Do-It-Yourself Software Eases Tax-Prep Burden

It's that season again.

Time to trek down to the library to pick up a pile of forms, go home and unearth all the tax-deductible receipts, pick up a supply of pencils and erasers, and hunker down for a few nights of number crunching.

That's the schedule for some 118 million taxpayers this spring, if last year's count is any indication.

But a growing number of those taxpayers are taking advantage of computer programs that make the process a lot easier. They eliminate the forms, the pencils, and much of the time and numbers crunch.

About 17 programs are on the market, but two dominate: Intuit's TurboTax (MacInTax for Apple Macintosh) and Block Financial's Kiplinger TaxCut. Both are user-friendly and can handle relatively complex tax scenarios.

Most experts agree such software is not designed to replace professional tax preparers. "If you're going to a tax preparer now, we would never recommend that you switch to a [computer] program," says Gene Goldenberg, vice president and publisher at Block Financial. "It's whatever your own comfort level is."

Comfort is key with the two most popular programs. They ask you questions, and as you type the answers, the program zips the information into the correct form.

The problem is that the programs don't always ask the follow-up questions that a tax professional would, says Keith Byrum, computer expert at RiCo Financial, a tax service in Clovis, Calif. "When these programs first came out, we wondered if we would see a drop in business," he says. But the impact proved negligible.

Instead, the programs take aim at people who already do their own taxes. Of the 60 million individuals who filed returns last year, Mr. Goldenberg says, 20 million own computers, and only 3 million of those used tax software. So the market is "huge."

The programs are also much cheaper than an accountant: $50 for TurboTax (suggested retail) and $30 to 40 for TaxCut. Cheaper versions are available without CD-ROM. Filing returns electronically to the IRS costs $9.95 extra.

This year, TaxCut has launched a price war on Intuit's products, which held 85 percent of the market last year. And TaxCut's program will do just about everything TurboTax will, including download financial information from Intuit's popular Quicken money-management program. So taxpayers may not even have to key in numbers to answer the interview questions in either program. Intuit has beefed up this ability for 1997, so users can recheck each number before it's transferred to the tax form and correct it if necessary.

DELUXE versions of both programs also have helpful tax hints in both text and movie windows with expert advice, though TurboTax's are more extensive. Occasionally TaxCut instead refers you to gray IRS documents included in the package. This affects only somewhat obscure tax rules, however, such as calculating the basis of a home to determine gains or losses on its sale.

Unlike most of the less popular programs, both packages also have user interfaces that make navigating through tax forms, questions, and tips easy. TurboTax and MacInTax are a little more colorful than TaxCut, but TaxCut is no less useful.

Intuit sells additional programs for every state with an income tax, while TaxCut offers most states for IBM computers and only two for Macintosh.

After all the forms are completed, both programs can audit the return, looking for unusual information that could spark interest from the IRS.

While both programs have been criticized in past years for programming mistakes of their own, and Block issued a corrected version of TaxCut after its initial release this year, Intuit and Block Financial promise to pay any penalties that stem from program errors. And electronic returns have 1/10th the errors of those prepared by hand, according to the IRS.

This year, computer pioneers have another way of filing taxes electronically: on-line. Universal Tax Systems, which forwards electronic tax returns from TurboTax and TaxCut to the IRS, has launched a site on the World Wide Web with all the features of the CD-ROM programs. It costs nothing to fill out your tax return this way, but $9.95 to file it electronically or to print out the forms to mail it. Each user gets a personal ID number and can set a password to keep others from viewing his or her tax information. The drawback is that you won't have access to your tax forms if the Web site or your connection goes down.