When it comes down to it, the actual content of rival tax prep applications is nearly identical. So fear not. TaxAct's significantly lower price point doesn't necessarily translate into shoddier tax return calculation. We got virtually the same result using the other major programs available. (Disclaimer: this result may not apply to every tax scenario.) What you do sacrifice in TaxAct are the glossy graphics and the extensive FAQ database. On the plus side, the service has added audit support and a new Answer Center, which offers a variety of straightforward help files that are easily searchable.
Because of the striking similarity of the desktop and online versions, we're covering both in this review. Also, it's important to note that there are three price points for both versions: the Free Edition, which is suitable for most users' essential e-filing needs; the Deluxe Edition, which supports importing and donation calculations; and the Ultimate Bundle, which includes state filing.
Like all tax prep apps, TaxAct's desktop software takes some time to install and generally ready itself for your use. Setup with the online version is significantly shorter, but there are pros and cons to using online versus desktop prep--we cover this at the end.
We're happy to report that TaxAct was treated to a bit of a visual overhaul for the 2010 tax season, although the overall interface is still a bit stripped down--at least the font size is a bit larger. Unlike some of the other programs we tested, TaxAct has minimal visual cues to make the important points pop out. Also, the few videos scattered throughout are a bit hokey and they concentrate on the process rather than on picking apart tax conundrums.
Like TurboTax and H&R Block At Home, TaxAct can import W-2 forms, but only those prepared by TALX W-2 Express. It will import capital gains information from the GainsKeeper service and from a CSV file, but not other 1099 forms from your bank or brokerage.
In addition, TaxAct leaves quite a bit of legalese for you to deal with. For instance, the interview asks for the financial institution's ID number, but the help file doesn't say where to look. Key jargon in the interview goes unexplained, like the difference between passive versus active category foreign tax credit. The help files didn't contain references to these phrases, either. But a Tax Tutor powered by J.K. Lasser provides basic reminders, like reporting taxes on severance pay and tips. Also, TaxAct has also gone a long way toward improving its help section with the Answer Center.
The Answer Center, which is prevalent on the right-hand side of the window, offers a tabbed area split into three sections: help, forms, and tools. The help section allows you to type any question and then populates a variety of possible answers. Under the forms tab, you can view the various tax-related documents and find information on their parts. The tools include a variety of calculators--standard, tax, loan, and savings--as well as a stock assistant for entering stock transactions in spreadsheet format. There's also a handy donation assistant for looking up the fair market value of donated goods.
While TaxAct still lacks some of the major and minor features that justify TurboTax and H&R Block At Home's higher cost, it might be just right for tax prep whizzes who want to fly through a tax return with few distractions and minimal guidance. If you're on the fence, you can begin a free return online (TaxAct.com) before committing to TaxAct, or any other prep program.
A note on online versus desktop prep: While there's no rule, we tend to think of online tax prep as ideal for those filing individually--it's sometimes less pricey for singles, and it stores your encrypted return on the provider's server. Linux users may also prefer online prep, since most makers of tax software don't program downloads for the Linux platform. TaxAct does not produce a version for Macs. Desktop prep may be better suited for families, who can file up to five Federal e-files as part of a single software license, or for those who would rather store their data locally on their computers.