It's that time of year again--time to start thinking about filing annual income tax statements. Though it's never a particularly pleasant task, the software packages on the market today can make this annual event a bit less intimidating.
Historically, small-business people either have struggled along on their own, preparing tax forms each year, or have found themselves faced with potentially large tax-preparation bills. Today's tax-software packages are powerful, user-friendly tools that are available for prices well under $100, allowing you to save both time and money.
K. Richard Helms is the owner and operator of Helms and Co., an independently owned accounting and tax-consulting firm in the village of Wellsville, New York. He considers TurboTax to be far and away the best tax software package for individual business return preparation. "The main asset for the amateur preparer is that the program walks the individual through the preparation process," Helms says. While he doesn't recommend that small-business owners do their tax returns entirely on their own, he does point out that the TurboTax programs are "a good source of forecasting and accumulating information for the professional preparer."
Even if you're faced with complex tax issues and will need to call upon the advice of a tax professional, a tax-software package will provide you with a helpful first draft--a good starting point for your tax discussions. The more work you can do on your own, and the better prepared you are, the less time (and money) you'll need to invest with a tax accountant.
Lin Grensing-Pophal writes about business from her home office in Chippewa Falls, Wisconsin.
Must Have Features
Of course, you'll want to select a package that's easy to use and that will save you the maximum amount of time on tax preparation.
Virtually every package offers an "interview-based" form-completion option, which presents you with a series of questions; your answers will provide the information needed to complete the various forms and schedules. Look for a package that offers an interview sequence free of accountant's jargon, along with an option to enter data directly onto the forms, if you choose. To avoid having to re-enter data already maintained in an accounting system, most programs allow you to download data from text files, or directly from compatible software packages.
The software should include all of the IRS forms that you'll need for your particular business situation. As Intuit's Daina Finch points out, "All business-tax software should include forms for depreciation, car and truck expense worksheets, amortization, capital gains and losses, extensions of time to file, and various tax credits."
Also, make sure the product supports the specific legal form of your business. "You'll need form 1040 Schedule C for a sole proprietorship, form 1120 for a corporation, form 1120S for an S corporation, and form 1065 for a partnership," Finch says.
If you're filing both federal and state taxes, make sure the program you select offers the appropriate state tax module that will transfer information automatically from the federal return to the state return.
Don't forget about technical support. Look for a package that provides extensive onscreen help, as well as 24-hour-a-day technical support.
The best packages combine ease-of-use with quality output. A "peace of mind" option offered by some of the software vendors is a guarantee that, if you incur any IRS penalties due to a software mistake, they will be paid by the software company.
Questions To Ask
It's not unusual for businesspeople to purchase new software, only to find that:
a) it won't work on their computer system, or
b) it doesn't meet their business's needs.
Before making a purchase, there are some important questions you should ask the salesperson:
*What are the hardware requirements? Is the program designed for Macintosh or PC? Windows or DOS? How much memory is required to run the program?
*How difficult is the program to learn? Is the documentation offered with the program easy to understand? Does it have a useful index that will allow you to look up specific questions easily? Is the online help feature complete and easy to use?
*How often is the software updated, and what is the cost of those updates? You'll want to make sure that, as tax laws and schedules change, you'll have the necessary information to prepare accurate returns.
*Does the software allow you the option of filing your taxes electronically? This can save you time and money, in addition to simplifying the tax-filing process. Be sure to find out if your modem and communication software will support this option.
Kiplinger TaxCut (H&R Block)
Overview: This package is a good tool for the sole proprietor or homebased business operator. It includes Schedule C and calculations from IRS Publication 587, Business Use of Your Home. The Windows CD-ROM version offers videos that guide the user through more difficult tax decisions. TaxCut will prepare your return and advise you on how to reduce your taxes. Offers an interview-guided option for information entry. The audit and review features will check your return and correct your errors.
Minimum System Requirements: PC: 4MB RAM, 13MB disk space, Windows 3.1. Mac: Mac Plus, 4MB RAM, 13MB disk space, System 7.5 or higher.
Suggested Retail Price: PC version: $24.95; Mac version: $29.95; CD-ROM: $34.95; state supplements are $24.95 for PC and Mac versions.
Phone: (800) 457-9525.
Simply Tax (Chestnut CDs)
Overview: An easy-to-use package that works well for most common tax situations, including sole proprietorships, partnerships, and C and S corporations. Allows return data to be entered via an interview format or directly into electronic forms, although the interview option is not as finely honed as those found in some other programs. Data may also be imported directly from Kiplinger's Simply Money personal-finance program or from text-based data files.
Minimum System Requirements: Windows 3.1 or Windows 95, CD-ROM, 8MB RAM, 15MB disk space, modem for electronic filing.
Suggested Retail Price: $17.95; state supplements are $17.95.
Phone: (800) 345-6665.
Personal Tax Edge (Parsons Technology)
Overview:An economical choice for sole proprietors. It includes more than 80 of the most popular federal forms, schedules and worksheets used by individuals, including Schedule C. (Those filing for partnerships or C or S corporations should consider a different package.) State Tax Edge modules are available separately for all states requiring an income tax return. The Deluxe version contains the J.K.Lasser Your Income Tax Guide and What the IRS Doesn't Want You to Know--publications that offer numerous tax-saving tips.
Minimum System Requirements:Personal Tax Edge (DOS) requires 640K RAM, DOS 3.0 or later and 11MB hard drive space; Personal Tax Edge for Windows requires Microsoft Windows 3.1 or later, 4MB RAM, 14 MB hard drive space and VGA monitor; Personal Tax Edge on CD-ROM requires an IBM-compatible with a minimum 80486DX processor at 25mhz, 4MB RAM, 9MB hard drive space, Microsoft Windows 3.1 or later, an MPC-compatible CD-ROM drive, and a mouse or equivalent pointing device.
Suggested Retail Price: $19; state modules are $19.
Note: Not available in stores; must be ordered directly from Parsons Technology.
Phone: (800) 223-6925.
TurboTax (Windows) and MacInTax (Macintosh) (Intuit)
Overview: Considered the leaders in tax-preparation software, these programs are user-friendly and complete, offering an interview option that will move you effortlessly through the tax-preparation process, offering tax advice, pointing out possible deductions, double-checking your return, and alerting you to areas that might trigger an IRS audit. Or, you may prefer to enter your data directly onto forms.
TurboTax and MacInTax are available for individual taxpayers, partnerships, and C and S corporations. If you use a personal finance package to handle your business accounting, these packages will save you time by allowing you to import data directly--especially if you're already using Intuit's Quicken.
Minimum System Requirements: PC: 386 (486 for CD-ROM), Windows 3.1, 4MB of RAM. Mac: 68020 (for CD-ROM), System 7, 4MB RAM (6MB for CD-ROM).
Suggested Retail Price: $49.95; state supplements are $24.95 each and are available for all states with state income tax requirements.
Phone: (800) 446-8848.
Helms and Co., P.O. Box 250, 3231 Riverside Dr., Wellsville, NY 14895, (716) 593-4120.
Intuit, 6330 Nancy Ridge Dr., #103, San Diego, CA 92121, (800) 4-INTUIT.