If you're among the 40 percent of Americans who prepare their own tax returns, you've no doubt got compelling reasons for doing so. The cost is probably foremost. Doing it yourself can cost nothing if you're handy with a calculator, or as little as $10 for H&R Block's TaxCut Basic online program.

And for many people, tax preparation is not the slog it's reputed to be. The Internal Revenue Service says about two-thirds of Americans avoid the time-gobbling job of itemizing by taking the standard deduction, which is $10,300 for couples filing jointly for 2006. Individual filers spend less than three hours, on average, filling in federal tax forms, the IRS says. And by doing it yourself, you can learn a few things about your finances and taxes in general.

TurboTax and TaxCut, the leading tax-prep software packages, promise to make the process easy and accurate. Do they deliver on that claim? To find out, we pitted TurboTax head-to-head against TaxCut in a rigorous test of accuracy and usability. We employed profiles of four hypothetical families, each with situations and tax issues that many taxpayers face, like rental property, home businesses, and employee business expenses. We also included traps in each scenario to see how the software would respond (see Our tax tricks and traps).

Cynthia Scalisi, an enrolled agent in Goleta, Calif., who prepares more than 600 individual, trust, and business tax returns each year, helped us devise our scenarios. Enrolled agents have met IRS standards that qualify them to prepare taxes and to represent taxpayers before the agency on all tax matters. A Consumer Reports Money Adviser staffer, coached by Scalisi, entered the information in the software for each scenario and evaluated how easy it was to use. Scalisi then commented on the resulting tax forms.

The results were mixed. Both TaxCut and TurboTax scored well on ease of use. Both products delivered on their promise to provide accurate calculations, and they caught many of our tricks. But neither was perfect in properly evaluating the data we entered, particularly in more complicated tax situations.


WHAT'S NEW

This tax season H&R Block, the maker of TaxCut, rolled all its federal versions into one--TaxCut Premium--and brought back Mac compatibility. There are two additional desktop products--one that includes state tax returns and another that adds e-file capability. For the second year, TaxCut offers "Worry-Free Audit Support." If you file electronically with any TaxCut product, H&R Block says it will help you "manage the entire audit experience." A company spokeswoman says that since the IRS usually doesn't send audit notices right after a tax season, it is too early to tell how many people will eventually take advantage of that support.

Some versions of this year's TurboTax can get free online help from both of the companies for technical questions. To talk directly to a tax expert, you'll pay $20 for each tax issue through TaxCut and $40 through TurboTax.

The cheapest options are the online versions, available at www.taxcut.com and www.turbotax.com. TaxCut Premium+ E-file costs just $20 online, vs.$36 for the desktop version, including e-file costs. TurboTax Deluxe Deduction Maximizer costs $30 including e-file, compared with $60 for the desktop product and e-file. Note that the online products let you prepare and file just one return. In contrast, you can prepare unlimited federal returns with the desktop products and e-file as many as five with either program.


WHAT WE FOUND

The heart of tax-prep software is the interview, which generally follows the order of Form 1040.With both products, you can either go through the comprehensive interview or jump directly to the topics you need. TaxCut and TurboTax both tell you up front what forms and documents you'll need, and they guide you through unfamiliar topics. Both include a wrap-up page at the end of every section showing your entries. You can stop and save what you've done, then go back where you left off to work on that return or switch to another one.

We found navigation equally easy with both products. You can amend what you've done or skip to something new by using a master list or initiating a word search. Both products have counters with running tallies of your refund or tax owed. TurboTax includes a running total of deductions, too. Both offer lots of linked pop-ups, many of them printable, with detailed explanations of numerous topics. Both let you see the IRS form you're working on.

In general, we deemed TaxCut screens kinder to the eyes. If you love that running tally of your refunds and deductions, however, you may prefer TurboTax's bigger refund counter. TurboTax can also magnify tax forms for easier reading.

TaxCut's search capability was more sophisticated, but we found TurboTax a bit more convenient. Both products let you download from other tax-prep software products and from financial software like Quicken or Microsoft Money, or any programs that support Tax Exchange Format. However, only TurboTax can link to employers for W-2 data and to major investment firms and banks for Form 1099 interest and dividend information. That saves a lot of time and ensures accuracy.


TRIPPING OVER THE DETAILS

Our consultant was impressed by the sophistication of both programs' interviews. In the simplest of our scenarios, that of the Shermans (see Our tax tricks and traps), both programs produced final results within a few dollars of her calculations. The software also caught many of our traps, such as the overpayment of Social Security tax and nontaxable combat pay.

But in more complicated scenarios involving home businesses and unusual credits and deductions, interviews didn't always go far enough to produce the right answer. Although TaxCut Premium is promoted as capable of handling small- business tax returns, it wasn't clear about where to enter the cost of goods sold for a home business. As a result, our staffer made a guess as to where to enter that information. Scalisi later told her that the entry would probably be a red flag to the IRS. TurboTax's interview would not allow our staffer to enter information on the purchase of a hybrid or alternative motor vehicle, which meant missing a tax credit of up to $3,150.

In two instances, our staffer entered data into TurboTax that didn't get transferred to all the proper forms. TurboTax asks questions about jury-duty pay earned, then lets you enter how much of it you repaid to your employer. But while the $145 in reimbursed jury-duty pay showed up on the screen and was calculated in the return, it didn't show up on line 34 of the completed Form 1040, which made the math look wrong and could confuse the typical taxpayer. Of more concern, TurboTax turned a $4,234 property-tax deduction into a negative number, minus $1,059, costing the couple $1,200.

TaxCut and TurboTax both attempt to add value to their software with advice throughout the interview and personalized tax planning at the end. But there's some advice that's hard for software to dispense. For example, the programs assume that you'll want to get the biggest deductions you can this year to reduce your current taxes. But if you expect your income to jump next year, you may need a tax preparer's help to determine how much in deductions to delay until next year to offset the higher income.

To be fair, our concerns might have been addressed by the online help centers each product provides during tax season. We did most of our testing in early December, when neither help center was fully operational. The software also may have been updated later to take into account these issues. But it's disconcerting that these flaws were in software already on the market.


THE BOTTOM LINE

Both TurboTax and TaxCut are good products for simple returns involving the standard deduction or just a few itemized deductions like home-mortgage interest. For ease of use and more comprehensive information, we lean toward TurboTax. But TaxCut is nearly as convenient and costs less. TaxCut also includes Deduction-Pro, a program to help you track and find the value of deductions. We found it more comprehensive than TurboTax's offering, called ItsDeductible. And as a stand-alone program, DeductionPro is easy to use to track deductions year-round.

If you own a home business or have a complicated financial life, you're probably better off having a tax professional prepare your returns. An accountant or enrolled agent can recommend more personalized tax-planning strategies.