TaxACT Review: Good Deal for Tough Taxes

Ted Needleman, NotebookReview  writes: It's been a difficult tax year for lots of folks, what with Hurricane Sandy and the "Fiscal Cliff." Yet regardless of these disruptions, it makes real sense to take a close look at the main software alternatives available to you if you're doing your own taxes. As we'll see in this review, the third in a series of three, TaxACT is noticeably less pricey than its competitors, TurboTax and H&R Block At Home, although it does contain some minor idiosyncracies. TaxACT's support options are different, too.

Overview

This tax year has been an unusual one. First, Hurricane Sandy wreaked havoc on much of the East Coast, and the storm left a terrible number of taxpayers without a place to live, much less to organize their records for return preparation.

On top of that, the "Fiscal Cliff" situation left the I.R.S. uncertain as to whether many of the forms and pieces of tax code would be changed, eliminated, or remain the same. Usually, the I.R.S. starts processing electronically filed returns in mid-January. This year, the start of the tax season was officially pushed off until January 30th.

While taxpayers got a two-week delay on starting to electronically submit their returns, the April 15th filing deadline (if you don't file for an automatic six-month extension to file) is still very much in place.

Which Software To Choose?

If you decide to prepare your own taxes, which product should you choose, and beyond that, which version? As with its major competitors, TurboTax and H&R Block at Home, 2nd Story Software, Inc.'s TaxACT is available in several editions and in online as well as CD or downloadable flavors. (For expanded views of the screenshots at right, please click on the images.)

For some taxpayers, the online Free edition of TaxACT will suffice, although you will have to pay for phone support. (Email support is free.) This version of TaxACT actually offers most of the same forms as the other editions, but there are limitations on how much income you can have in order to use it, Also, the Free edition also doesn't handle some more advanced tax situations such as calculating if you are better off filing separately or jointly if you're married, and it doesn't deal with non-cash charitable donations.

TaxACT: Less Pricey Than Its Competitors

If you're willing to spend money, TaxACT is noticeably less expensive than its competitors. Among the online versions for consumer use, the $9.95 Deluxe and $19.95 Ultimate Bundle editions of TaxACT can manage a more complex return than most taxpayers would feel comfortable doing without technological assistance. The more costly Ultimate flavor adds state tax return filing. (New York residents, however, get state tax filing for free.)

TaxACT's Windows-based PC software for preparing your returns is available on CD or for download. The software offers the same basic features as the three online editions, but aside from the Free version, it's a bit costlier: $12.95 for the Deluxe edition and $21.95 for the Ultimate edition.

If you want to be able to file up to four more federal returns (perhaps for family members), the prices go up by $7.00: to $19.95 for the Deluxe edition and $28.95 for the Ultimate edition. If you want to file a state tax electronically, this will cost you $14.95 with Deluxe, but one state is included with Ultimate. This does not include a filing fee for the state return, which is $7.95. (New York residents don't need to pay this fee.) 2nd Story also produces separate editions of TaxACT for businesses and for professional tax preparers.

Performance

I tested the Ultimate Bundle on CD, so if you use the online flavor, your installation experience might be different. The software installed easily, You just click on a button on the initial start-up screen to indicate which edition you want installed. Other than the Free edition, the software needs to be unlocked with a 10-number key included in the package.

The initial install finished in just a few minutes. Each time the application started, it checked for updates and downloads. It also installed those very quickly.

A (Mainly) Straightforward User Interface

As with its competitors, TaxACT allows you to use the application in either step-by-step handholding mode or forms view. Jump directly to the forms if you know precisely what needs to be filled out. You can switch back and forth between the two modes.

Also as with TurboTax and H&R Block at Home, TaxACT is organized into tabbed sections, each of which addresses components necessary to complete a return. Subsections of each major tab also provide additional differentiation in what information is required to complete them. So if you need to return to an area, you can do so without starting out at the beginning of a major section tab.

For example, the "Basic Info" tab contains subsections labeled Import, Personal Info, Dependents, Filing Status, and Estimated Payments. There's a "Jump To Topics" button on the right side of this section, so you can skip forward or return to a previous subsection.

Like the other major tax prep applications, TaxACT uses a vertical pane on the right side of the screen to display a fluctuating Balance Due or Refund as well as the Help facility.

TaxACT also provides video help on certain subjects as the return is prepared, and this feature can be turned off if it's not wanted or becomes intrusive.

Importing Past Returns Can Be Cumbersome

However, one area that I'm less than impressed with is TaxACT's import feature. TurboTax and H&R Block at Home are both able to import last year's data directly from the other vendors' files. TaxACT can perform this input only from its own files.

TaxACT, though, can import data from last year's return if you have stored this return in PDF format. Either that, or you can go back to the software that you used and generate the PDF. Finding out how to do this took a bit of investigating, but using the Help feature, I was directed to the File menu, which held an Import selection. It would have been nicer to be immediately directed to this function when asked whether I wanted to to import last year's data. In fact, it's not really evident that TaxACT has this capability as you walk through the Q&A process.

In actual operation, however, the QuickConvert utility lived up to its name, rapidly extracting appropriate data from last year's PDF and populating the appropriate fields in the new return accurately. If your return has a lot of different kinds of repetitive data, such as W-2s and 1099s as mine does, QuickConvert can be a real timesaver.

Filing for an Extension Is Clunky

TaxACT has one additional eccentricity that I think some taxpayers will find annoying. It's extremely common for a taxpayer to file for a six-month extension. Filing for the extension is free, and as long as you remit (or have withheld) the taxes that you estimate are due, there's no penalty for taking an additional six months to file. You are required to fill out and send form 4868. (Note: You might also need to file a different form with the state if you want an extension on filing your state return.)

TurboTAX and H&R Block present the option to file for an extension right at startup, as well as the option to file an amended return (Form 1040X). In TaxACT, on the other hand, the option to file for an extension is located under the Filing tab, where it's harder to find. While this makes sense on some levels, if you're accustomed to one of the other vendor's packages, you might wrongly assume that Form 4868 is not available in the software.

Consider the Support Options

TaxACT doesn't provide the level of phone support that TurboTax and H&R Block at Home do. It doesn't promise that you'll speak to a CPA or Enrolled Agent (TurboTax) or a "tax professional" (H&R Block), but only that you can talk to or email their support staff. If you anticipate your return being difficult to prepare, this can be a significant issue.

Yet on the other hand, TaxACT does offer "Audit Assist" within the software. This is really just a FAQ covering the most common areas that are audited and does not involve any humans in the process. However, TaxACT also supplies audit support as a separate $39.95 option provided through Tax Audit Defense, a separate company.

Since Tax Audit Defense promises to represent you in dealing with any federal or state audits (assuming you give them a power of attorney), this looks like a bargain to me, although I did not test it. A CPA or Enrolled Agent charges several times than that an hour to represent you in an audit. You can also sign up for this service if you're using another vendor's tax software, but not at this low price.

Conclusion

TaxACT produced an accurate return, and on the whole, it wasn't difficult to use. If you don't mind putting up with a few idiosyncracies, TaxACT can represent a good deal for you. If you're in a particularly tricky tax situation, though, you'll need to weigh a couple of other considerations. While TaxACT doesn't provide the same level of phone support as its rivals, it does give you a bargain on Tax Audit Defense.

Pros:

• Great price
• Easy to use, on the whole
• Help videos available at intervals

Cons:

• Filing for a six-month extension is clunky
• Importing a previous return can be cumbersome

Individual Ratings: *

Software & Support 
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Price/Value Rating