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All tax software really does is fill out T1 forms for the Canada Revenue Agency; what it can sell you, however, is the hand-holding it does as you fill out the forms.

It's not always as easy as it sounds — for that, you can thank Ottawa's bureaucrats, who have been anointed to create impossible four-letter acronyms for deductions, exemptions or contributions to plans. As a rule, then, the more help that tax software offers, the better it is.

The problem is that filling out a T1 is partly an art form. How much you can deduct (as opposed to what you may deduct) is not something software can tell you precisely, but if you've asked for too much, the CRA will be happy to point it out in an audit.

And there are things you simply had no idea were tax-deductible. Intuit, maker of QuickTax software, reminds us that these include artificial eyes, fertility treatments, fitness programs for children, furnaces and air conditioners for those with respiratory problems, student loans, vitamin B12 injections and even wigs. More tellingly, a survey by Decima Research for UFile tax software found that more than two-thirds (68 per cent) of Canadians think the cost of raising a child is too high, but 33 per cent do not know how they can use the available family savings tax exemptions.

Ideally, tax software should include the entire Canadian Tax Act, revised annually, with a fabulously intuitive guide on how to use it. Given that the Tax Act makes the Montreal phone directory look like a radical exercise in redaction, an idealist would soon go mad.

The tax software makers are doing something right. Last year, the CRA reported that more than 50 per cent of people had filed their taxes online, and it expects more to do so this year. And the Conference Board of Canada says that fewer people have security concerns with filing taxes online (44 per cent) than they do with online banking (50 per cent). This despite a horrendous five-day computer collapse at CRA on March 6 last year, which compromised no data but resulted in the inability of CRA to accept many thousands of electronic filings.

Tax companies such as Intuit (QuickTax) and Dr. Tax (UFile) will tell you that their software is not intended to replace accountants. The software is intended to serve the larger number of Canadians who range from those who are not afraid of filling out forms to those savvy enough to massage their returns themselves. Those at the extreme ends of this spectrum — the terminally terrified and the creatively complex — are expected to consult an accountant.

Tax software makers have to scramble to compete. They can create strategy modules that offer guidelines for how to fill out the forms, or they can fiddle with the number of returns you can make. They also have a cut-off point at which they will start charging you for a return: Those making (usually) $25,000 or less each year often use the software for free.

One thing important to remember when buying tax software is the distinction between NetFile, a system by which non-professional tax-preparation people send their returns over the Internet, and EFile, which is for CRA-accredited tax professionals. TeleFile is a system of filing using a telephone. And UFile is software, not a system of filing (except that it uses NetFile to submit your forms).

Another thing to remember is that very few software packages work on Macintosh computers, but most have a Web-based system intended to be as complex as the boxed version, so Mac users will not be left in the dark.

UFile 2007, from Montreal-based Dr. Tax, is an interview-based system that starts off asking very basic questions (name, address, social insurance number, T4 slips and such). Depending on your answers, the interview jumps to questions that follow your specific needs. The engine behind this part of the process is the same one UFile uses in its package for accountants.

It will calculate self-employment income and capital gains, and it can be used in Quebec, where residents file separate federal and provincial tax forms.

UFile has incorporated tax changes for 2007, including reduced tax rates and sales taxes, and the rate for a child younger than 19. And it will inhale your return from the year before (if you used UFile) for reference on how to work the current forms.

Among new features are the ability for seniors to split their pension income, and a module called MaxBack, a refund analyzer that calculates the lowest possible tax amount payable. There is also an RRSP calculator that guides your payments.

The UFile package is simple at first, but progresses to greater difficulty as returns become more complex. Clicking on a little question mark beside most entries will offer more information regarding the entry, but not all are as clear as one would like.

UFile comes in several flavours: UFile.ca, the online version, costs $15.95 before tax; additional family members get their returns for free; UFile for Windows breaks down into UFile Standard ($19.99, good for eight returns), and UFile Plus ($29.99, good for up to 16 returns), both available at Future Shop and Best Buy stores or as an online download from www.ufile.ca. A third is UFile Pro, for professionals only.

The online version also allows you to prepare your tax forms for free — until you want to print your return or file it electronically.

For its part, QuickTax 2007, from Edmonton-based Intuit Canada, also offers an interview-based method, and is also a little challenged when it comes to the more arcane questions — if you can't figure them out with the program, you will always end up wondering whether you would have done better had you really understood the entries.

For instance, many of the 6 million people who contribute to the RRSP plan don't really know how it works, so Intuit has put a lot of effort into explaining such things as the relationship between RRSPs and the Home Buyers Plan. Another important feature is the ability to carry forward RRSP contributions, and how to contribute to RRSPs for a spouse or common-law partner.

The program allows you to see, via a pane at the bottom of the page, the relevant part of the T1 return you are filling out, which should be a comfort to those who are accustomed to seeing the T1 when filling out their returns.

Another feature that Intuit says no other package has is a guarantee — it will refund any money lost due to malfunctioning software. It also has an "A to Z" list of deductions under the Tools menu, and offers different tax-reducing strategies. A little window on the top of the screen constantly updates the refund as you fill out the form.

Disappointingly, Intuit has cut down the number of returns with each package. Last year, it was five returns; this year it's two. This, Intuit says, is because the company is moving to another marketing model, which is on a price-per-return basis. The company says that about 60 per cent of QuickTax users file only two returns, so they can buy more individual returns as they need.

QuickTax Basic is for simple tax returns ($19.95 for CD or download); QuickTax Standard ($39.99; online: $19.99 per return), for individual and families with RRSPs, medical and tuition expenses and spousal and dependant credits; QuickTax Platinum is for people with investments capital gains ($59.99 as a CD or download); and Business Unincorporated is for business combined with personal income tax (CD and download, $79.99).

What's interesting is that all tax software is facing a classic dilemma: It must be as simple as possible, but makers must also keep adding features and different ways to distinguish their products from competitors. So the choice becomes: How simple can it be made when they're constantly adding on features?

Judging by these two packages and a few others, no software has had a direct hit on the sweet spot of clarity. But that's not necessarily the software makers' fault: After all, they all have to describe a Tax Act that is forever changing. It's tough to keep up.

Other packages certified by Canada Revenue Agency include:

GenuTax Canadian Tax Software: This program puts no limit on the number of returns you can prepare and file, and works on the principle that once you buy it, you don't buy it again, nor pay for the annual updates. But it doesn't do provincial taxes for Quebec residents.

TaxTron Canadian Tax Software: Formerly known as GriffTax, TaxTron is available in both individual and corporate versions for Macintosh users as well as for Windows. It also comes in bilingual versions. Not certified for returns requiring Harmonized AgriStability and AgriInvest Programs.

eTaxCanada for Windows 2007, by Phanku Software Corp.: This downloadable software is not certified for AgriStability and AgriInvest programs, and it is excluded in Québec, Prince Edward Island, Northwest Territories, Nunavut and Yukon.

FutureTax, from FutureCA Corp.: Available in CD version and online, FutureTax will not charge if your net income is less than $25,000.

myTaxExpress 2007, from Arcadia Solution Corp.: A downloadable package that is not certified for returns requiring T1273 STATEMENT A - Harmonized CAIS Program Information and Statement of Farming Activities for Individuals. It is also not to be used in Quebec.

StudioTax 2007, from BHOK It Consulting: A downloadable package that is totally free, but bot certified for returns requiring the Ontario Minimum Tax Carryover, the reconciliation of 2007 Business Income for Tax Purposes, or the Harmonized AgriStability and AgriInvest Programs.

TaxFreeway, from Entropy Technology Ltd.: a downloadable available for both Macintosh and Windows.