Tax Preparation Software

2006 IRS Filing Date Change

2006 tax returns must be filed by April 17 because April 15th falls on a weekend this year. Taxpayers living in Maine, Maryland, Massachusetts, New Hampshire, New York, Vermont and the District of Columbia, have an April 18th filing deadline, because of a Massachusetts state holiday where the IRS houses a processing facility.

Tax Preparation Sweat Equity

This year more time and sweat will be required to complete your taxes than ever before. In 1995 the IRS reported it took an average taxpayer 9.5 hours to complete form 1040. This year figure on investing 14+ hours, depending upon how much prep-prep work you’ve done concerning record keeping and filing. Add state and city tax return prep time to this number and the “simplification” of the tax structure suddenly looms more complicated than previous years. The IRS 1040 2005 instruction booklet is 142 pages long, up from 128 pages in 2004.

Downsides Of Tax Preparation Software

The biggest drawback is data entry input errors. The IRS‘s position is that self-prepared returns are twice as likely to contain errors compared to those filed by a professional tax preparer. This is true to a point, because even professional tax preparers make data entry mistakes. The best rule of thumb is to check your figures carefully.

Missing legitimate deductions because programs can’t offer interactive tax-planning advice is another challenge. At least, the software can’t as yet. The responsibility for knowing this information falls to you.

All of the programs make sporadic sales pitches for additional products somewhere in the middle or at the end of your prep work before you create your final forms.

Software Bugs

Glitches do occur even in the best tax preparation programs. Turbo Tax User Forum offers solutions to these posted by users. H&R Block Customer Support is limited to posting solutions to known issues.

Check Software Packaging

Nothing can be more frustrating that to buy a tax preparation software package only to discover that your PC or Mac operating system configuration can’t handle it. Make sure by making a list of your system’s capability before you shop. Do the same for any online software.

You Get What You Pay For

Changes in the tax law will require purchase of new versions of your tax software program. Last year‘s version will no longer work to your advantage. Most small business returns are complicated, and it's easier and far more cost-effective to import the previous year's information into this year's software product version than to reenter names, Social Security numbers, employer information, and other data all over again. Most business owners use the same software program because of this problem rather than switching to another software program, even if others are cheaper.

The more expensive tax preparation software programs offer more help levels and more in-depth interviews to help you complete your tax forms.

• Detailed interview
• Multiple category mileage deductions
• Medical, charitable, and business
• Depreciation expenses
• Noncash charitable contributions exceeding $500
• Large cash contribution to a single group
• Triggers to the Alternative Minimum Tax (AMT)
• Asset sales, stock sales and dividends
• Mortgage interest
• Real estate property taxes
• Business deductions
• Employee expenses

Best Software Choices

TurboTax Boxed Programs fit the bill and are good for small business owners because they provide a detailed interview to help with the above-listed areas in Turbo Tax Online from $39 to $99.

H&R Block’s Boxed Tax Cut Program and H&R Block Online selections run from $29 to $79.