So are imports. Online Tax Program only lets you import data from last year's online return, and you can count on one hand the number of institutions from which you can import online W-2 and 1099 information.
Online Tax Program lacks the standard information options found in TurboTax and TaxACT. It doesn't provide an always-available summary of your tax highlights as you progress through your return, as the others do. It also lacks the running Refund/Tax Owed total box that has become a fixture with every other online tax preparer.
Seem trivial? But that feature is how you can determine the impact of every bit of information you enter, and even play what-if with your deduction options. Online Tax Program makes you step blindly through its Q&A until it's ready to review for you.
Despite a busier interface, TaxACT Online's interview is much better organized, easier to follow, and far more informative.
This year, it points out how tax law changes apply to you and has a somewhat beefed up--although not great--tax planner for those future years. TaxACT integrates federal and state tax preparation seamlessly, provides a complete arsenal of forms, and offers handy navigational aids around the screen.
It does not, however, permit data import from anything except last year's TaxACT Online. That and the lack of live help or truly context-sensitive advice for tax issues translate into extra time wasted for anyone with more complicated returns.
On the other hand, TaxACT Online lets you complete your federal form free of charge this year. It charges only $8 to complete a state return, and it will e-file either for $8 apiece--for a grand total of $24 if you do everything electronically. Or, print and snail-mail your returns, and you'll slip past April 15 for only $8.
WHICH FOR YOU?
If you have a relatively simple return--a situation that covers most American taxpayers--TaxACT Online will more than do the job for you.
If you really don't "get" taxes and want someone to lean on, the staff H&R Block's Online Tax Program probably offer the most coordinated live support options--for considerably more money.
But if you really want to do it yourself and you want all the best tools at your disposal, there's no question that TurboTax for the Web Premium is the way to go. While it costs a little more, and other tax sites may sound like they include the time-saving features found in Premium, it's all about implementation.
TurboTax for the Web's interview and tax planning tools are just deeper, more appropriate to the task, and more conveniently displayed than those on other sites.
By Mike Hogan