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Three of the best-known tax preparation programs, from left, TaxAct, H&R Block at Home, and TurboTax.

New York Times ,

The pros and cons of tax software and online programs

  • Article by: ALESSANDRA MONTALTO
  •  New York Times
  • February 12, 2013 - 11:16 PM

 

Tax preparation is moving to the cloud.

The makers of the better-known tax preparation programs — TurboTax, H&R Block at Home and TaxAct — say that many customers, particularly younger ones, prefer Web-based programs to old-fashioned, desktop versions. Web-based programs — techies call this cloud computing — reside on remote servers that customers access via their browsers. They offer the convenience of working on a return from any Internet-connected computer and having that return stored on the software makers’ secure servers.

Desktop programs may be costlier and, in some ways, clunkier — you must buy them on CD or download them — but they also offer more flexibility.

A single purchase, for example, lets you prepare and file multiple returns, as you might want to do if you’re part of a same-sex couple or if you help family members or friends with their taxes. And you can more easily jump back and forth between the tax return and the interviews the programs use to gather information. That lets you check entries as you make them. What you lose in convenience, you gain in control.

Each of the tax preparation programs, whether desktop or online, has strengths and shortcomings. TurboTax is the easiest to use, importing lots of financial information with just a few clicks. H&R Block promises the most reassuring help — its staff will represent you at no extra charge if you’re audited. TaxAct offers the best price. Here is a look at each provider’s offerings:

 

TurboTax

TurboTax’s maker, Intuit, has its roots in technology, not taxes, and its facility with bits and bytes shows in its wares. Its desktop and online programs make doing taxes as simple as such a time-eating task can be. If you end up cursing come tax time, the target will be the IRS, not your software.

The desktop version of TurboTax Premier is $89.99. The download only takes a few seconds. All of the unchanged data from the previous tax year — names, addresses, federal ID numbers, even descriptions of business expenses — pop into the right places on the 2012 forms.

The online version of TurboTax, by contrast, doesn’t import as much. But otherwise, the online program looked and worked much the same way as the desktop software.

You don’t have to pay to try it because TurboTax, like H&R Block and TaxAct, doesn’t require online users to pay until they file their returns. The online version of TurboTax Premier, is $49.99 for a single federal return, which is currently at a discount. But TurboTax says it could rise to as much as $74.99, its list price, before April 15.

 

H&R Block at Home

H&R Block’s desktop software doesn’t import quite as much information as TurboTax, and doesn’t provide some of the obscure tax guidance that can be found in TurboTax. But it has an eye-pleasing, easy-to-use interface and, for most people, it could do a fine job. Block’s Premium software on CD is $59.99.

Block’s software typically handles returns without problems and its online offering operated just as smoothly. Users pay $49.95 for a federal return.

Block’s assistance also impresses. If taxpayers use its software to file their return, the company promises that one of its tax experts will represent them, free, if they’re audited.

The chances of needing this help are slim — the IRS audits fewer than 1 percent of individual returns, according to statistics it publishes. But even the idea of an audit brings angst, and that guarantee reassures.

 

TaxAct

TaxAct’s selling point is price. The desktop version of its Ultimate Bundle, which includes electronic filing of a federal and a state return, costs $21.95. TaxAct doesn’t sell a desktop version for the Mac. TaxAct imports less information than TurboTax and Block.

In addition to being inexpensive, TaxAct is quirky. Its maker, 2nd Story Software in Cedar Rapids, Iowa, does some things differently than its competitors. Its interview questions come in a different order, and some of them address surprising topics.

Only TaxAct, for example, asks whether taxpayers have a conscientious objection to Social Security and have filed Form 4029 documenting it. Members of some religious denominations can be exempt from Social Security taxes, as long as they promise not to take benefits.

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