TaxAct 2006 Online Deluxe + State review: TaxAct 2006 Online Deluxe + State

TaxAct 2006 Online Deluxe + State from 2nd Story Software is one of the least expensive online tax-preparation services available. You'll pay only $15.95 to complete your federal and state returns, with e-filing included. To skip state filing, the step-down TaxAct Online Deluxe costs $9.95. TaxAct's Online Standard edition, which lacks tech support as well as guidance with life events and college financial aid, is free for federal e-filing but costs $6 to file a state return online. Comparable services from industry heavyweights H&R Block TaxCut and Intuit TurboTax cost three to five times as much.

TaxAct works in most browsers, including Internet Explorer 5, Firefox 1, Netscape 7, Opera 9, and Safari 1 and newer. You'll have to enable cookies, disable pop-up blockers, and might need to clear the cache before you start. TaxAct Online requires that you run at least Windows 95 or Mac OS 9. The clean interface displays your estimated federal and state refunds (or tax due) at all times, and tabs with pull-down menus make it easy to jump around the various subjects. This service automatically saves your work as you proceed through the interview--essential if your computer crashes or you accidentally close the browser window. Unfortunately, after we had entered our W-2 data and clicked to the next page, all the fields became blank when we pressed the Back button to fix a typo. We're glad this happened only once.

TaxAct Online Deluxe + State lets you prepare and e-file your federal and state returns for only $15.95.

Like its online and desktop rivals, TaxAct asks a series of questions and uses your answers to fill in the appropriate lines of your tax form. TaxAct 2006 Online can also import TaxAct 2005 Online returns. The service is free to try, so you pay only when you print or e-file your returns. Concerned about privacy? TaxAct Online uses industry-standard SSL encryption to transmit your data, which it stores and backs up on its secure servers.

TaxAct's interview covers the basics well, including salary, dependents, business income, major life changes like a marriage, and so on. It takes into account the government's new credits for the telephone excise tax, household energy efficiency improvements, and the purchase of a greener car. TaxAct 2006 has added many features since last year, such as help with FAFSA student financial aid. Now TaxAct can also produce and save PDF tax forms.

However, TaxAct's more complex sections could be more precise for novices. For instance, the section for entering Schedule C business data didn't explain how we should break down home office rent and utilities. That came next in the 8829 form section, but then we weren't sure if we needed to backtrack and adjust our initial rent and utilities figures. And in the State Q&A section, we were unclear about how to enter a student loan interest deduction. We also wish that TaxAct's review would link us directly to the sections in question rather than just telling us, for instance, to "access federal Form(s) W-2 under the Wages Topic using the Federal Q&A."

For support, TaxAct offers a well-organized, searchable knowledge base on its Web site. Support is free via e-mail and at an Iowa telephone number, and TaxAct guarantees a response within 48 hours. During tax season, January 10 to April 15, support is available weekdays from 8 a.m. to 9 p.m., Saturdays from 8 a.m. to 5 p.m., and Sundays from noon to 5 p.m Central time. The rest of the year, it's available weekdays from 8 a.m. to 5 p.m. You may also obtain phone support from an accountant advisor at the third-party Ingenio service, which charges a hefty $19.95 for the first 10 minutes and $1.99 for every 2 minutes thereafter. You must use this support within 30 days of paying for it.

TaxAct will refund your money within 30 days of e-filing if the IRS rejects your return. If the IRS later audits you, TaxAct pledges to pay any penalties that resulted from an error in its service. However, unlike H&R Block's TaxCut desktop and online services, there's no personal help to walk you through an audit.

TaxAct's bargain price makes it a solid choice for filers with simple returns, and it covers a variety of tax credits and life changes. But you might want to consider boxed software such as TaxCut if you need more hand-holding with investments and complex deductions. If you're dead-set on using a Web-based service, then we prefer Intuit TurboTax Online.