Business returns on PCs - tax programs for personal computers - evaluation

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

Business Returns On PCs

One of the little-noticed but more embarassing admissions of the Internal Revenue Service appears just inside the instructions for the corporate and partnership tax returns. It is the official estimated average time it will take you to learn about the applicable law, prepare the tax returns, and pull copies together to send to Uncle Sam.

The IRS estimate for the corporate Form 1120 or the partnership Form 1065 is 120 to 130 hours - or about three work-weeks plus overtime! Figure even more if a few other schedules are required. Mind you, this calculation is after the IRS assumes you've spent 60 to 100 hours keeping the backup records for the federal tax return in apple-pie order.

Of course, major corporations are different. Their tax departments, 10 to 50 accountants strong, can take months to prepare their annual six-inch-thick federal tax returns. Even then, the return typically has lots of pages that say "supporting details on file at the company offices."

If you are lucky enough to be your small firm's chief financial officer, treasurer, controller, accounting, department head, full-charge bookkeeper, spreadsheet jockey, and principal tax guru all rolled into one, then paying out $180 to $1,000 for tax-return software can be your lifeline to sanity.

For the midsized or small business that tries not to be completely at the mercy of its outside CPA or auditors, personal-computer tax programs offer a way to cut down the time to prepare a tax return or to check the results of the outside professionals.

If you are the CPA who has been doing your client's 1120s and 1065s manually or using a service bureau, one of these programs that run on an IBM or compatible PC may let you computerized and enjoy the control and quick turnaround time of an in-house system.

We took a look at three programs for preparing federal corporate and partnership tax returns to see how well they help in cutting down the IRS's estimated time.

Unlike the individual tax programs that have been doing Form 1040s for a number of years, the corporate and partnership programs for PCs have not had as many shakedown seasons or as many users letting the publishers know what they think.

All three of the publishers whose programs we've reviewed also put out fine professional 1040 programs, which sell thousands of copies that are used to prepare millions of personal returns. The 1120 and 1065 programs sell hundreds of copies and may be used to prepare only one or a few corporate or partnership returns each.

Accordingly, business-tax-return software for PCs does not yet have all the convenient hand-holding features of 1040 programs. The business programs we looked at have minimal or no substantive tax instructions to be summoned up in a window when the IRS form flummoxes you.

The help keys will give you software-operating instructions and sometimes cross references, but they seldom give expert advice on translating arcane IRS concepts. These programs assume the user knows the tax terrain.

The programs contain eight to 15 IRS subsidiary forms and a healthy batch of worksheets to support them. They all include such professional features as batch processing and printing and client letters with filing instructions and billing.

Two of the publishers, Chip-Soft and Tenkey, each put out a single program that includes both the Form 1120 for the traditional corporation and the Form 1120S for an S corporation. The third publisher, CPAid, has separate programs - and separate fees - for the Form 1120 and Form 1120S. They all publish a partnership program that does the Form 1065 partnership return and related schedules.

CPAid

CPAid serves primarily professional users. The program can be installed on a network as well as stand-alone PCs. Several well-developed features fatten each program to over four megabytes of hard-disk space. I discovered one useful feature while putting in a sample scenario. I tried to leave the Schedule L balance sheet with fewer assets than liabilities plus shareholder's equity. CPAid beeped, and a midscreen window opened to admonish me that things were in a precious state of imbalance.

Unwelcome news, perhaps, but I thought, "Thanks, I needed that."

When I came to anentry consisting of the total of many items, a touch of the F3 key opened an overflow window where I could list the elements. Another press F3 sorted the list into alphabetical order, which is invaluable when you need to check a long tally against a jumbled source list. It is also an orderly way to arrange records.

The calculator function is the simplest I've seen. Put the cursor on the entry field, type in a number, then press the symbol for the operation you want, say, the asterisk (*) to multiply. Then type in the next number and press Enter, which functions as the equals key. The producr of the two numbers you've just multiplied is in the entry field. No bothering with a little picture of a calculator.

At a number of decision points in the program, the F4 key gave me a window showing the available choices. It was like the assurance of a multiple-choice test in school. I may not be sure about the answer, but I have fighting chance when it's right in front of me.