No Sweat Software For The Tax Trials

Time was when using tax-preparation software was almost as time-consuming as preparing your 1040 by hand. Whatever gains the programs offered by automating tedious calculations and putting dozens of obscure Internal Revenue Service forms and schedules at your fingertips were offset by the difficulties--particularly for computer novices--of navigating the software.

To their credit, the developers of tax software have made their programs much more user-friendly. The latest editions of TaxCut and TurboTax--the top sellers--underwent extensive redesigns that let users move around with greater ease. And more programs are being offered on CD-ROM, a format that should be perfectly suited for tax use. Seasoned filers gain access to meaty tax guides, while neophytes may appreciate the full-motion video clips of leading tax experts explaining the IRS code and offering advice. Unfortunately, while the CD-ROM versions showed improvements over last year's first efforts, most still haven't tapped the full potential of multimedia.

TIE-INS. Despite the advances, most tax software remains useful largely where tax situations are fairly straightforward. Returns involving such complexities as self-employment, partnership income, or passive investment losses may still require the services of a pro. But even if you hire an accountant, you might keep down the cost by using software to prepare a first draft. At the least, you'll be better organized when your accountant starts the meter running.

Both TaxCut and TurboTax are promoting links to their corporate parents as selling points. TaxCut buyers who later conclude they need professional help can apply the full cost of the software toward the fee charged by H&R Block, which acquired TaxCut's parent--Meca Software--about a year ago. What's more, TaxCut users can call the nearest H&R Block office for answers to tax-related questions and get free help if they're audited.

TurboTax offers a similar tie-in, with a $25 credit good at any of 10,000 participating tax preparers. But much of TurboTax's appeal is its integration with its sister software, Intuit's Quicken personal finance program. This year, TurboTax makes it easier for Quicken users to export data--such as deductible medical expenses--into their tax return.

Still, TurboTax and TaxCut stand up well on their own. In response to user complaints, both now make it easier to leave the "interview" process and skip to other sections. "Last year, people felt like they were walking a tightrope," admits Eric Jacobsen, Meca's marketing vice-president. "If they moved from the interview to the forms, they couldn't figure out how to get back."

Navigating TaxCut has become simpler with a new interface that groups the various steps and functions under eight notebook-style tabs. As a result, users of TaxCut's Windows version can jump to just about any tax topic with three clicks of the mouse. And when tax season's over, a single "uninstall" step now deletes the program--save for a small file that retains key data for next year--from the hard drive. That comes in handy now that most tax programs hog up to 15 megabytes of drive space, vs. an average 6.5 megabytes last year.

IMPROVEMENTS.Combined, these improvements once again make TaxCut the easiest program for phobic taxpayers. But confident filers may find TaxCut's hand-holding still too tight at times. Rival TurboTax allows veteran PC users to navigate more quickly. This year's version also sports a new notebook tab interface, supports 15 more forms, and does a better job transferring data from its worksheets to other IRS forms. TurboTax also has added an "uninstall" feature of its own.

Another plus: TurboTax cleaned up a few irritating features of earlier versions. For instance, the "errors and omissions" feature--intended to catch oversights that could trigger an audit--had pointed out problems but left it to the user to go back and fix them. Now, TurboTax takes the user to the offending item, thus allowing on-the-spot repairs.

A year ago, Computer Associates International offered its fledgling Simply Tax for just the $8 shipping cost. The promotion seemed to pay off--800,000 copies were distributed. Unfortunately, it doesn't appear that this year CA has given customers much reason to come back. The 1995 edition debuts a new interface that's much less intuitive than last year's. Despite incorporating tips drawn from the Ernst & Young Tax-Saving Strategies Guide, the overall level of advice it offers pales beside that of rival programs.

Bargain-conscious filers might want to consider Personal Tax Edge, at $19 from Parsons Technology. While not as rich in features as TaxCut and TurboTax, Tax Edge is a sturdy program that includes powerful interest and depreciation calculators, which may prove valuable after tax season ends. Tax Edge may also appeal to residents of smaller states, since it provides companion programs for all 43 states with an income tax--or 15 more than TurboTax and TaxCut. The state programs run another $19 each, at least $6 less than those for TurboTax and TaxCut.

Indeed, Tax Edge is good enough that when Intuit acquired Parsons last year, it incorporated much of Tax Edge into another Intuit program, J.K. Lasser's Your Income Tax. A second copycat program, Tax Saver from Novell, also uses code licensed from Parsons.

If there's any application suited for the CD-ROM format (other than games), it's tax programs. A CD-ROM's 600-megabyte-plus capacity can hold voluminous IRS regulations and independent tax guides. Regrettably, the '94 CD-ROM versions offer few improvements over disk-based editions. The notable exception: TurboTax Multimedia, which clearly put a lot of effort into improving last year's disappointing product.

VIDEO CLIPS. This year, TurboTax Multimedia provides 5,000 links to IRS tax publications--far more than any rival. The new version, which sells for about $10 more than the disk-based program, offers strong "hypertext" links that allow users to jump straight from the tax form to the relevant section of the IRS code or an easier-to-read guide by tax expert Mary Sprouse. Sprouse also appears, as does Fortune Editor-at-large Marshall Loeb, in video clips offering tax advice--although it's hard to fathom what value the clips offer over the text screens.

By comparison, the CD-ROM versions of TaxCut, Tax Edge, and Lasser offer few features--save for sometimes-insipid video clips--not found in the disk versions. Meca obviously realizes the shortcomings of the TaxCut CD-ROM because it is offering it at the same price as the disk version--and throwing in two additional programs, Personal Attorney and Mortgages, Insurance & More.

Thanks to improvements in programs such as TurboTax and TaxCut, tax software now may help you save time over doing your taxes by hand--and reduce the math errors that can delay your return. And if a program helps you spot a deduction you might have otherwise overlooked, it would more than earn its keep.

    Before it's here, it's on the Bloomberg Terminal.