Software to tame your tax return - includes related article - evaluation

Nation's Business, Feb, 1990 by Laura Lou Meadows

Software To Tame Your Tax Return

The time of the paperless tax return may be upon us. Even the Internal Revenue Service is touting electronic filing with the tax packages they sent out nationwide - anything to get poor old Uncle Sam out from under those warehouses full of 107 million Form 1040s. Of course, electronic filing means computerizing as many tax returns as possible.

This year's crop of off-the-shelf tax software for preparing 1040s is finally getting to the point where its helpfulness is greater than the time it takes you to figure out the programs. For the computer-literate business person who already is using a spreadsheet, word-processing, or other office program, tax software is easy enough to be a true bonanza at tax-return time. And with many of the programs priced below $100 (under $50 at some discount stores), they are worthwhile for anyone with a computer who is facing the tax-return task without a friendly accountant. Even if you do use an accountant, the tax-return programs can help you save time - and money - by organizing the material for the accountant.

As you would expect, tax programs have always been good at arithmetic. That's nice on the first pass but a godsend when you think you're all done and then find a receipt for $627 that has to be put into a sub-sub-calculation, which then affects the entire return. Today's programs can absorb such a change and recalculate (in two or three seconds on my 286 IBM clone) every form and schedule that it affects.

The new tax programs can "interview" you to determine which schedules you'll need, and they can display pull-down menus to make forms and features easy to find, pop-up calculators and help windows to give you specific instructions for the line you're puzzling over, and general advice on a tax topic. Entries are color-coded to alert you to differences between your entries, the numbers the program calculates, and overrides you make to accomodate special circumstances. (If you don't have a color monitor, the programs use underlines and reverses to achieve the same result, though it is harder to see.) Most have tax summary windows that you can call up at any point to see how much you owe based on what you've entered so far.

Each year tax programs get better at applying formulas and automatically carrying results from supporting schedules back to the 1040. They are also better at automatically computing items such as the self-employment tax on your Schedule C profits. Most information you enter only once, and the computer carries it to every other place it's needed.

To see the features in operation, we tested four of the leading tax programs with a tax scenario for a married couple with two salaries generating excess FICA, a business with depreciable properties reported on Schedule C, a limited tax partnership interest (for a total income over $200,000), child-care expenses, and typical itemized deductions. All four programs produced a correct return; some took a little coaxing, and some did more on their own. Each of these programs contains 30 to 50 forms, schedules, and worksheets - enough to handle all but the most complex tax returns.

TurboTax

Now in its sixth year, TurboTax has become the top seller with its sleek, simple operation, its screens that track the IRS forms and line numbers, and its authentic IRS instructions, which appear for a particular line at the touch of a key. Its automatic calculations are as thorough as any individual program on the market. Operations of the function keys appear on the bottom line of the screen, and pressing the escape key highlights pull-down menus.

The depreciation worksheet finishes the tedious task of figuring depreciation deductions by the time you have answered a series of questions on pop-up screens about basis, percentage of business use, method of depreciation, and so on. Then when you call up Schedule C, TurboTax will have put the correct figures on the proper lines.

When you've completed your entries, TurboTax reminds you to run its diagnostic routine to see if you have answered all essential items.

The two manuals are detailed but not overwhelming: One explains the operation of its many features, the other tells you what the program is doing at each line of every form, schedule, and worksheet. If you get bored, TurboTax will keep score as you romp through a series of tax-trivia questions.

TurboTax, $75 federal, $40 each for 41 states. Discount for last year's registered users: half price for federal program, $25 for each state. Minimum hardware requirement: DOS 2.0 or above, IBM PC or compatible with 384K, two floppy drives or one hard drive and one floppy drive. ChipSoft Inc., 5045 Shoreham Place, San Diego, Calif. 92122; (619) 453-8722.

TaxCut

For a person who wants more hand holding on tax concepts and more help on specific tax rules, Andrew Tobias' TaxCut offers a unique Expert Advisor for more than 50 topics. Expert Advisor asks you about one element of your transaction at a time, deriving its next question from your previous response. Pausing to explain any tax term that may baffle you, it will come up with an answer based on the data you entered. If you have second thoughts, you can go back and change your response, and the ever-patient Expert Advisor will give you a fresh answer.