Test lab. (tax-preparation software)(includes related articles) (Software Review) (Evaluation)
by Richard O. Mann, Alfred C. Giovetti

It's that time of year again when throughout America people stay up late, wrestle with piles of bank statements and old receipts, and begin to mutter to themselves as they attempt the 1040 two-step. It's tax time.

Although nothing can really ease the pain of paying taxes, your PC can convert your annual tax-preparation session from a befuddling ordeal to an efficient, almost pleasant exercise. Or, if you use a paid preparer, this might be the year to take your fiscal fate back into your own hands with the capable assistance of your faithful PC.

In Test Lab this month, we focus on ten tax-preparation programs. Tax software is getting to be so good that you can rely on it to guide you successfully through the often confusing maze of forms with their arcane instructions--as long as you don't have truly unusual transactions.

These tax-preparation programs range from lean, form-filling speed demons to multimegabyte masters that gently interview you and handle all the forms and schedules. The amount of instruction and help these programs offer ranges from little or nothing to extensive handholding every step of the way (including IRS instructions, plain-English explanations, and lists of tax-saving tips).

Most of the programs contain the basic feature set, which includes IRS instructions, at least 35 forms and 10 schedules, the ability to print IRS replica forms for at least the 1040 itself on laser or dot-matrix printers, an electronic filing option, and available add-on software for state returns. You can assume that these features are there unless we tell you otherwise. The features grid also lays out the nitty-gritty details for you.

New this year is the exciting Form 1040PC, not offered by all the programs. The 1040PC bypasses printing IRS replica and substitute forms, which, after all, are mostly composed of lines with no dollar entries. The 1040PC prints only lines which contain data. Returns eligible for the 1040PC--the vast majority--print on a single page. The IRS believes it can process the 1040PC significantly faster and more accurately than traditional paper returns.

The realities of publishing schedules mean that we have tested "early bird" or "head start" editions of the software. Developers traditionally release a preliminary version in the late fall. When the IRS and Congress finally approve the forms and finalize the rules in January, developers ship the final version. Although developers rarely make significant changes in their software between the early bird and final editions, it does happen.

The timing also means we can't test software that doesn't ship an early bird edition. In sidebars, we cover two fine programs that weren't available to test. Another sidebar shows off an intriguing product designed to turn your PC into an electronic taxfiling business.

Using these programs doesn't mean that you must dump your tax adviser and go it alone. If you have nonstandard transactions, you may still be able to prepare your own return by simply calling your tax adviser for advice on the hard parts. Your adviser will still bill you, but less than it would cost to prepare the entire return. Other preparers may be able to use your disk as a starting point and merely review and finish the return that you took as far as you could.

How should you choose a tax program? Decide how much handholding you need and look for a program that fits your style. Some of us like to work directly with the tax forms; others would be delighted never to see the actual forms till it's time to sign them. There are programs for both styles. If you use another financial program, take a look at our features grid to see if you can plug your program's data into the tax package of your choice. Check the hardware requirements to be sure your PC will run the program. Compare the forms in your last year's return to the software's list of forms to ensure that it handles all the forms you'll need.

Then, buy the program that best fits your needs and let it simplify your life.