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Our annual review of the top tax-preparation programs tells you what's new and lets you decide which would better meet your needs--before you buy.
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Our annual review of the top two tax-preparation programs, TurboTax and TaxCut, tells you what's new and lets you decide which would better meet your needsbefore you buy.
Remember the paint-by-numbers kits you had as a kid? A grown-up equivalent might be today's do-it-yourself tax software. Granted, painting was more fun, but preparing your own tax return lets you avoid an accountant's fees. And this year in particular, using software may keep you from missing credits or deductions that could save you money, because the programs incorporate the hundreds of tax law changes enacted in 2001.
Several tax software programs are available, but the Big Two are Intuit's Quicken TurboTax and H&R Block's TaxCut. They're so well-honed and user-friendly, working with them is like having your own Sherpa to guide you through the Himalayas. Each year, TaxCut and TurboTax run neck-and-neck, adding features that make doing your taxes simpler and less painful. Here's an overview of both programs and what's new in them this year.
Just as you translate medical terminology into lay language for patients, TurboTax explains IRS jargon for you. The program comes from the same company that sells Quicken personal finance software.
If you used personal finance or tax preparation software last yearwhether it was TurboTax, TaxCut Quicken, or Microsoft MoneyTurboTax will transfer or import any applicable data from it to this year's return, sparing you the drudgery of typing that information again. And Intuit has expanded another timesaver: Instant Data Entry (previously called Automated Tax Return), which downloads key tax information directly from participating financial institutions, brokerages, mutual funds, and employer services companies. More than 40 companies now take part.
TurboTax's "interview" starts with general questions about income sources and life financial situations. Your initial answers trigger additional inquiries more
tailored to your situation. As you proceed, Turbo-Tax describes possible deductions and credits, helps you figure out which ones you qualify for, fills in the corresponding tax-form lines, and calculates your bill or refund.
Turbo Tax anticipates the issues that will confuse most taxpayers and lists those at the side of each interview screen. Say you're plowing through your financial and investment expenses. These questions appear: "What expenses can I deduct related to my investments? Can I deduct the depreciation on my computer as an investment expense?" You click on the question, get the answer, and move on.
The Tax Law Advisor, a new feature, explains how the Economic Growth and Tax Relief Reconciliation Act will affect your 2001 taxes. It also helps you plan strategies to prepare for tax provisions that will phase in over the next few years. And in case you really get stymied, TurboTax also offers Live Tax Adviceaccess to tax professionals who will answer to questions via phone or e-mail (fees apply).
Easy navigation makes the software a snap to use. You won't get stuck in any screen; you can flip back to earlier screens or zip from the interview to the appropriate tax form and back.
After you've finished your return, TurboTax searches for errors, suggests deductions you may have overlooked, and identifies entries that could trigger an audit.
TurboTax for 2001 is available in Basic, Deluxe, and Premier versions ($14.95, $29.95, and $39.95, respectively, after mail-in rebates). The Deluxe and Premier versions let you download one state product and file one federal return electronically for free (with the mail-in rebate). Both also come with the Tax Law Advisor. And they include a Tax Strategy Manager with tips customized to your tax situation, a tax library, IRS publications, and video advice from financial experts.
TaxCut covers pretty much the same bases as TurboTax. The software leads you through a "question and answer" session, which extracts figures needed to find deductions and credits. It then puts your tax information where it belongs on the tax forms.
Like TurboTax, TaxCut lets you directly import data, including taxable investment gains and losses, from other financial software. And similarly, it allows you to transfer information from last year's return if it was done in TaxCut or TurboTax. This year, TaxCut has also added Auto Entry, which downloads W-2 and 1099 data directly from more than 40 participating financial institutions and payroll providers. To help you identify what data was imported and where it came from, TaxCut now color-codes this information.
Other improvements made for 2001: Filing electronically is easier, and a section called Tax Law Changes, similar to TurboTax's Tax Law Advisor, has been added. Also new, and similar to TurboTax's Live Tax Advice, is TaxCut's Ask a Tax Advisor. It lets you contact an H&R Block tax professional by phone, e-mail, or online chat for $19.95 per question.
TaxCut's hand-holding is particularly apparent in the Shoebox tool, a boon to disorganized folks. Shoebox assumes that during the year, you tossed all documents that look tax-related into a box, and now you face the daunting chore of sorting through them and finding where the information belongs on your tax return. The software offers "Show us where you obtained a document in your 'shoebox,' and what it is, and we'll show you on what form to enter the item." You select the appropriate tax-document sourcean estate or trust, your attorney, a mutual fund or corporation, etc.and it takes you to the appropriate line on the tax form. Like TurboTax, TaxCut reviews the data you've entered and searches for missing or erroneous information. The software won't let you file your form until you correct any mistakes.
TaxCut's Basic and Deluxe versions cost $14.95 and $29.95, respectively, the same as TurboTax's, but you needn't mail in rebate forms. TaxCut Deluxe provides free electronic filing and a free TaxCut state program (both after rebate).
Leslie Kane. Get the software you need. Medical Economics 2002;3:87.