Mostly Happy Returns Via
the Software Route
By George Hager
The answer -- after two days spent testing the top two mass-market tax-preparation software programs, Kiplinger's TaxCut and Intuit's TurboTax -- is a qualified yes.
As millions already know (about 14.5 million people reportedly used computers to file their taxes last year), if you're reasonably computer-adept and have a fairly uncomplicated tax situation, these programs are terrific. Both are feature-rich, enormously powerful tools, vastly evolved from their simpler ancestors. The deluxe editions will even pop up videos of live tax advisers to walk you through complex tax topics or (in Kiplinger's program) offer tips about how to cut your tax bill -- very reassuring when you're sitting there wrestling with the tax code by yourself.
For my first test, I pretended I was a single, middle-income person who had just moved to Washington from Texas last January to take a new job. I had modest income from a mutual fund and only a couple of deductions.
Both programs handled the hardest part of this return without breaking a sweat, instructing me on the time and distance requirements I had to meet to deduct my moving expenses and then figuring the deduction for me. After a little practice to get familiar with the software, I was able to prepare this return and print it out in about 30 to 40 minutes, start to finish, with either program. Electronic filing, which both programs offer and aggressively promote, would probably have cut the time even further. Not bad.
On the other hand, if your taxes are complicated -- kids, child care, a second home, out-of-state rental property, self-employment, a home office -- you can quickly find yourself in deep water trying to get either of these programs to sort things out. For my second test, I asked the Alexandria accounting firm Ross & Moncure to provide a complex, real-life scenario. (Full disclosure: These guys do my taxes, and they think software like this siphons off at least some of their clients; they were happy to have the chance to try to trip the programs up, and, to a minor extent, they succeeded.)
Data entry took a long time (about three to four hours for each program), and there were a few times when I wasn't sure that what I was doing would be okay with the IRS, despite extensive online hand-holding. In the end, both programs avoided most of the accountants' traps but fell into a big one by failing to inform me I had to file an out-of-state tax return for my out-of-state rental income, a dangerous omission (states such as California and New York are notorious among accountants for tracking you down and dunning you for back taxes, penalties and interest on income you made from investments there -- very unpleasant). And both programs managed to crash at least once while doing the complex return.
That said, however, both programs are so powerful and well designed that I think I could eventually have produced an acceptable return with either one. The key word here is eventually: If you have a complex tax situation, you'll have to be patient, and you'll have to push both programs to cough up the advice you need to make judgment calls on questions such as how to deduct a home office or how much you can contribute to an IRA or an SEP (simplified employee pension). Don't wait until 10 p.m. April 15.
Bottom line: For a basic return, I'd take either program. Kiplinger's TaxCut touts its supposed price advantage, but Intuit claims that with discounting and a rebate good through April 15, TurboTax's price is competitive. Judging from the claims of both companies, you can find the no-frills PC versions of both programs for $10 to $15 (after Intuit's $5 rebate) and the deluxe PC version (if your computer has a CD player, buy this one) for about $25 to $30 (after Intuit's $20 rebate).
Where TaxCut really does have a price advantage is in its state tax-preparation programs: You can download them for free from the Kiplinger Web site (www. taxcut.com) or buy all of them on one CD for $5.95. State programs from Intuit are $27.95 for the first one and $19.95 apiece after that. My complex return would have required two separate state returns, adding about $48 to the software bill. Ouch.
Despite that price disadvantage, though, I'd feel a little more comfortable with TurboTax for a complicated return. While both programs are overflowing with help and advice, TurboTax seemed to do a slightly better job of anticipating my questions and putting appropriate questions and answers in front of me when needed.
I also liked the fact that TurboTax efficiently clumped related questions together on a single screen in its interview mode, rather than TaxCut's method of limiting you to one question per screen, which gets tedious. Both programs let you choose whether to be interviewed about your finances, which is sort of like sitting there with an accountant asking you questions and filling in the forms for you, or take a quicker route, choosing the relevant forms and filling them out yourself.
But what finally tipped me toward TurboTax was a seemingly small detail: My imaginary complicated taxpayer was a self-employed TV cameraman who wanted to make a maximum contribution to his SEP, a complex calculation. TaxCut provided advice but left me on my own to do the calculation, and in my haste I got it wrong. TurboTax let me check a box to tell the program that I wanted it to calculate the maximum contribution for me, a nice touch.
A few final notes: In the "aren't computers terrific" category, both programs have routines you run after inputting all your data to check for errors and the sort of things that trigger audits (larger-than-average deductions, etc.). Both also have tax planners that let you look ahead to next year and beyond, based on the tax data you feed in this year. The feature I came to like best was that each program shows the running total of your tax bill (or refund) in the corner of the screen: Enter a deduction and you can instantly see how much it affects your bottom line.
In the "aren't computers awful" category, make sure to save and make backup copies early and often if your return is the least bit complicated. During the two days I worked with the software, both programs crashed and ate data; I became religious about saving. Also, be sure to get the manufacturer's latest updates for the software, incorporating the latest changes in software and the tax code, before you complete your return. Alas, this requires using the tax program to go the manufacturer's Web site, something I was utterly unable to do. Whether this was the fault of the tax software, my middle-aged machine or my balky America Online 3.0 software, I have no idea. All I know is that it didn't work. Lucky it wasn't April 15.
© Copyright 1999 The Washington Post Company