Software Aids Tax Preparation
Software Aids Tax Preparation
Like it or not, it’s probably time to start thinking about paying your income tax. With more than 400 changes in the tax code for 2001, that may seem an especially daunting challenge this year. Fortunately, the problem is easily solved with your computer and one of this year’s tax preparation software packages.
Number crunching is one of the things computers do best. And whether you’re an independent salesperson operating as a sole proprietor or the head of a small real estate company, one of these off-the-shelf programs can guide you through preparation of your return. And if you live and work in a state with its own income tax, you can also purchase a companion program to guide you through compliance with local tax codes.
This year the “big three” in tax preparation software include TaxACT from 2nd Story software, TaxCut from tax preparation specialists H&R Block, and TurboTax from Intuit, publisher of Quicken. Each of these programs builds your return through a series of on-screen questions. A question is posted on screen, and you respond by filling in the appropriate blanks. If you’re not sure about an answer, the Web sites of each of the tax package publishers has reams of information on taxes and tax planning topics organized by topic.
Tax preparation can be even easier if you used one of the popular finance management programs such as Microsoft’s Money, Intuit’s Quicken for individuals, or QuickBooks for the small business to keep your accounts during 2001. These programs let you seamlessly import a year’s worth of income and expenses into any of the tax programs in the this article, making the data entry portion of tax time easier.
Once your data are in the tax preparation package, the program organizes and deducts your expenses; handles the calculations on taxes owed or refund due; and even looks for deductions you may have missed. When you’re through, you can print your return and the label for mailing it or file it electronically.
Although all three programs of the tax preparation software programs in this article will help you calculate your taxes, basic TaxACT has the added appeal of being free. A “deluxe” version of TaxACT, which is probably what you need to file a small-business return, can be downloaded from the company’s site for $9.95. State editions of the software are available at $12.95. You have the option of printing and mailing your return or filing it electronically with the IRS through the company’s server for $7.95. You can even fill out your tax form online at the company’s alternate site. Before you can prepare your return online, you must set up a free account on what the company describes as its “state of the art secure server.”
For their higher prices, both TaxCut and TurboTax strive to be much more to users than a mere tax-preparation program. In addition to importing your data and calculating your return, TaxCut software include a “Tax Law Assistant,” a “Saver Credit” feature, and a “Professional Audit” service. The Assistant explains how changes in the tax code impact this year’s return and how they’ll impact you for the next five years. The Saver Credit and related “Express IRA” features help you choose and set up an IRA with your refund. If your not sure that the review from the Professional Audit feature built into the software is enough, you can have your return reviewed via e-mail by an H&R Block tax specialist for $29.95 before submitting it to the IRS. Response times will vary depending on the demand for the service and the complexity of your return.
Tax Cut is offered in two versions: TaxCut Basic for $14.95 and TaxCut Deluxe for $24.95, with one free electronic filing and a copy of one state version of the software (after mail-in rebates). In a promotion with Microsoft, buyers of TaxCut also get a rebate worth up to $34.95 toward the purchase of Microsoft’s Money 2002 Deluxe financial management software.
Intuit’s TurboTax is offered in several versions: TurboTax Deluxe, $39.95; TurboTax Premiere with enhanced features for $49.95; and TurboTax Home and Business for $69.95. Web-based versions of the company’s 1040 software are also available at the turbotax.com site, with pricing dependent on when the return is completed and filed.
Turbo Tax Premiere features a “Tax Law Advisor” to explain the impact of changes in the tax law on current and future filings. A “401K Maximizer” shows you how to increase contributions to a retirement account without reducing take-home pay. The software’s “Deductions Manager” compares this year’s return with previous returns prepared electronically with the same software to make sure you haven’t overlooked a way to reduce your taxes. TurboTax for Home and Business also includes a “Depreciation Expert,” “Business Tax Library,” and all the necessary forms and charts to prepare a Schedule C for business income making it the best choice for independent contractors .
Doing your taxes yourself will require a few hours of your time, minimum, and there’s no one else to blame if your error or miscalculation invites an audit. On the other hand, the software costs only a fraction of what a tax professional might charge, and the software publishers stand behind you should a mistake in their programs lead to your problems with the IRS.
No one enjoys preparing a return or paying taxes, but one of these programs, with their many features, can make the process just a little less painful this year.
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