With tax return season now rolling into high gear, maybe you're thinking about trying to save money by preparing your own returns. If so, two providers of tax prep software -- Intuit, maker of TurboTax, and H&R Block -- probably pop most quickly to mind. Yet, there are many others out there, too, including lesser known 2nd Story Software. At prices ranging from free to $21.95, 2nd Story's TaxACT software can offer great value to those who are only preparing one or two returns (which means most of us).
TaxACT has been flying underneath most people's radar screens for many years due to a lack of extensive advertising or retail distribution. If you’ve been watching TV lately, though, you might have noticed new TaxACT commercials featuring two guys in the backseat of a cab arguing about how much they’re paying to get their returns done professionally. Finding TaxACT in stores has now become pretty easy, too. Also, as with most consumer tax prep products these days, the software is available online. You can either prepare your taxes online or download the equivalent of the CD editions for use on your own computer.
Easy import from last year's returns
Like TurboTax, TaxACT’s offerings are available in several editions. TaxACT's “Free” edition provides just about all of the forms and schedules that a taxpayer might need, but it does lack a few of the features that are supplied in the $12.95 “Deluxe” edition. These include Form 1040X (for amending a return), plus a "return import" capability. Return import can be a real time saver because it's able to load a lot of the information from last year’s return, and to then automatically fill in many of the fields for you.
TurboTax provides return import for three competing vendors, whereas TaxACT lists eleven vendors whose returns can be imported, including Lacerte and ProSeries, which specialize in professional tax preparer software. If you have a PDF copy of last year's return -- or if you can scan a paper return into PDF format -- there’s a good chance that your return can be converted regardless of the type of software originally used for generating it.
TaxACT's retun import capability is known as QuickConvert, and it isn't foolproof. With the first return we tried, QuickConvert gave us an error message saying that it couldn’t read the PDF format. When we tried other PDF returns, though, TaxACT imported that data from last year’s returns both rapidly and correctly.
QuickConvert will be a greater help to some taypayers than to others, though. My own return for 2011 included W-2 income, self-employment income, home office deductions, and other complexities. Being able to import much of the information from last year’s return saved me a considerable amount of work. It wouldn’t have been such a valuable time saver if last year’s return had been a 10EZ, a form that only takes about 10 minutes to prepare.
A special feature for disaster victims
TaxACT, however, also provides another special feature that you might find especially useful. This tax year is going to be a difficult one for many taxpayers due to the enormous amounts of damage and casualty losses caused by hurricanes and other bad weather.
In response, the Deluxe edition of TaxACT now includes a checkbox for “Hurricane or Disaster experienced?” right upfront on the Life Experiences initial checkbox screen. If you check that box, TaxACT will advise you on how the law changed this year in terms of allowable calculations. It will also explain that you can take a "disaster-area casualty loss carry-back" to last year’s return if making this move will put you in a better financial position. That’s pretty impressive for a program that doesn’t cost much more than a pay-per-view movie on cable.
TaxACT also offers a tabbed menu at the very top of the screen, for experienced tax preparers who want to forego the full TaxACT tax prep processs and select only the forms that they know they need.
For the most part, though, filing a return in TaxACT is almost exactly like doing the same return in TurboTax. Both tax prep solutions offer step-by-step guidance through the return, in almost the identical order. TurboTax, however, is much pricier. For example, TurboTax Home & Business Edition, which we reviewed here previously, will run you a steep $99.
A few drawbacks
TaxACT does carry some potential drawbacks. Unlike TurboTax Home & Business Edition, which supports filing of unlimited numbers of federal and state returns, neither the Free nor the Deluxe edition of TaxACT comes with a state return at all. Instead, a state return will cost you another $14.95 for the software and an additional $7.95 for e-filing. If you live in a state that permits e-filing, the Ultimate Edition of TaxACT, at $21.95, represents the best deal, because it includes both a state return filing package and state e-filing.
In other regards, the short explanatory videos scattered throughout TaxACT might be helpful to some tax prep newbies while other users might find them distracting. Fortunately, you're able to turn them off if you'd like.
Personally, I think the picture of a baby on the first "Life Experiences" screen (representing a new dependent exemption) is a bit over the top.
Also, the TaxACT Web site can be very confusing -- even on the comparative chart -- as to which features you get with the various editions.
But these complaints only amount to nitpicking. Overall, with the exception of the one speed bump around trying to import one of last year’s returns, we found TaxACT to be easy to use, and a great value for those who only need to file one or two returns.
I'd like to add the same caveat here, though, that I gave in my TurboTax Review. If you're facing a specific tax problem that you're not sure how to handle, it might be best to spend the extra money and go to a tax professional with the training and experience to help you through it.
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