ZDNet's Ultimate Tax Software Guide for 2008

ZDNet's Ultimate Tax Software Guide for 2008

Summary: It's tax time in the U.S. once again, and short of actually doing your taxes (you've got until April 15, right?

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It's tax time in the U.S. once again, and short of actually doing your taxes (you've got until April 15, right?), it's time to choose just how you'll do them.

Say hello to tax preparation software.

Instead of taking last year's finances and dumping them on the desk of a tax preparation specialist or a CPA -- for a hefty fee, generally -- consider using tax software. This year it's even easier to do your taxes, thanks to improved interfaces, importing features, online services and increased competition among the contenders.

In other words, doing your taxes can be a breeze, provided you've got all your forms on hand. Here's the lineup of the software -- online and boxed -- vying for your attention:

Intuit TurboTax

Good for complicated returns or those who need hand-holding.

TurboTax is the grandaddy of all tax programs, and the most full-featured. This year, TurboTax comes in six flavors online and four boxed flavors, plus state fees:

Online:

  • Free Edition: For simple returns, particularly the 1040EZ, but also handles 1040A and 1040. Straightforward -- no hand-holding, but it will check for all tax credits you're eligible for, including higher education. If you're not sure if your taxes are simple enough for this, start here: the program will "upgrade" you if you need a more fully-featured version for your return. Service + federal e-file free; state e-file $25.95 extra. [read more]
  • Basic Edition: Intuit downplays this version because it's effectively the Free Edition plus hand-holding wizards and walkthroughs. If you have a simple return but need assistance, this is the one you need. Service + federal e-file $14.95; state e-file $34.95 extra. [read more]
  • Deluxe Edition: Most customers select this version of Turbotax because it also accounts for owning a home, charitable donations and medical expenses. Service + federal e-file $29.95; state e-file $34.95 extra. [read the review] [check prices online] [read more]
  • Premier Edition: All the features of Deluxe, plus stocks, bonds, mutual funds and rental properties support.Software + federal e-file $49.95; state e-file $34.95 extra. [read more]
  • Home & Business Edition: Everything in Premier, plus support if you're a business owner: sole proprieter, consultant, contractor or single-owner LLC. Includes freelancers. Service + federal e-file $74.95; state e-file $34.95 extra. [read more]
  • Business Edition: For a very small minority of users; Business Edition serves corporations, partnerships and multi-member LLCs. Service + federal e-file $109.95; state e-file $49.95 extra. [read more]

(You can compare the versions here.)

Boxed Software:

  • Basic Edition: Software + federal e-file $29.95 plus above state fees.
  • Deluxe Edition: Software + federal e-file $59.95 plus above state fees.
  • Premier Edition: Software + federal e-file $89.95 plus above state fees.
  • Home and Business Edition: Software + federal e-file $99.95 plus above state fees.

The Bottom Line: TurboTax is the most expensive software, but it's the most fully-featured. It's fast, straightforward, and the hand-holding text is clear and understandable. If you want to knock your taxes out fast, it's worth the money. If you already use other Intuit software (Quicken, Quickbooks, etc.), it's a no-brainer, as TurboTax will import data with one click.

[Go to ZDNet reviews of TurboTax software]

H&R Block TaxCut

Good for simple tax returns or those who need live support.

If TurboTax's specialty is complicated tax returns, TaxCut handles the other side of the spectrum, excelling at simpler returns, with easier ways to eventually talk to a human being (one dressed in H&R Block green, that is). It also offers more returns per "installation" than TurboTax, five versus one, which is important if you file several individuals' taxes.

On the other hand, it doesn't have the importing features of TurboTax, and takes a little longer to complete. This year, TaxCut comes in five online flavors and four (two premium) software flavors, with varying state fees:

Online:

  • Free Federal Edition + E-file: For simple returns in a straightforward fashion. Service and federal e-file free; state e-file $29.95 extra. [read more]
  • Basic + E-file: For simple returns with a bit of hand-holding. Service and federal e-file $14.95; state e-file $29.95 extra.  [read more]
  • Premium + E-file: For those who have itemized deductions and investments; includes a free session of tax advice from a tax advisor. Service and federal e-file $39.95; state e-file $29.95 extra. [read more]
  • Signature: Everything in premium plus unlimited tax advice and a final review from a tax professional. Service and federal e-file $79.95; state e-file $29.95 extra. [read more]
  • Online Office: The online equivalent of a CPA -- full tax preparation by real people, with unlimited year-round advice. Service and federal e-file $99.95 and up; state e-file $29.95 extra. [read more]

Boxed Software:

  • Basic Edition: Software + federal e-file $19.95; state e-file $19.95 extra for each used; state e-file $29.95 extra for reach return filed. [read more]
  • Premium Edition: "Premium + Federal + E-file" software + federal e-file $34.95; state e-file $19.95 extra for each used; state e-file $29.95 extra for each return filed; "Premium + Federal + State + E-file" software + federal e-file $49.95; state e-file $19.95 extra for each return filed. [read the review] [check prices online] [read more]
  • Home and Business Edition: Software + federal e-file $79.95; state e-file $19.95 extra for each return filed. [read more]

The Bottom Line: TaxCut's screens are easy to read, but just a hair more jargon-y than TurboTax's. Where TaxCut excels is live support, and H&R Block offers "Worry-Free Audit Support," where an tax professional will help defend your return against an IRS audit, included in the price of the software. If you dig personal interaction, or you're already an H&R Block customer, this is your pick.

[Go to ZDNet reviews of TaxCut software]

TaxACT

Good for bargain hunters who need less hand-holding.

The Chrysler in the Tax Preparation Software Big Three. Inexpensive with strong technical support, it's generally stripped of the user-friendly wording and tools of TurboTax and TaxCut. On the other hand, it's as straightforward as it gets. It offers one free federal return ($7.95 for each additional). This year, TaxACT comes in three online and four desktop flavors:

Online:

  • Free Edition: Simple and complex returns with simple, straightforward interface. Service + federal e-file free; state e-file $13.95 extra. [read more]
  • Deluxe Edition: Adds data import and non-cash donation support. Service + federal e-file $9.95; state e-file $7.00 extra. [read more]
  • Ultimate Edition: The Deluxe Edition with state e-file. Service + federal AND state e-file $16.95. [read the review] [read more]

Desktop Software:

  • Free Edition: Simple and complex returns with simple, straightforward interface. Software + federal e-file free; state e-file $13.95 extra. [download via ZDNet] [read more]
  • Deluxe Edition: Adds data import, non-cash donation support, calculators and unlimited preparation of federal returns. Software + federal e-file $12.95; state e-file $13.95 extra. [read more]
  • Ultimate Edition: The Deluxe Edition with state e-file. Software + federal AND state e-file $19.95. [read more]
  • Home and Business Edition: The Ultimate Edition plus federal business return e-file and partner/shareholder allocations. State + federal AND state e-file $44.95. [read more]

The Bottom Line: If you're a bargain hunter and don't mind running into a little accounting jargon here and there, this software is for you.

[Go to ZDNet reviews of TaxACT software]

Free Federal E-File

One more thing to note: The IRS offers free federal e-file for everyone regardless of income, and free software preparation for those who made less than $56,000 per year.

You can access that service here (or simply use the "free" versions of software listed above, made available via a contract between the IRS and the software manufacturers).

What about the states, you ask? Well, each of the 50 differ in who gets free e-filing. Here's a list of the states; click the link to go to their e-filing system (strikethroughs mean there is no income tax for that state) and read their limits or requirements:

Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire (see comment below), New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, Wyoming, District of Columbia.

Conclusion

Which one to choose? That's up to you and your personal situation. If value is most important, TaxACT. If you value a personal touch, TaxCut. If you value speed and money is no (relative) object, TurboTax.

And if you'd prefer something else altogether, check out TaxSlayer and CompleteTax, two more options for both free and premium filing.

A note about online services: Most companies now charge you for the convenience of having your software installed on a CD. Online services are quite easy to use, saving your data as you go and allowing (once you pay) to download your return and worksheets as a PDF. With online software, you never have to "update" it, since it's always up-to-date with the tax code.

» Image Gallery: Intuit TurboTax versus H&R Block TaxCut, in screenshots

» ZDNet Downloads: Related tax tools and software

More from ZDNet's Tax Refund Special »

Topics: Software, Banking, CXO, Government, Government US, IT Employment

Andrew Nusca

About Andrew Nusca

Andrew Nusca is a former writer-editor for ZDNet and contributor to CNET. During his tenure, he was the editor of SmartPlanet, ZDNet's sister site about innovation.

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Talkback

22 comments
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  • TaxCut Home & Business

    Why do editors make headlines like "Ultimate guide to..." when they leave out so many details?
    TaxCut Business includes support for S-corps (Form 1120-S). (Not included in TurboTax Home & Business.) TaxCut is a great value for small business owners who are not intimidated by taxes (in general) and payroll.
    Also, H&B and Premium editions of TaxCut have been upgraded this year to include 5 free federal e-files. (no free state e-files, however.)
    m_data
    • oops, sorry!

      You did point out that TaxCut has 5 e-files. sorry!
      m_data
  • TaxAct

    I've used all three, just trying TaxAct this year. In general the article is right on the money. I chose TaxAct Deluxe this year because it will also generate FASFA application, which with 2 in college right now is a serious bonus. The only caveat is that TaxAct won't import from TurboTax or TaxCut.
    justin.johnson
  • DIY and Federal Free File

    You Federal E-file information is incomplete. The $56k income limit is only if you want tax prep software. Anyone who can fill out their own tax forms without any hand-holding can now file them for free: http://www.irs.gov/efile/article/0,,id=201897,00.html
    MichP
    • That's correct.

      You're right; I accidentally omitted basic federal e-filing. I've corrected the post.

      Thanks!
      andrew.nusca
  • Tax Software Guide

    For the past few years Tax Cut has had a free downloadable version. Last year it came out quite late in February 2008. You make no mention of this option for this year. Can someone clarify?
    millerah
    • Looks like it's no longer available.

      ...at least, according to TaxCut's site, on which I see no mention of a "free" software version (only online).

      Perhaps the company decided the online service handles that need sufficiently?
      andrew.nusca
  • Comprehensive and inaccurate

    I had the honor of testing TurboTax a number of years ago, when it was fairly new. Since I had already completed the tax returns for myself, several relatives, and a family trust, I wanted to see how much easier it would have been to use TurboTax than preparing the returns manually.

    At first I was very impressed with the interview style interface and the various help screens. Then I looked at the completed return. It was garbage! There were a great number of errors that shouldn't have occurred. When I spoke to TurboTax personnel about it, they told me I could "override" the errors. But, if I hadn't already prepared the returns manually, I wouldn't have known there were errors, and if I prepared the returns manually, I wouldn't need TurboTax!

    Now granted not everyone has passive activity losses in a complex trust which distributes income currently, but TurboTax didn't handle simple 1040 issues much better.

    Since that time, I have annually reviewed TurboTax and several other software solutions with respect to my taxes, and those of friends and family, and each year I decide to do the returns manually. I don't have the time to answer all the irrelevant questions, type in all the irrelevant data, audit the return (by preparing it in draft format manually), and then have to file an amended return to correct the errors the software has transmitted before I could review and correct them.

    I do have an advantage over many taxpayers in that I have an extensive computer and accounting background, with over 47 years of experience. Years ago, I wrote my own computer programs to create a draft format tax return from my financial data files, from which I prepared the final tax return. Now I just use an MS-Word spread sheet with formula calculations for the entire return. It works well for me.

    Yes, if you don't understand accounting and tax law, or have the time to keep current during the year, one of the software programs will probably be easier than doing your return manually and cheaper than taking it to a competent return preparer.

    But understand that the software is not necessarily accurate, complete, or comprehensive -- even if the IRS has given it their stamp of approval.
    cdgoldin
  • Re: Turbo Tax vs Tax Cut

    On several occasions, I've tried Turbo Tax online and then done the same with Tax Cut.

    In every instance, I saved hundreds of dollars by using Tax Cut.

    In one case, I went from owing a few hundred dollars to receiving a refund of over $100.00.

    IMO, Tax Cut is much better than Turbo Tax.

    I tried Tax Act last year after I'd already filed and for state it was not as good as Tax Cut, but it was close enough if you were filing your state return electronically.

    I may enter it again on Turbo Tax just to see if they've improved, but until I see Intuit's package beating Tax Cut, I see no reason to give them my money.
    notsofast
  • TaxAct

    I've used TaxAct for four years now, and I love it. I've got a "real" job, a "hobby" job, I use a portion of my house as dedicated office space, I have non compensated business expenses, etc... Overall, not terribly difficult, but for the ease of NOT making math errors, not carrying over home-office percentages as offsets to regular depreciation, etc. it is a good software. It offers reasonably good articles for most things, and for the rest ... Just Google the form or the issue and find the current tax code section. Piece of cake. I think it took me 10 minutes to do my return this year.
    andyaaa9
    • RE: TaxAct

      I also have used TaxAct for many years, first as a purchased software package and then with online. I haven't had to go into extreme details with deductions, etc., but it does take the time to walk you through things and explain them pretty well. Like andy said, anything you don't completely understand you can easily Google and find the information for it there. I think once I finally got all my stuff together, I had my Federal and one of my state returns completed and E-Filed in about 20-30 minutes. I was then able to print my other state return to mail off for a little extra. I may consider TaxCut in the future, though, mostly because I like knowing I can talk to a live person if I have any questions.
      russdwright9
  • TaxACT multi file

    I've been using the free download version of TaxACT
    for years for 3 returns, but the freebie doesn't
    import last year's data, and will only do one return
    at a time (well, one per installation).

    This year, I decided to spring the ~$13 to save time
    and typing for importing, and figured doing multiple
    returns would be straightforward, not to mention the
    added features. Importantly, I was very satisfied with
    the product and thought they deserved the $13 for a
    well-rounded product.

    HOWEVER, be aware [and the review notes it but you
    might miss that, I did originally] that you can eFile
    only ONE return this way, more will cost ~$8 each!

    Yes, this is documented but not overly obvious. I'm
    not sure what is the point of allowing multiple
    returns for one price, yet limiting actual efiling to
    just one. Yeah, you can still print & mail, but
    that's so pre-millennium.
    ProfQuill
  • Click this comment

    I used Tax Cut from H&R and it was a piece of cake.
    Andrew Mager
  • States without taxes?

    Your chart of "free" state filing sites has New Hampshire crossed out.
    While it's true that it doesn't have an EARNED income tax, it DOES have a "Dividends and Interest" tax (i.e. what goes on Sched B of the federal 1040).
    E-filing is available... but not for the first year you file.
    astro_z
  • People?

    I'm one of the lucky ones, being a dependent of my father while still in college, I can have the Army pretty much take care of it, I just need to remember to bring everything I need.

    I'm pretty sure there are equivalents in the civilian world - people willing to help with taxes. Probably for a fee, though.

    I'm sure the software is very nice software, but taxes is taxes, and I'm sure they're fantastic interfaces, but the best UI in the world isn't going to hide the nature of taxes being inherently complex. I've already received a bunch of forms from previous workplaces and the college. Looks like this year isn't going to be a simple year no matter how I cut it.
    CobraA1
  • TN tax clarification

    Passing along a note from another reader:

    "There is an income tax in TN on unearned income."
    andrew.nusca
  • Any Biz Owners out there that use TaxCut (Premium version)?

    Not sure if this is the appropriate venue but I have a few questions about TaxCut(Premium) version. I am using it for the first time this year to prepare my return. I?m no stranger to taxes; I?m a CPA by profession but there seems to be some limitations to what TaxCut can due.

    I had a business (sole prop) which I sold in Dec 2008. I had quite a few assets that have been depreciating over the years as well as a 15yr intangible asset.

    My questions are:

    1) TaxCut can only handle ten entries on line 2a Part I and ten entries on line 10a Part II of the 4797. How do you get around this if you have more than what TaxCut allows?

    2) Why doesn?t TaxCut allow you to set up the intangible in the Asset/Depreciation Worksheet like you do for tangible business assets? It seems you have to manually figure out the amortization and enter it directly on the 4562. Not a problem, but someone can easily loose track of it year after year especially when its time to sell.

    3) Why does TaxCut require you to re-enter the sales of your assets again on the 4797 when you told it in the Asset/Depreciation Worksheet that you disposed of it during the year? Makes no sense. Most programs have you enter that info within the Asset/Depreciation Worksheet once you?ve told the program that you disposed the asset.

    Is it necessary to upgrade to the Home & Business version? Or is there something I?m missing? Again, tax knowledge is not the issue here but how TaxCut handles(or I this case, not handle)the reporting of multiple transactions. Thanks for any insight anyone can offer. If there's any other venue(s) that I can explore, i.e. specific blogs, message boards etc, I'd appreciate that info too. I have used my one free ?Ask a Tax Advisor? but they had to escalate my questions to the technology group! (why, I don?t know). I would think an ?advisor? who works with the product should be able to answer my question. I?m still awaiting for someone at HRB to call me back.
    sm00shie
  • MSTax!

    You skipped the best!
    Loverrock Davidson
    • Which one?? The tax you pay to MS or the non existent software??

      Given that MSTax doesn't exist, I guess you must be talking about the extra money people pay to MS every time you purchase a COTS computer.
      wackoae
    • WooHoo!! He wants to be me!

      People strive to be me :)
      Loverock Davidson