Tax Prep Software - Hardware Review - Evaluation

Home Office Computing, March, 2001 by Victoria Hall Smith

Navigate your way through receipts, forms, and IRS red tape

WHEN YOU WORKED FOR someone else, tax time was a once-a-year tangle of receipts and forms, but the bulk of the worry was reserved for your corporate accounting department. Now that you work for yourself, taxes are a year-round source of stress. Thankfully, technology has made tax preparation easier to manage. Now, many of the most complicated tax issues have simple solutions.

There are two types of tax preparation software tools: software that resides on your computer and Web-based. Most home-based business owners still need to buy shrink-wrapped software to suit their needs, as Web-based solutions mainly cater to personal income tax preparation. But just because you buy and install software doesn't mean you have to give up on the Web; all of the shrink-wrapped software solutions offer online filing along with links to helpful tax-related Web sites.

We've evaluated the four leading tax preparation packages for home-based businesses. Three of the applications--TaxAct, TaxCut, and TurboTax--have online versions that are scheduled to appear by the time you read this. We tested all of the software with an Acer 933 MHz Pentium III PC with 128MB of RAM. Our connection to the Internet was a simple analog phone line, but we had no problem quickly accessing the added information and services found on vendors' Web sites.

We tested each package for ease of use, help systems that are searchable and provide usable information, the ability to import from accounting and other tax software, and automation that simplifies the complex calculations inherent in tax returns. We found that even though this is a mature software category, innovation isn't hard to come by. In fact, we didn't dislike any of the packages we tested, but found that each is suited to a slightly different user.

AutoTax Individual

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If you're one of the many people who find the interview process a pain, or who don't need tips and tutorials, AutoTax may be just what you need. Taxlink, one of the top ten electronic filing services, has been selling their TaxTranslator software for professional preparers for a number of years, and it's the engine under AutoTax. It's powerful but definitely not for novices.

This package asks you for basic information to set up your return--then you're on your own. You can go right to the 1040 or skip ahead to Schedule C; it's up to you because there is no plan to follow nor an onscreen to-do list.

The little help you do get comes in the form of a point-and-click Windows interface (this is a DOS program after all), and a built-in assistant named Sam to help answer a few questions. Tabs along the bottom for each form provide decent navigation, and an audit inspector hunts for errors once you're done. As expected, electronic filing is supported through TaxLink, as are refund loans through a third party.

AutoTax did its job well, and it's an economical solution for experienced tax preparers, but the package doesn't have anything to offer average business users.

[pros] DOS favorite for professionals

[cons] Not the best solution for everyone else

TaxAct Deluxe 2000

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Like last year, TaxAct's browser-like interface is the most intuitive and logical to use of our home business tax packages. Navigation is its biggest strength: Your current location in the process appears where a URL or Web address would appear in Netscape or Explorer, and clicking on that address shows you where you are.

TaxAct's interview process and printing is better this year, too: both are thorough and fast. You can now print individual forms or schedules or even your whole return. Two new depreciation summary reports detail the current year's depreciation, and what to expect for next year. Both reports can be sorted by name of asset or the date acquired and printed for safekeeping so you won't have to dig up all of that information again next year.

As good as this package is, the lack of the ability to import from your accounting software or any tax software other than TaxAct is unacceptable. The interview process does make quick work of entering all of the information in Schedule C, but the process wouldn't be necessary if you could just import the data. That said, it's a surprisingly strong contender for a low price.

[pros] An easy interface gets the job done

[cons] The inability to import data doesn't

TaxCut for Your Home and Business by H&R Block

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Like TurboTax, TaxCut for Your Home & Business has kept the browser interface of last year, but has also added new pastel colors and a sparse, almost crude redesign.

This year, the personalized interview process organizes the tax forms you'll need automatically. A new "Where Am I?" window allows users to pinpoint their progress on the IRS forms, but we found it more confusing than helpful.

A new Seamless Import helps TaxCut users import Microsoft Money data with fewer hassles. (TaxCut can also import data from last year's TaxCut and TurboTax). The tool was an improvement over last year, but our experience depended on the accuracy of the tax assignments we made all year long. TaxCut also offers year-round monitoring and analysis of Money data for next year's taxes, stock transactions, and deductions.