TaxAct Online 2007 review: TaxAct Online 2007

TaxAct 2007 Online Deluxe + State from 2nd Story Software is one of the least expensive online tax-preparation services available. Of its three flavors, the entry-level Standard is free for electronic federal filing. However, state returns cost $14 extra for Standard and $7 for the $10 Deluxe edition. We tested TaxAct Ultimate Online, which costs only $17 and includes e-filing for federal and state returns. This is a steal compared with offers from Intuit TurboTax and H&R Block TaxCut. You'll have to pay extra for the Deluxe edition or higher to import data used in TaxAct from prior years. TaxAct will keep your data on its servers for three years.

TaxAct Online 2007 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 may need to clear the cache before you start. TaxAct Online requires that you run at least Windows 95 with browsers including Internet Explorer 5 or Firefox 1 or higher. Mac users can access TaxAct with Safari 1, Firefox 1, Opera 9 or higher.

2nd Story Software also offers TaxAct software for download, which we did not test. However, for those looking to file for several members in a household, we recommend TurboTax or TaxCut applications, which we did review.

Setting up TaxAct is as simple as setting up a username and password from a browser. 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. However, just remember to click on TaxAct's dedicated back and forward arrow icons rather than your browser's Back button. Luckily, if click the Back button by mistake, TaxAct will take you back to the prior screen so you won't lose your place, unlike previous iterations of the service.

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 Online supposedly imported our return from the prior year, but later we still had to manually enter our employer identification number from scratch. 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. However, its interview is bit more redundant than TurboTax's. You can import a W-2 via TALX W-2 eXpress if offered by your job. TaxAct 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 Deluxe and Ultimate include help with life events, comparisons to national averages, and capital gains and depreciation details, as do Intuit TurboTax and H&R Block TaxCut. We appreciated TaxAct's extra help with FAFSA student aid forms, as should college students. 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. We also wish that TaxAct's review would link us directly to the sections in question.

For support, TaxAct offers a well-organized, searchable knowledge base on its Web site. Support by e-mail is free. Telephone support is also available at an Iowa telephone number for users of the Deluxe or higher editions. TaxAct guarantees a response within 48 hours. During tax season, January 10 to April 15, support is available weekdays from 6 a.m. to 7 p.m., Saturdays from 6 a.m. to 3 p.m., and Sundays from 10 a.m. to 3 p.m PST. The rest of the year it's available weekdays from 6 a.m. to 3 p.m.

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 specific, personal help to walk you through an audit.

TaxAct's bargain price makes it our preferred 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 Intuit TurboTax if you need more hand-holding with investments and complex deductions.