November 19, 2009

Tax Preparation Software – Boon or Bane

In times past, everyone used to complete their tax returns by hand. With the advent of personal computers, programmers have come out with many different types of tax preparation programs specially suited for the PC (or Mac, as the case may be). These programs make it easier for taxpayers to prepare their taxes than doing it by hand. But there are some subtle problems that may arise if you're not careful.

The chief problem arises when you assume that your tax returns are error-free just because they were computer generated. No matter how good your tax software may be, you need to check for errors. Can computer programs make errors? You bet. There can be a few categories of errors that tax programs may be prone to commit. Firstly, there may be software errors where a glitch in the program causes an issue. When you fix the issue, it often solves other related problems as well. Secondly, there may be a tax interpretation issue where the programmer who wrote the program interprets the Tax Code differently from how you would do it. For this sort of errors, you may have to override the program and rectify the errors manually. Then there may be other bugs in the program that may cause issues. Hence, never assume that all is well with your tax preparation program.

In order to make technology work for you, firstly make sure your data entry is correct and up-to-date. Only with the correct input will your tax preparation program produce accurate results. When you purchase a tax preparation program, ask the vendor about how it works, any training they provide and what type of customer support they give. Besides questions about the program itself, ask your vendor technical tax questions also. If they cannot answer basic questions like, "Will increasing my 401K contribution reduce my taxes?" then you should be wary of the program they are selling. Tax program vendors should only give pat answers like, "The program is like that," or "That's the way the program works" only for computer related issues like formatting. If the program is good, it will have value-added features like comparative charts of your taxes year-by-year.

Most importantly, be sure to check the results of the program as though you were doing it by hand. You probably need to do it for only the first year or so, after which you can repeat the process minus the glitches and errors the following year.

Putting this extra bit of effort will greatly reduce any inconveniences when it comes to using computer tax preparation software.

Darrin T. Mish is a veteran, nationally recognized tax attorney who has focused on providing IRS help to taxpayers for over a decade. He regularly travels the country training other attorneys, CPAs and enrolled agents on how to handle their toughest cases with the IRS. He is highly ranked among the top attorneys in the country, with an AV rating from Martindale-Hubbell and a perfect 10 on Avvo.com. Martindale-Hubbell has also honored him with a listing in their Bar Register of Preeminent Lawyers. He is a member of the American Society of IRS Problem Solvers and the Tax Freedom Institute. With clients on every continent but Antarctica, he has what it takes to solve your IRS problems no matter where you live in the world. If you would like more information about his practice and how he can help you, please call his office at (813) 229-7100 or toll free at 1-888-GET-MISH.

Share and Enjoy: