Individual taxpayers have been using packages such as ChipSoft Inc.’s MacInTax and TurboTax for Windows and Meca Software Inc.’s TaxCut for at least five years. Potential users also include owners of sole proprietorships, who file Schedule C for business income/loss along with the business’s 1040.
Once a company buys into tax software, it’s an every-year investment, since changes in the tax code require new versions every year. But the investment shouldn’t break a small business, since many packages cost $100 or less. And many companies even have first-year giveaway deals or discounts in subsequent years after the initial purchase.
Many tax-preparation programs feature links to popular small-business accounting packages like Intuit Inc.’s Quicken and Quick Books and Meca’s Managing Your Money.
Once a firm has gathered its records and receipts, either on paper or via accounting software, the package will guide the user through an interview process, asking questions specific to the firm’s tax situation. The package will then present the next applicable form.
Along the way, the packages act as an “accountant in a box” by featuring pop-up windows advising of a missed deduction and “auditing” the return at the end of the process to determine whether the numbers are likely to catch the eye of the Internal Revenue Service.
Then the user can print the return, sign it, and send it to the IRS, or use the electronic filing service that some vendors such as Meca and ChipSoft offer for a fee of about $25.
For those who have the discipline to think about next year’s taxes, many of these packages also include rates for the tax year, and other planning tips.
ChipSoft’s TurboTax BusinessTax Series, for example, a DOS package that shipped in January, guides users through the rocky waters of asset tax depreciation and offers advice in the form of pop-up help balloons. If an unfamiliar term appears in a help balloon, the user can click on it for a definition. ChipSoft, recently bought by Intuit, is also planning Mac and Windows versions.
But are more robust packages like this suited to business users accustomed to having someone else handle their taxes? One guideline for who should use these packages is how involved they are in the business’s other financial affairs.
“If the small-business user is prepared to do the books, they’re probably conversant enough to use one of these packages,” said Charles Gaylord, CEO of ChipSoft in San Diego. Cautious users can have an accountant review returns prepared by the package, Gaylord added.
ChipSoft, Meca, and other companies such as Parsons Technology Inc. also offer versions for several state returns.
Businesses that are looking to computerize the preparation of tax returns may want to consider an alternative to stand-alone products such as Meca Software Inc.’s TaxCut and ChipSoft Inc.’s TurboTax.
Intex Solutions Inc.’s Tax Solver, for example, takes a different approach to tax preparation by working on top of a spreadsheet such as Lotus Development Corp.’s 1-2-3 or Microsoft Corp.’s Excel.
Tax Solver offers the advantage of allowing users to test different tax scenarios — such as changing the depreciation method — and review the bottom line as quickly as the spreadsheet can recalculate, an Intex official said.
“You can also do any simple or complex calculation off to the side and then post it to an entry cell in any of the tax forms,” said Jim Wilner, vice president of PC products for Intex, in Needham, Mass. “This is useful for more complex tax situations.”
Because Tax Solver lacks the interview format of the stand-alone packages, it’s most beneficial to someone “who’s not a total tax novice,” Wilner said.
Spreadsheet add-in products like Tax Solver also do not prompt users. While running a spreadsheet, the user must choose the appropriate tax form and navigate the IRS’ instructions.