TurboTax takes the trophy again this year. Of the online tax services I reviewed, it did the best job of looking out for my bottom line and minimizing the work without glossing over subjects, though the number of options and the high cost can be a turnoff.
I liked the ability to customize the process; proficient filers and speed demons can deal with the areas they choose while novices can inch along. For instance, people who know what they can deduct can select the Find Deductions Myself option; less-confident filers can choose Maximize My Deductions and go step-by-step. I wish backtracking were easier, though; returning to specific screens took several more clicks here than on some other sites.
TurboTax was the hands-down winner in the ability to import W-2s and 1099s. The majority of taxpayers receive these documents every year, and TurboTax can import the data from most payroll providers, most financial institutions, and from Quicken, thereby relieving many users from having to key the information in. TurboTax also allows users to e-file in up to three states (other sites limit you to two at most).
TurboTax was the most proactive of the group in its tax advice. For example, it told me up front that if I answered yes to the question "Did your child provide more than half of his or her own support in 2007?" I could not claim the child as a dependent. Like TaxAct, TurboTax noticed that the Social Security and Medicare taxes reported on my W-2 were too high, but TurboTax took the extra step of telling me that I was entitled to a refund from my employer--and then told me what to do about it (ask my employer for a refund and a new W-2, and then file my tax return).
TurboTax was also the only site to warn me that some of my interest income might be exempt from certain state taxes--and it provided the rules for each state as well. And through the integrated ItsDeductible program, TurboTax was the only service that helped me assign credible fair market values to donated goods.
The extra features were everywhere. For example, the Live Community feature allows users to ask questions of other users (no substitute for expert tax advice, but a way to do on-the-fly research). People who play fast and loose with deductions will appreciate the Audit Risk Meter, too. And users who don't want to go it alone can pay a TurboTax Professional $99.95 or $149.95 (depending on the complexity of the return) to finish the job.
Of course, there's no such thing as a free lunch--the Premier version is $49.95 and state returns are $29.95 each, and people with simple returns may need only a less full-featured, less expensive service such as TaxAct or Tax Cut.
--Tina Orem