Simpler Software For More Tedious TaxesDean Foust
Still haven't used your personal computer to do your taxes? Consider then this recent bulletin from the Internal Revenue Service: Chances are you'll need at least a half hour more than last year to complete your return. Thanks to the complexities of the Clinton tax plan, the average time needed to prepare a fairly simple return consisting of Form 1040 and schedules covering itemized deductions, interest and dividend income, and capital gains will take roughly 13 1/2 hours.
Maybe you should let your PC ride to the rescue. By automating many calculations, tax software can greatly reduce the time and drudgery required to prepare your return--perhaps by half. It can also virtually eliminate math errors, a common cause for refund delays. What's more, a good tax program can help users catch deductions they might otherwise miss and spot potential problems that could lead to an audit. With more programs making it easier--and cheaper--to file electronically, you may get an earlier refund to boot.
GOOD QUESTIONS. This year's crop of tax software contains several new features that make doing the 1040 tango with a computer even easier. More programs now employ the interview technique. Instead of letting you plunge into the morass of forms and schedules, the program asks you to respond to simple questions, then routes the answers to the right form or schedule. And more programs are allowing taxpayers to file using the "1040 PC" form that the IRS approved last year, which condenses even a complex return down to two pages by only printing the lines in which filers have entered a number. This also marks the year that tax software went multimedia, although the first efforts seem disappointing.
The biggest change this year, however, is the software cost. The price wars waged in spreadsheets and data bases have expanded to the tax arena: In an attempt to win market share from ChipSoft and Meca Software, the two dominant players, Parsons Technology and Computer Associates International are practically giving away their programs. Their goal: Build a group of users willing to pay full freight for next year's update. If Parsons and CA succeed, that may force the competition to drop their prices next year.
For all of the improvements, most tax software
remains useful largely for individuals who have straightforward tax situations. Returns involving such complexities as self-employment, partnership income, or passive investment losses still may require help from a professional.
For phobic taxpayers, Andrew Tobias' TaxCut provides the most hand-holding. It also breaks the process down better than other programs: Help screens translate IRS-speak into plain English and are sprinkled with the wit and humor of Tobias, a leading financial journalist. TaxCut's new Navigator feature makes its interview even easier than before. The first tipoff comes at the outset: For example, TaxCut never asks you whether you want to take the standard deduction or itemize, or which forms you should use, but simply adjusts based on how you respond to a series of questions.
Another new TaxCut feature, called Instant Update, gives users a split-screen view of both their 1992 and 1993 returns, allowing them to reenter--with a single key-stroke--those items that haven't changed since last year.
NEW BELLS. On the other hand, the lengths that TaxCut takes to oversimplify the process may be irritating to those taxpayers with more confidence in their abilities. These filers may find ChipSoft's TurboTax more efficient and better able to handle complex tax questions. ChipSoft didn't tinker much with the program, which in the case of the Windows version was good. But the DOS version still badly needs an overhaul. The instructions and help screens obscure far too much of the screen, often leaving users unsure of where they are in the return.
There are a few new bells and whistles on TurboTax. ChipSoft made it easier to retrieve data from its companion budgeting and check-writing program, Quicken. And the new Deduction Finder conducts a last-minute search for savings you may have overlooked.
TurboTax also unveiled a new $60 CD-ROM product containing the Windows version, three tax planning and savings guides, and an on-line copy of the best-selling J.K. Lasser Tax Guide. While the CD-ROM bundle offers a discount off what the products would cost separately, the product is a huge disappointment. The beta (prerelease) version reviewed by BUSINESS WEEK is essentially a collection of the disk-based programs with no apparent attempt to integrate them.
STRANGE MOVE. The Lasser guide lacks a strong hypertext feature that would allow users to click on key words to move to more extensive discussions of a subject. And the type is hard to read on anything less than a 20-inch monitor. Most puzzling, though, is why most of the CD-ROM version doesn't really run off the CD-ROM but requires copying 14 megabytes of files onto your hard drive.
Parsons' Personal Tax Edge, available by direct mail for $19, may be the choice for the bargain-conscious. It lacks the all-inclusive features of its better-known rivals, and its interview function isn't as conversational as others. But to its credit, Tax Edge contains a few distinct features you can't get elsewhere, such as powerful interest and depreciation calculators that could prove helpful in analyzing investments long after your return is filed.
Considering what a bargain Tax Edge is, it's puzzling why Parsons has begun promoting a less powerful competitor, Tax Mate. The first 250,000 respondents will get Tax Mate for just an $8 shipping charge. But Tax Mate's features are so limited that it can really only handle simple returns that shouldn't need a computer. Tax Mate supports far fewer IRS forms and schedules than rivals do and doesn't offer a "shoebox" feature that lets you enter receipts individually with the computer sorting them into the right category.
For $3 more, you can get a copy of Computer Associates' first foray into the tax software biz, CA-Simply Tax. Yes, most tax pros advise against buying untested tax programs until the bugs are worked out, but Simply Tax has been around for some time: CA just bought the old EasyTax program from SoftKey. This Windows program offers a nice interview feature and decent tax tips. But unlike TurboTax and others, Simply Tax doesn't include for free the communications software that allows you to file by modem. That must be ordered separately.
All of this software requires up-to-date computers that run Windows and have a lot of internal memory. For users of older PCs with limited memory and perhaps no hard drive, there is one no-frills program that can run off floppies: AM-Tax ($39, 816 426-8361), which requires just one 3.5-inch floppy drive or two 5.25-inch drives. Two more sophisticated programs will appeal to practitioners and individuals with complex returns: Tax Solver ($80, 617 449-6222) and TaxPerfect ($80, 214 386-6320). Tax Solver (800 525-5611) is a collection of integrated spreadsheet templates that is unmatched in its ability to perform "what if" analysis of various tax scenarios, while TaxPerfect comes with 720 pages of on-line IRS instructions. One drawback: The latter two programs offer either no or few state forms.
Once you have completed your return, it's time to consider electronic filing. But you can't just dial up the IRS with your modem. Instead, you have to send the electronic form via modem to an IRS-approved transmitter (which charges $10 to $20 each). In years past, you had to mail your disk to the transmission service or pay extra for special communications software. But this year, TurboTax, TaxCut, and Tax Edge have thrown in the communications software for free.
Whether these services can all handle the surging interest remains to be seen. Last year, many TurboTax users who filed electronically complained that they didn't get their refunds until months later than promised. A ChipSoft official says that most of the problems occurred with returns that contained mistakes. But the official admits that the company didn't do a good job of kicking the returns back to users quickly enough. And while ChipSoft created a special "mailbox" within the CompuServe on-line service, many users inadvertently sent their returns to the wrong CompuServe forum. ChipSoft says it has made a number of improvements that should minimize any problems this year.