CompleteTax, TaxACT, TaxCut: Which to Choose in Free File?

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The IRS says more folks are taking advantage of Free File, its program that allows many taxpayers to prepare and file their federal taxes for free online. In Free File, you can choose among 19 authorized services to prepare and file your return. It's a good bet that many taxpayers will consider the popular TaxACT, from 2nd Story Software; TaxCut, from H&R Block; or CompleteTax, from CCH.

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    Recently my friend Chris and I tested all three to see which offered better value and ease of use for a typical Free File customer. (If you want to use them in Free File, you must enter their sites through www.irs.gov, not through their regular URLs, where you'll usually pay a fee to prepare and file your federal return.) Chris, like an estimated 70 percent of Americans, had 2007 household adjusted gross income below the $54,000 cut-off point that Free File requires.
    We didn't try TurboTax, the market leader. While it has a free federal version on its regular site, it excludes a lot of taxpayers preparing through Free File. Only those with adjusted gross incomes of $30,000 or less, active military personnel with AGI of $54,000 or less, and folks who qualify for the Earned Income Tax Credit can prepare and file with TurboTax in Free File. (We noticed only after we used CompleteTax that its AGI requirement--$32,000--is nearly as strict in Free File. We present our CompleteTax results here anyway.)
    In a nutshell, here's what we found:
    •All three programs—CompleteTax, TaxACT and TaxCut—calculated the same federal and state refund amounts. That's encouraging for folks concerned about accuracy.
    •All three took about an hour to do, including preparing a New York State return. Chris's relatively simple returns involved inputting data from a couple of W-2s, a 1099 for interest income, a charitable donation receipt, and a couple of other documents. If your return is more complicated, you should expect that it'll take longer to complete.
    •TaxCut Free File will serve anyone 50 and under with an AGI of $54,000 or less. We found that of the three it was easiest on the eye, and included some nifty features. While both TaxCut and TaxACT had cool counters on the top right recalculating the refund as we worked, only TaxCut told us when the return was 65 percent finished, 90 percent finished, etc. TaxCut had the most useful checklists before each new topic so Chris knew what she needed to have ready and only had to answer parts of the interview pertaining to her. TaxCut also provided handy summaries at the end of each section for review. Both TaxCut and CompleteTax anticipate taxpayer questions by posting typical questions—and links to answers--to the right of each screen.
    •CompleteTax had the most jarring look, but it was somewhat more intuitive. For example, to input information from your W-2 form, you fill out an identical-looking form online. Of the three programs, CompleteTax was the only one with the option to import W-2 information from your employer, which should ensure accuracy and save your a few minutes (your employer has to participate with CompleteTax’s electronic W-2 program). However, CompleteTax had a number of annoying pop-ups related to filling out the forms, and what seemed like an unnecessary requirement to mark each page as complete . We also didn't like that CompeteTax made Chris disclose the bank account where she wanted her refunds deposited before it divulged her final refund amounts.
    •TaxACT’s Free File service works for anyone between 19 and 54 with an AGI of $54,000 or less. It was a fairly simple program with some nice features: a refund counter like TaxCut, commonly-asked questions on the right margin, and a clean-looking layout. But there was no convenient checklist at the beginning of every section; we had to slog through a series of questions, and then wait for the program to process and refresh each page after completion. In all, however, it took about the same amount of time, overall, as the other programs.
    Bottom line: For ease of use, we preferred TaxCut and CompleteTax. But for folks who have to file a state return and can't file for free with their own state, TaxCut at $29.95, is considerably more expensive than both CompleteTax at $14.95 and TaxACT at $13.95. If you don't have to file a state return or your state offers its own free online filing, TaxCut is a better choice. If you must pay to complete and file a state return electronically and fit the tough AGI criteria, go with CompleteTax. Otherwise, TaxACT is a quite reasonable choice.
    Of course, there is nothing to stop you from filing your federal return online in Free File and using that information to fill out and send in a paper form for your state income tax. It depends on what your time is worth. Because the software automatically transferred all the federal information directly to the state tax forms, Chris spent at most 10 minutes filling out her New York forms. For many people, that convenience is worth $13.95.


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    BACK TO: Consumer Reports: Smart Shopping
    2008-07-21 15:50:38
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