Irs Encouraging Tax Software Use New Programs Find Errors, Speed Refunds By Weeks

Tax preparation software has been around as long as home personal computers, but this is the first year the Internal Revenue Service has encouraged taxpayers to use it.

The software prevents many of the most common mistakes and can speed refunds by several weeks, an IRS representative said.

“Computer programs do several important things for the preparer,” said Carol Felber, a public affairs specialist in the IRS’ Dallas office. “They point out omission of important information, prevent math errors and produce a neatly typed return that’s easier for us to read.”

For anyone unsure of the value of tax preparation software, that may be reason enough.

But there are other reasons: This year’s crop of tax return software includes the most extensive help features yet.

For less than the cost of an hour with an accountant, users can get videotaped and written tips from leading financial advisers, or they can get telephone support from H&R Block.

More important, at least in the IRS’ view, the programs offer users two options that people preparing their taxes without help don’t have. Aside from the standard return, tax software users can file their returns electronically or use the highly condensed 1040PC form one or two pages of nothing but numbers and essential information.

The IRS really likes the 1040PC, because it is scanned into the computer, rather than being handentered, so it is processed more quickly, Felber said.

The three major programs, Simply Tax, TaxCut and TurboTax (called MacInTax for the Macintosh), all offer three ways of preparing the forms.

The most common approach is the interview, a process where the computer prompts taxpayers for information and then enters it in the appropriate fields. The shoe-box method lets users enter figures randomly, and the computer sorts the information to the right forms. And there’s always direct access to the forms, so users can fill out their own returns.

The programs provide a way for users to pull information from most of the major personal finance programs, including Managing Your Money and Quicken. But that helps only if the taxpayer has used those religiously all year.

All the programs automate calculations, carrying figures forward to the appropriate boxes. They also warn users when there’s a conflict between two entries, a box left empty, or a figure that seems out of proportion to the rest of the return.

The programs also offer a quick means of evaluating “tax strategies.” Translation: “If I use this figure here, will it save me money?”

Before printing out the return, or zapping it by modem, the programs provide an auditor that scours the return for any lingering problems. The programs also print out a sheaf of papers supporting the return for the user’s files.

Because the tax laws change every year, users must buy a new version of preparation software each year.

Many companies create so-called head-start versions that sell before the new year. But to actually file taxes, users must get a final edition of the programs, which will hit store shelves later this month.

Two of the major programs, TurboTax and TaxCut, offer a CDROM version for the PC and floppy disk version for the PC and Macintosh. Simply Tax is on floppy disk for the PC only.

Simply Tax, from 4Home Productions, takes the narrow view of what users want, a no-nonsense way to file a tax return. The introductory windows are well organized, but the windows multiply as the return progresses, making work awkward.

A Deduction Finder suggests potentially overlooked money-savers, and the Audit Alert compares entries with national averages to warn about potential problems.

Help and tax suggestions come from The Ernst & Young Tax Savings Strategy Guide.

Because the program isn’t loaded down with multimedia and complex graphics, Simply Tax is a leading candidate for users with older machines such as a 386-based PC.

MECCA Software Inc.’s TaxCut is a blockbuster. The program uses a tab-style organizer for its main screen - a feature users will see more with the introduction of Windows ‘95.

The tabs break the filing process down to eight major steps, the first being the interview. At any point the user can skip around the interview, stop it or go back and change information.

An option under the edit menu lets the user tag an entry as tentative, then reminds the preparer to check the entry before filing.

The multimedia version comes with audio and video clips from TaxCut’s creator, Dan Caine. Usually the voice clip restates the question on the screen and explains the usual response, if any.

Caine’s programming abilities outshine his presentation skills. The media clips quickly become tiresome and then downright annoying.

But TaxCut has one huge benefit for its users: H&R Block. The software maker has struck a deal with the tax-preparation company. Anytime the program doesn’t answer their questions, users may call the nearest Block office to discuss the matter with a representative.

If that still doesn’t cut it, H&R Block will apply the purchase price of the software toward the cost of having its staff prepare the return.

TurboTax doesn’t provide a similar offer, but it has so many potent tools, it probably doesn’t matter. This is the program made by Intuit, the same company that makes Quicken, the standard of personal finance software.

TurboTax has been overhauled more often than the tax code, with a new look, better organization and a ton of accessible support material.

Like TaxCut, TurboTax uses a tab-style organizer for its main window and an interview process. It relies on worksheets for complex entries, so users can enter the information in pieces, then send one figure to the tax form.

More important is the help function, which has been beefed up significantly. TurboTax’s built-in suggestions and explanations are the easiest to use of the three. The program lays out all the pertinent facts and quickly tells taxpayers what a standard response would be.

On the CD-ROM version, support runs even deeper. An impressive video narration weaves explanations from Fortune magazine’s Marshall Loeb and tax attorney Mary Spouse through the preparation process.

The video clips, although sometimes slow in loading, are always pertinent and offer the meaningful information that users expect.

The CD also includes every arcane word of instruction from the IRS and the full text of The Money Income Tax Handbook.

The multimedia versions of TaxCut and TurboTax require power to run smoothly. Computers need to be a 486 minimum, preferably a 66 MHz or faster.