The Cutting Edge: COMPUTING / TECHNOLOGY / INNOVATION : Software Can Help Make Tax Time More Bearable

Uncle Sam doesn’t give you much choice about whether to pay your taxes. But he does give you plenty of options when it comes to how to fill out your forms. You can do it by hand, go to a neighborhood tax preparation shop, or seek out the services of an accountant, tax attorney or enrolled agent. Or you can turn the job over to your personal computer.

Actually, you can’t just delegate the job to your machine, but PC tax preparation programs, which have been around for about 15 years, are getting pretty sophisticated and easy to use. There are several programs on the market, but this year I focused on the multimedia (CD-ROM) versions of the two leading programs: TurboTax from Intuit and Kiplinger TaxCut from Block Financial Corp.

These programs have been competing with each other for several years and each year they seem to get more and more alike. Both are based on an interview process--similar to what you get when you walk into a tax preparer’s office. Rather than having to deal with tax forms, you answer questions and let the programs fill out the forms for you. With either program you also have the option of entering data on an on-screen replica of the Internal Revenue Service forms.

Both programs offer all the forms that most taxpayers will need. In the unlikely event that you need a form the program doesn’t have, you can fill it out by hand and enter the bottom line in an appropriate place in the tax program. Both programs can print out IRS-approved forms that you sign and mail in, and both can also be used to prepare data to file electronically.

The IRS doesn’t yet allow taxpayers to file electronically on their own, though there is speculation that the agency may soon allow it on an experimental basis. In the meantime, users of either program can use their modem to send their returns to a service bureau that, for about $20, will send in the return for you. TaxCut users who are CompuServe subscribers can file with the service for $10.

The IRS says it can process electronic returns much faster than ones submitted on paper and, in most cases, get refund checks out sooner. Electronic filing is also cheaper for the IRS, because it doesn’t pay someone to input your data. Unfortunately, the agency doesn’t pass the savings on to the taxpayer. TurboTax can optionally print form 1040PC, which contains all the data of a regular tax return but takes up a lot less paper.

TurboTax Deluxe is the glitziest when it comes to video tax tips and multimedia help. The disk also has electronic versions of two tax books, “The Money 1996 Income Tax Handbook” and “How to Pay Zero Taxes,” as well as 30 IRS publications. You can quickly access these and other help documents from within the program. There is also multimedia video advice at various points throughout the program. These short video clips help break the monotony, though they don’t generally provide information that can’t be displayed as text.

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Kiplinger TaxCut doesn’t have as much video help but there are audio tips and plenty of handholding throughout. The program does have some video clips that contain tax advice from Kiplinger’s editors.

Intuit makes a big deal about the fact that TurboTax is able to automatically import data from Quicken, its best-selling personal finance program. That’s true, but TaxCut can also import Quicken data. TaxCut users do have to go through the extra step of first exporting data from Quicken, but the process is clearly explained and takes less than a minute. Both programs can also import data from Microsoft Money, Managing Your Money and other major personal finance programs. If you use a personal finance program throughout the year to keep track of your income and expenses, either program will automatically enter the data on the appropriate forms, assuming you had coded it correctly.

Neither program is completely bug-free. Intuit, for example, reported that TurboTax will erroneously allow taxpayers over 70 to take a deduction for contributions to an IRA--news to the IRS. Block has also reported a few problems with TaxCut. Both companies have already posted corrections (or work-arounds) on their World Wide Web sites and on commercial online services, and both companies have pledged that they will pay any penalties that result from a bug in their program.

Considering the complexity of the U.S. Tax Code and what it took to create these large programs, it’s amazing that they don’t have more bugs. No method of doing taxes, including using a well-respected CPA firm, is foolproof. If you complete the same return using different tax programs, you’re likely to get slightly different results, but that’s also true if you provide the same data to more than one professional tax preparation service.

Calculating taxes is not an exact science and, as good as they are, these programs aren’t for everyone. If you have a complicated return or just need help and strategic advice, then you may be better off going to a tax professional. I recently took an informal survey among senior computer industry executives and every one--including one who works for a tax preparation software company--have their returns prepared professionally. The same is true with many computer journalists I know--present company included.

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The IRS doesn’t have its own tax preparation software but it does have its own site on the World Wide Web (https://www.irs.ustreas.gov) where you can download forms, get “tax help and education” and read tax regulations “in plain English.” The forms you download, in most cases, can be printed and filed with your return. The IRS site is, surprisingly, pretty inviting. It’s comforting to know that the IRS has become downright friendly, not to mention even a bit hip. If only it were more forgiving.

Lawrence J. Magid welcomes e-mail at Larry.Magid@latimes.com and invites you to visit his home page on the World Wide Web at www.larrysworld.com. Links to tax sites can be found there.