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canadian dollar and computere keys, concept of tax. iStockphoto
canadian dollar and computere keys, concept of tax. iStockphoto

Taxes

Tax software's days are numbered Add to ...

Future Shop sent me an e-mail the other day featuring what will soon be a product of the past.

That would be personal income tax software you buy at a store and then install on your computer. It's still quite a popular product - so much so that the big tax preparer H&R Block entered the field in Canada last year despite the fact that Intuit's QuickTax dominates the sector and there's already a No. 2 player called UFile.

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But tax software is slowly on its way out. You read it here first.

First off, growth in sales of physical tax software is much slower than the increase in usage of online tax services. That's where you download a software program or visit a secure website for completing your tax return. In both cases, you then file to the Canada Revenue Agency using its Netfile program.





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The UFile people report that 60 per cent of their business was desktop software for the 2008 tax year and 40 per cent was online.

However, online grew by 17 per cent over the 2007 level, while desktop grew only 3 per cent.

The growing focus on limiting the amount of garbage we produce also argues against desktop tax software. This is a product you buy each year, then use and discard. Why own when you can rent?

One more reason to go online is that you can file your taxes free. The easiest free option is a product called StudioTax, which you can download at studiotax.com. I recently asked a question on tax software on my Facebook page ( Rob Carrick - Personal Finance) and had a few responses from people who used StudioTax.

"Free and easy to use," was one comment. "My whole family has been using it for years," was another. Someone else said he was "reasonably happy" with StudioTax the past couple of years, but was using QuickTax this year.

StudioTax was covered on the Canadian Finance blog earlier this week and the reviewer said he was impressed when he used it last year. However, he also said StudioTax does not allow you to import previous returns from other software products, and that it could use a more polished look to make it more competitive with market-leading QuickTax and others.

Note that the CRA has approved StudioTax for use on Netfile, as it has for a new free tax software offering called UdoTaxes.

The e-mail from Future Shop offered a handy comparison of desktop tax software products that showed a price range of $19.99 for UFile's standard edition with eight returns to $34.99 for QuickTax Standard, also with eight returns, and $39.99 for H&R Block At Home Deluxe Tax Software, which gives you 16 returns.

(H&R obviously hasn't been around long enough to know the convention of one-word names for tax software.)

This brings us to yet another reason why you could be better off doing your taxes online rather than buying software. If you're just doing one return, you'll save money. H&R Block and UFile charge $15.95 for a single online return, QuickTax $16.99.

All three products also provide free online tax returns in some circumstances. Here's a quick rundown:

QuickTax Offers free returns to members of the military and police services who served on active duty overseas during the 2009 tax year, as well as their spouses; people with household income of less than $20,000 can also use QuickTax free, as can people with ultrasimple tax returns; there's also a free edition designed especially for students with incomes of less than $20,000.

UFile All postsecondary students, regardless of income, can use UFile.ca at no cost, as can families with incomes below $20,000.

H&R Block Tax returns for dependents are free online.

One area where the desktop version of tax software has a decided edge is for multiple returns. If you file taxes for eight people, your cost per return can be as low as $2.50 using UFile.

Offering up to eight returns seems to have quelled criticism of QuickTax, which for the 2007 tax year offered just two.

For 2009, QuickTax has introduced a service for online users where you pay $15 and get to pose an unlimited number of questions to a team of tax professionals until the April 30 filing deadline.

H&R Block is offering free answers to tax questions at hrbtaxtalk.ca, or by calling its offices.

If all of these tax software options aren't enough for you, go to the Netfile website (netfile.gc.ca) and look for the list of certified products.

There are close to 20 different options and access to all of them is available online. It's the way of the future - but you can get it now.

******

Source: H&R Block, Intuit Canada and UFile

Follow on Twitter: @rcarrick

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