Intro

LIKE MOST NORMAL FOLKS

, I don't much enjoy doing taxes. Yet, like millions more than 20 million in 2006, according to the IRS I've been doing the job on my own, using tax software and filing online.

Granted, I've been blessed with a simple 1040EZ situation: a single filer with no taxable investments other than a savings account, no mortgage or other real estate assets, and a single W-2 from my employer, Dow Jones & Co.

But this year my taxes are getting a major makeover. I bought an apartment in April, got married in May, and in August, my husband and I left our rental apartment in New Jersey for our new place in Manhattan. To boot, I brought in a little extra income from freelance reporting and my husband's job as a consultant means he either travels on business, or works from his home office.

Do I dare do our taxes now?

Honestly, I'd rather be getting a root canal. But it's not like I'm facing an exclusively complex situation. More than 2.2 million couples got married in 2005, according to the National Center for Health Statistics, the latest calendar year for which numbers are available. That same year, 7.4 million people moved to a different state. And last year, 7.5 million bought a home, according to the National Association of Realtors.

So my editors at SmartMoney.com and I decided this was the perfect time to test the two leading tax software programs Intuit's TurboTax and H&R Block's TaxCut back to back. With the competition getting fierce as more people than ever e-file, we wondered: Will one program be easier to use than another? Will I get the same tax bill or refund with both?

Using my real federal tax return see the sidebar for details I ran into some interesting discrepancies, especially when it comes to relatively new tax laws, such as the option to deduct state sales tax instead of state income tax.

And yes, I got different refunds. Here's the TaxCut-TurboTax face-off.

Shopping

Nothing is simple when it comes to taxes, even the shopping part. To start with, should I choose an online filing program or the software that you install on your computer? The software was about $20 pricier with both companies, but came with a free deduction-maximizing program, a $20 value. Given that last year the IRS

its noncash donation rules for charitable deductions, I figured that would come in handy.

Mind you, just like using the tax programs online, the software is only valid for one tax year and you'll have to purchase another in 2007. I was also assured by H&R Block and Intuit spokespeople that the online versions are identical to the software. One exception: While TurboTax does provide its deduction-maximizing software with the online version as well, H&R Block doesn't.

I then decided on Intuit's least pricey software, TurboTax Deluxe, for $44.95. (TurboTax also offers a Premier version ($74.95), which promises help calculating the tax basis on your investments, and TurboTax Home and Business ($89.95), geared toward the self-employed and small-business owners.) From the H&R Block menu, I chose TaxCut Premium plus State and e-file for $59.95. (If you're OK with printing out and mailing your return, you could have the same product for $29.95.)

A quick and easy software download and installation later (you don't really need to go to the store to buy "the box"), tax time began. Each tax return took roughly three to four hours on two consecutive days.

First Impressions

At first glance, I found TaxCut to be somewhat friendlier than TurboTax. Using TaxCut, I felt like I was talking to a nice accountant asking me questions about me, my life and my money, explaining all the while how that affected my taxes for the year. When I clicked the "Got Married" tab in the "Life Changes for 2006" part of the interview the next screen congratulated me: "Congratulations to you and your spouse! You've made a commitment to share your lives and your tax situation." Indeed.

Using Intuit's TurboTax, meanwhile, felt like talking with an accountant who had no time to lose, shooting off question after question with no unnecessary explanations. I personally liked TaxCut's "chatty" approach better, but if you prefer speed and efficiency and are used to Intuit's other products, like Quicken TurboTax might be a better fit.

Both products had helpful videos throughout the interviews, explaining various tax-law changes and how they might affect your return a decidedly better solution than simply linking to large blocks of text. Both TaxCut and TurboTax allow you to import data from Quicken.

One nice TurboTax feature that TaxCut lacked is the ability to import data from your investment accounts directly, if you have online access to those. (Just select the investment firm from the menu and plug in your username and password.)

Likewise, with TurboTax you can import your W-2 information. This clearly is the best way to prevent mistakes. (That would later affect the accuracy of my state tax returns.) For the time being, H&R Block doesn't have any plans to add that capability, according to company spokeswoman Denise Sposato. With TurboTax, you can import your W-2 information only if your employer provides it to Intuit. Currently, about 80% of U.S. employees have that capability, according to Intuit spokesman Scott Gulbransen.

Glitches Galore

IRA Troubles

There's a big drawback to TaxCut's friendliness, it turned out. Midway though my interview, we started "talking" about retirement and I was shown a screen with our estimated tax savings if my husband and I both maxed out our traditional IRAs: $1,000 apiece. Nice.

But next on that screen was the line: "Open an H&R Block Easy IRA and make your contribution right from home." We'd already maxed out our IRAs elsewhere, so I said "No Thanks" and continued on.

Only after my tax return was done and showed a tax refund much lower than the one I got with TurboTax did I realize that I hadn't included our IRA contributions. Going back, I found that the "sales pitch" link would actually take me to the form where I fill in IRA contributions. I had to click through two screens to get there, one of which was a consent form to H&R Block to use our information when opening an H&R Block Easy IRA. Definitely not a logical (and much less "friendly") way to get you to an important part of your tax return. By press time, H&R Block hadn't returned our request for comment on this issue.

In this case, I much preferred TurboTax's no-frills approach. A simple "Do you want to enter information for retirement and investments now?" was quick and clear.

The sales- or income-tax dilemma
This is the first year I'll be itemizing deductions, so I had a choice: deduct our 2006 state and local income taxes or claim a deduction for sales taxes instead. Of course, the IRS figures no one keeps receipts for every single item bought throughout the year, so they provide a table that calculates your deduction based on your income, number of exemptions and state. In addition to that, you can add on the sales tax paid on any big-ticket items, such as cars or boats.

The good thing about tax software is it calculates which deduction makes more sense, so you don't have to deal with complicated tables.

But that's where I ran into a snag. What exactly qualifies as a big-ticket item? According to TurboTax, that's cars and a variety of other vehicles, aircraft, boats, mobile homes, and building materials for home improvements. We had paid sales tax on none of that, so the software went on to deduct our state and local income taxes.

Using TaxCut, I was left with a different impression. It listed "cars, other motor vehicles, boats, and homes (including major home additions and renovations)" as qualifying for the sales tax deduction. And, hey, we bought a home last year, and because it was new construction we paid the developer's costs, including $6,300 in city and state taxes. I punched that in and the software went ahead to deduct our sales rather than income taxes. The result: $835 more in our tax refund.

Who was right? According to Mark Luscombe, a CPA and principal analyst for the tax and accounting group at tax publisher CCH, we could deduct the sales tax paid on a home purchase, but only if what we paid was, indeed, sales tax. Very few states actually impose sales tax on the purchase of a home, he said. Perhaps what we paid was transfer tax? Now that he mentioned it, I think that's what we paid.

Here's proof that, when it comes to more complicated questions, a chat with a "live" CPA is invaluable. TurboTax offers the option to speak with a tax specialist for an additional $39.95. With TaxCut, you'll pay $19.95 per topic discussed. TurboTax's tax specialists are either CPAs or enrolled agents, according to Gulbransen. H&R Block's specialists are CPAs or "tax professionals who have at least five years experience," according to Sposato.

Home-office deductions
It's worth noting that my experience with home-office deductions was nearly identical with TurboTax and TaxCut. TurboTax pitched me an upgrade to its more expensive "Home and Business" software as soon as I entered my freelance income, promising further help with maximizing home office and other small-business deductions. I declined and found the rest of the software guidance sufficient.

State-Return Nightmares

Having survived through our federal taxes, I thought state would be easy. After all, the software is supposed to transfer all the information I'd already entered in our federal return. Wrong, very wrong.

I first tackled the New York State return with TurboTax. Immediately, there was trouble: Because the software had imported my W-2 information automatically and my W-2 apportioned part of my annual income to the state of New Jersey, where I lived through July my taxable income suddenly ballooned. It looked like my whole income would be taxed by New York, and then the New Jersey part of my income namely what I earned during the first seven months of the year would again be taxed by New Jersey. Was that right? No help text or explanation was offered. (If you're utterly confused by all this, you're not alone. Here at SmartMoney.com, we couldn't figure it out either.)

I was then asked to apportion the income received while we lived in New York, followed by the income we received as nonresidents. I did that by dividing our total income by 12, then multiplying by five, for each of the five months we lived in New York. After answering the remaining questions, I arrived at a New York state refund of $22.

TaxCut was a whole different beast. As with the federal return, the questions were easier to understand, with more explanations throughout the interview. Instead of importing information from my W-2, the software simply asked me to enter the income I earned from New York sources while a resident of New York and the income I earned while a nonresident of New York. I entered our total annual income. The software then asked me to apportion our New York interest income and IRA contributions. The result: a refund of more than $500. Had I apportioned our income between New York and New Jersey as my employer had done on my W-2 form our refund would have clocked in at more than $4,400.

How much are we really entitled to? I have no way of knowing unless I make that paid call to TaxCut or TurboTax's "tax professionals." And then I'd have to pay yet again to prepare and e-file a second state return.

Frankly, I'd rather go to my newly-hired CPA and do it all anew. Sure, it'll be much pricier than the software. But in a case like this, every penny's well-spent.