'Tis the season for tax preparation

February 22, 1993|By Phillip Robinson | Phillip Robinson,Knight-Ridder News Service

What's the most common mistake on a tax form? Math errors. But computers don't make such errors.

What's the most common problem in filing a tax return? Not having the form. But computers can store electronic copies of a thousand different forms, and print one whenever you need it.

What's the biggest headache in completing forms? Figuring out what goes where from the convoluted instructions. But computers can automatically copy the result on line 37B of Page 2 to line 16A on Page 1, and then automatically make changes to either line if they're affected by anything else.

What's the biggest heartache for those expecting a refund? The wait. But filing electronically through a computer can speed your return, getting you the money in days or weeks.

For all these reasons, and because computer people like to apply their equipment to every problem in sight, this is the season for tax-preparation programs. Indeed, most people who buy tax software do so this month.

This year, there are four major tax-prep programs for individuals and small companies: Personal Tax Edge, TurboTax, TaxCut and MacInTax. (There are other programs for professional preparers, who might file for 200 to 300 clients.)

Do you need a computer?

Your first decision on tax software should be whether to use it at all. If you've got a simple return to file and you're happy doing it by hand, or if you've got a more complex return and you're happy having an accountant handle it, don't bother with tax software.

But do take note of the $20 to $50 price tag. That's not much to pay for something that can have all forms handy when you need them , organize notes on expenses and receipts , calculate for you and even suggest possible smart moves and tax savings (though you'll want to check anything significant with an accountant).

One more thing: If you try a program's advanced "electronic filing" option, you can actually get your refund in days or weeks.

State taxes

Something else to consider is whether the program you've selected has a companion product, purchased separately, for completing your state tax return. Keep in mind that some state returns require only minor changes from what you've done to complete your federal return. So if you buy a state program, you could find yourself paying $40 or so to accomplish something you could do by hand in only a few minutes. But if doing everything on the computer is important to you, ask if a state program is available.

The major tax programs have state versions for the most populous states, but sometimes not for smaller states. Personal Tax Edge, TaxCut, TurboTax and MacInTax have state versions for most places -- just check to make sure the one you need is available now. TaxCut for the Macintosh is new, with only California and New York state forms, while MacInTax has forms for many more states.

Get the latest version

A final buying tip: Make sure you get the "final version" of any program, not a so-called "head-start version" sold before the IRS completed its new rules for the year. The major packages have been shifting from head-start to final versions in the last couple of weeks.

Next comes ease of use. All programs claim it, naturally. But they offer varying degrees of help in showing you how to work the program, explaining what tax rules mean, suggesting how to proceed incompleting forms (taxes aren't a science; there's some art involved in deciding what to claim and where) and offering telephone support.

The ease-of-use bandwagon these days is the "interview," which TaxCut started several years ago. Once, tax software simply asked you to fill in the blanks for each line of a form, calculated the results and printed the finished form. Now, most programs have an optional "interview," in which the program asks you questions in English, and then inserts the answers where needed.

TaxCut has an interview for all its versions, and I think it has the most advice at the right points. TurboTax has an "EasyStep" interview that's similar, and in its DOS version, also has some touches of humor to lighten the number-crunching. Personal Tax Edge offers the least advice in its interview, although it does have a new "suggestions" feature that looks for routes to savings.

Another part of ease of use is an ability to import financial records. Tax software is easier to use if you spent the year tabulating expenses and income with programs such as Quicken, Managing Your Money or MoneyCounts. Make sure your tax program can suck out that information and slam it into the right forms automatically.

TaxCut supports many programs and has a "shoe box" feature to hold bits of relevant financial history. TurboTax doesn't directly import from as many programs, but does work with the Tax Exchange Format, a standard format-in-the-making supported by the major financial planning programs.

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