Consult a tax expert, human or electronic

March 05, 2006|By HUMBERTO CRUZ | HUMBERTO CRUZ,TRIBUNE MEDIA SERVICES

How can anybody keep up? In the past year alone, the tax code grew by more than 5,000 pages, with major congressional legislation revamping the bankruptcy process, offering tax incentives to conserve energy and providing tax relief to hurricane victims.

Changes stemming from previous laws, such as higher contribution limits to retirement plans, continued (and will continue) to be phased in. Debate without resolution keeps swirling about the alternative minimum tax (AMT) and whether to extend lower rates for qualifying dividends and long-term capital gains beyond 2008.

Meanwhile, a tax reform advisory panel proposed alternate plans for America's tax system, both calling for fewer and lower tax brackets but also fewer deductions while eliminating the AMT and overhauling retirement savings plans.

Against this backdrop of complexity and change, there is only one logical piece of advice I (or anyone) can offer at tax-preparation time: Get some help, whether from tax software, a professional tax preparer, or both.

Time was in the 1990s when I happily did my own taxes with just paper and pencil and a hand-held calculator. Today I'd be a fool to, when affordably priced software can do all the tricky and laborious calculations in a jiffy and, more important, prevent costly errors.

That's why I'm a big fan of tax software. Aside from saving hours of drudgery, the top programs, through plain-English, on-screen interviews that ask for tax-related information, greatly cut down if not eliminate the risk of misinterpreting the rules.

This year, I can recommend market leader TurboTax from Intuit Inc., as well as competitors TaxCut from H&R Block, CompleteTax from CCH (a Wolters Kluwer business), and TaxACT from 2nd Story Software Inc. That does not mean other programs may not be good, too, only that I have not reviewed them.

For price, you can't beat TaxACT's standard online edition - it's free and robust enough to satisfy users with simple returns. My favorite if you have a more complex return or want advanced planning tools remains TurboTax.

For those who feel more comfortable having a professional do - or at least review - their returns, I suggest sticking with those with experience, good references and credentials, such as enrolled agents and certified public accountants. Ask for areas of specialization, whether they will represent you in an audit and whether they will bill you by the hour or for a straight fee.

Humberto Cruz writes for Tribune Media Services.

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