What's new in tax software?

There's good news and bad news.

The good news is that, as a group, tax preparation software programs this year will be better than ever. In most eases, programs will be easier to use, have greater flexibility and perform more tasks. The bad news is that, because of last-minute changes in the tax law, vendors will have to scurry to update their programs in time for tax season. It is likely that some programs will be delivered late, some will have errors and some will be late and have errors. Buyers should be prepared.

While the last-minute update is the most pressing problem, it by no means is the only one. For example, tax preparation software publishers aren't sure how quickly accountants will migrate to Windows. Publishers that misread the trend may find themselves with a fast-dwindling market for their older DOS products. Also, the industry is in the throes of business realignments, with consolidations and retrenchments changing its profile.

THE LAW AND DEADLINES

Although the Omnibus Budget Reconciliation Act of 1993 was passed in August - seemingly sufficient notice for the publishers to ready the updates - the products still may be late because the Internal Revenue Service must develop specific regulations to implement the law. Then the service has to prepare the forms and schedules that in turn support the new regulations. The IRS may not finish its work on the regulations until next month, and the tax forms and schedules - the final documents it has to prepare - may not be released until December.

To complicate matters even more, programmers have to wait until the states implement their changes - and there nearly always are last-minute changes in state schedules and forms. In past years, some vendors had serious problems even with minor tax law adjustments. Large vendors - those with substantial internal resources to handle myriad last-minute changes - will have an advantage over smaller competitors.

A LOOK TO THE FUTURE

The technology juggernaut, with its continuous flow of new hardware and software that are faster, more powerful and increasingly expensive to develop, continues to challenge vendors. In addition to the timing of customer demand for Windows products, software vendors worry about keeping up with advances in mass storage and data retrieval technology.

The number of tax programs that work under Windows is growing far faster than forecast. All leading vendors that haven't already done so are doing some develop work on Windows products, even though few CPAs currently use Windows. Developers are betting that, in the not-too-distant future, accountants will join the Windows wave. The question, of course, is determining when the not-too-distant future will arrive.

Mass storage and retrieval technology based on CD-ROMs - compact disks (CDs) that can store as much data as 2 million low-density floppy disks - is having a significant impact on the accounting profession, especially tax practitioners. Again, while many CPAs still don't have CD-ROM equipment, software publishers are betting that it's high on their shopping lists.

CD-ROM equipment may be the most important technology application of the decade. CD-ROMs not only store a phenomenal amount of information but also retrieve it quickly and conveniently. With CD-ROMs, tax research that once took hours can be performed electronically in a few minutes. All leading tax reference libraries are currently available on CD-ROMs. As a result, the era of printed reference services-at least in certain areas-may be coming to an end. But even if it doesn't, such services no longer will be as cost-effective as CD-ROMs.

Tax software itself is making a transition to CD-ROM as the preferred medium. CLR Fast-tax's GoSystem and CCH Computax's ProSystem fx both are available on CD-ROM, and here's what's being added this year:

* CLR Fast-Tax introduced a Windows product, EasyGo, which bundles many GoSystem 2 features with the Research Institute of America (RIA) OnPoint CD-ROM tax research library and a CD-ROM tax forms library. RIA can be accessed from an EasyGo screen. EasyGo runs directly from a CD-ROM, eliminating the need to load it on a hard disk.

GoSystem 2 also can be loaded on a hard disk or accessed directly from a CD-ROM. While processing time is slower with the CD-ROM, the technology will be a viable alternative as the speed of CD-ROM drives improves. In addition, CLR Fast-tax offers a tax archive service that creates a permanent archive by storing previous years' software and returns on a CD-ROM. It is especially useful when old returns require amendment.

* CCH Computax integrated ProSystem fx with its CD-ROM version of the Standard Federal Tax Reporter. Old versions of the program can be run directly from a CD-ROM drive. * Both Lacerte and SCS/Compute's Tax Machine are available on CD-ROM.

* Tax$imple offers a direct interface to all leading CD-ROM reference libraries.

* Two companies offer a complete tax forms service on CD-ROM:

1. Center Piece Software (5000 Cox Road, Suite 100, Glen Allen, Virginia 23060; telephone: [804] 346-0640) introduced two Laser Librarian products. The 1986-92 Archive edition offers prior-year tax forms and includes instructions for most forms, the IRS code for 1990-92 and important tax publications. The 1993 version is a DOS-based form-retrieval service that allows users to fill out a WYSIWYG (what you see is what you get) form on screen before printing it. The company says the CD-ROM includes 97% of federal and all state income tax and payroll forms, along with instructions, the Internal Revenue Code and other publications.

2. CLR Fast-tax's E-Form is sold in both DOS and Windows versions and includes federal and all state forms and instructions. Its WYSIWYG Windows version features on-line data entry. Both versions eliminate the need to maintain a printed forms library.

INDUSTRY CHANGES

Two software companies announced major acquisitions. Best

Programs, Inc. acquired CPAid, publisher of CPAid Master Tax and Client Write-up, adding both products to its line. Master 1040 - as Master Tax is now known - will be targeted to large and midsized CPA firms and replaces Tax Partner 2000, which was discontinued. Best also acquired Teleware, publisher of M.Y.O.B and Best Books accounting software.

ChipSoft, Inc. acquired Direct Link Software, the company that developed the American Institute of CPAs Accountant's Trial Balance program. The acquisition allows ChipSoft to extend its business tax coverage to all 50 states.

SCS/Compute, on the other hand, cut back its operations. Quick Tax, its single-user tax package, was discontinued. Pricing was being reevaluated for both Tax Machine and LMS/TAX products at press time.

THE SELECTION CRITERIA

Publishers of all tax software products included in the Journal's October 1992 review (as well as Pencil Pushers and other leading software packages) were invited to submit information for this year's article (see "A Review of the Leading Tax Software Programs," JofA, page 57). The publisher of Pencil Pushers again declined to participate, as did the publishers of TAASCforce and Tax Commissioner, both of which were included in the 1992 survey. New to the list are CLR Fast-Tax's EasyGo, ExacTax's Package EX, and Tax Resource's Ten4o.

All participating software vendors were asked to complete surveys and to provide lists of product enhancements. While I personally loaded and ran a benchmark return on each package as the basis for the 1992 review, I prepared this year's review using the information furnished by the software companies. Ratings therefore were not included.

While most of the changes represent refinements and fine- tuning for the most part, in two instances the changes are worthy of special note.

* Prentice Hall completely rewrote its 1040 software. Its new 1040 Advantage is a full-featured, interactive product that works and looks like Prentice Hall's business tax products.

* Tax$imple made over 100 improvements to its product. The changes addressed both the shortcomings found in the 1992 review and many of its users'comments.

Here, then, are thumbnail sketches of this year's improvements for 20 leading tax packages. For more details on prices, hardware requirements, modules, etc., see the exhibits throughout this article.

A-Plus Tax

Arthur Andersen & Co., 2803 Fruitville Road, Suite 100, Sarasota, Florida 34237 Telephone: [phone]

* The company claims processing speeds are twice as fast as in 1992 and the software no longer requires a math coprocessor. The product has an express calculation and print feature for printing directly from data-entry screens. This feature also allows diagnostic and summary reports to be viewed on screen and lets network users send print jobs to a designated workstation to free their own workstations for continued processing or other uses. Soft fonts are included with the software, eliminating the need for a font cartridge for laser printing of forms.

Digitax 1040

Digitax, Inc., 3001 South State Street, Ann Arbor, Michigan 48108 Telephone: [phone]

* Multistate processing, available in prior years only for Connecticut, New Jersey and New York, was expanded to include all 45 states. This feature also covers nonresident and partial-year resident returns. A 1041 program was added, with support for Michigan, New Jersey, New York and Pennsylvania.

EasyGo

Computer Language Research Inc. Fast-Tax, 2395 Midway Road Carrollton, Texas 75006 Telephone: (800) FAST-TAX

* EasyGo includes an electronic tax form service and a tax practice management system. It operate directly from a CD-ROM drive RIA OnPoint can be accessed from a tax return screen.

Practice management features include due-date and extended file management capabilities, invoice preparation, estimates and extensions, label printing and management report preparation for analyzing and charting client profiles and preparer productivity.

EasyGo has over 15,000 pages of federal and state forms and instructions. Forms can be accessed by number or description, completed on screen and printed on laser printers. The software includes links to tax planning packages.

GoSystem 2

Computer Language Research, Inc. Fast-Tax, 2395 Midway Road, Carrollton, Texas 75006 Telephone: (800) FAST-TAX

* Like EasyGo, GoSystem 2 provides a direct link to RIA's OnPoint tax research library, either directly from a return screen or separately. It supports allocations to nonresident states and for part-year residents.

The "1040 tax review" function allows users to trace every number in a tax return to the source documents. Features include extensive preparer, reviewer and file note capabilities, complete regular tax and alternative minimum tax (AMT) reconciliations and a custom checklist feature for creating checklists to verify the accuracy and completeness of returns.

Extensions and estimates can be printed in batch mode. Invoices can be prepared based on hours worked, page counts, forms and schedules produced or return complexity. All manual overrides on client returns can be printed on a single list.

The company offers customized tax archive CD-ROMs for 1991 and 1992 software and tax data, providing a permanent storage medium for prior years.

JetTax Total Power

JetTax, 200 East Sandpointe Avenue, Suite 320, Santa Ana, California 92707 Telephone: [phone]

* This year's changes include the addition of soft fonts and improvements in the layout and appearance of supporting schedules, client letters and invoices. The contents of content-sensitive help screens were enhanced. Client organizers were redesigned to match the interactive input screens, expediting data entry.

Lacerte

Lacerte Software Corp., 4835 Lyndon B. Johnson Freeway, 10th floor, Dallas, Texas 75244 Telephone: [phone]

* This year Lacerte offers a network version with file locking, access control, password protection and other security features. Users select modified accelerated cost reduction system (MACRS) depreciation using either the IRS tables or the declining-balance formula. AMT life defaults were changed to correspond with most users' requests. Print options include depreciation schedules for current and following-year schedules.

All print selections (returns, input sheets, client status reports, mailing labels, etc.) are combined in a single pull-down menu. Tax return data can be printed in upper or mixed case. View features of processed returns include facsimiles of actual IRS forms. Diagnostics and error-trapping features were expanded.

LMS/Tax

SCS/Compute, Inc., 12444 Powers-court Drive St. Louis, Missouri 63131 Telephone: [phone]

* Sales data can be entered on the depreciation screen and automatically carried forward to applicable schedules. State-taxable municipal bonds and U.S. saving bond interest are adjusted automatically for state purposes. Returns for any two states can be prepared from one client file.

Mouse support was added for entry within individual forms and schedules. The number and scope of diagnostics were increased. Worksheets illustrating internal calculations (Social Security, individual retirement account (IRA), Keogh and modified adjusted gross income) were added.

The publisher added a database that stores client file information, allowing statistics, customized client letters and reports to be printed and data to be exported to word processors and databases.

Master 1040

Best Programs, lnc., 11413 Isaac Newton Square, Reston, Virginia 22090 Telephone: [phone]

* Master 1040 (formerly known as Master Tax and sold by CPAid) is Best's tax product for large and midsized firms. Inputting in batch mode was made easier. Both batch and interactive input modules feature instant tax summaries. Soft fonts are included in the basic program, eliminating the need to buy a separate cartridge.

Package EX

ExacTax, Inc., 2301 West Lincoln Avenue, Suite 100, Anaheim, California 92801 Telephone: [phone]

* ExacTax is a full-function tax program with a strong following in a limited number of states (10 for 1040 and 5 for business). Although it's a DOS product, it runs under Windows. A complete set of financial statements (a balance sheet and income and cash flow statements) are available with the business system products. A 1041 fiduciary return was added.

A second tax organizer that uses code boxes for batch input was added. In addition, increased note capabilities were added to provide a complete audit trail.

ProSystem FX

CCH Computax, Inc., 21250 Hawthorne Boulevard, Torrance, California 90503 Telephone: (800) 45-PROFX

* CCH Computax added a feature that projects how pending tax legislation will affect a taxpayer's bottom line. It also added a feature that projects the effects of next year's depreciation, a diagnostics program and an analyzer to determine whether it's better for married couples to file jointly or separately. In addition, the program now provides context-sensitive integration with the U.S. Master Tax Guide and with CCH Computax's Standard Federal Tax Reporter on CD-ROM (which must be purchased separately).

Delete functions, which had caused problems in last year's testing, were improved. Practice management functions were expanded to include six status flags. A "pro-forma/organizer exception report" feature lists returns not yet processed and allows prior-year returns (1991 or later) to be prepared directly from the CD-ROM, freeing disk space for prior-year programs.

Tax Machine

SCs/Compute, Inc., 12444 Powers-court Drive, St. Louis, Missouri 63131 Telephone: [phone]

* Net operating loss (NOL), alternative minimum NOL and short-year deprecation worksheets can be accessed from the forms menu. The program calculates short-year depreciation. The entire package is available on a CD-ROM, speeding installation and update loadings. On-line help was expanded. On-line documentation can be printed.

Tax Machine calculates maximum allowable Keogh, simplified employee pension and IRA deductions. Worksheets for excess Federal Insurance Contributions Act and Medicare taxes can be printed. The publisher added a worksheet to calculate the taxable amounts of state refunds. Client extension forms can be printed in batch mode.

Tax/Pack Professional 1040

Alpine Data, Inc., 737 South Townsend Avenue, Montrose, Colorado 81401 Telephone: [phone]

* Alpine's single-line prompt was replaced with a conventional 1040 screen, Complete with line numbers, descriptions and calculated amounts. All calculations are updated as data are entered. The vendor solved the problem of supporting 386 and 486 computers by introducing a version of the program that takes advantage of both processors' architectures, thus offering faster processing and requiring less hard disk space.

Automobile worksheets were added to Support schedules C, E and F. Also added were IRA and taxable Social Security worksheets, two-year comparisons and additional state worksheets and supporting forms. Estimated payment vouchers and underpayment of estimated tax forms were added to all state modules.

Tax Partner

Best Programs, Inc., 11413 Isaac Newton Square, Reston, Virginia 22090 Telephone: [phone]

* The company added a feature that compares the benefits of filing joint and separate returns. Also, federal and state data were integrated so that all necessary federal information automatically carries forward to respective state schedules. The depreciation module includes the same depreciation engine as the popular fixed-asset program FAS1000.

Tax Relief

Microvision Software, Inc., 368 Veterans Memorial Highway, Commack, New York 11725 Telephone: [phone]

* The depreciation worksheet allows direct entry of asset disposals and computes the depreciation for the year of disposal. Sales information automatically carries forward to form 4797. All depreciable assets, including listed properties, are entered on one screen. Depreciation schedules include current and following-year depreciation. A worksheet for calculating car and truck expenses was added.

Entering nominee interest was simplified, line override capabilities were enhanced and a worksheet for calculating NOL was added. Critical diagnostic messages are flagged. The system also compares itemized deductions with the statistics published most recently by the IRS and issues a warning message for any out-of-line deductions.

The input screen allows users to enter data for any category. Several print functions were enhanced, providing additional flexibility in setting specifications, printing supporting schedules and queuing returns on network printers.

The tax reference library includes 18 other IRS publications in addition to Package X, the IRS forms and schedule library, and prints over 70 federal forms and schedules, as well as forms for 10 states and the District of Columbia.

Tax$imple

Tax$imple, Inc., 431 Route 10, Randolph, New Jersey 07869 Telephone: [phone]

* Tax$imple has more than 100 enhancements this year. Tax practice management tools were added, making it possible to generate 23 client profile reports and key practice statistics and to print balance due and estimated payment reminder letters in batch mode. Tax planning features were incorporated in the tax program, allowing what-if analysis. A total of 106 IRS overflow statements were added, as well as a feature that compares the benefits of a joint versus separate return and allocates schedule A deductions between spouses. In addition, a link was provided to leading tax research software programs available on CD-ROMs or floppy disks.

Many changes were made to facilitate data entry. Input allows automatic slashes for dates and hyphens for Social Security numbers. Social Security and Medicare wages and taxes automatically are calculated on W-2 input, which can be overridden. Business-code help screens were added for schedule C. Default answers were added throughout the program. The "shoe-box" worksheet for schedule A was alphabetized and a special printout capability created.

Key schedule layouts, calculations and automatic linking features were improved. K-1 input was simplified and dispositions carry forward to schedule D. Passive capital loss calculations carry forward to form 8582 and associated worksheets. Form 8829 was integrated with form 4562. Allowable health insurance deduction calculations were automated. The interest schedule provides for accrued interest, excludable savings bonds and nominee distributions.

TaxWorks

Laser Systems, P.O. Box 407, Kaysville, Utah 84037 Telephone: [phone]

* The fixed-asset manager was expanded to compute depreciation using any of 22 methods and to carry forward the result, including asset sales, automatically to applicable forms. Calculations are done on screen for review before processing. Federal and state data can be entered and processed simultaneously.

The expanded tax practice manager includes a client database, a client invoicing capability and a client instruction letter. The database can create customer lists and correspondence and identify a specific client or group of clients based on their tax profile. Five different report options are available to track billings, office productivity and weekly performance.

A summary of key return data is available from within the data input function, in addition to the on-screen facsimile review of completed schedules. Product training videos were updated. Print features of K-1s allow multiple printing of combined federal and state forms.

Ten40

Tax Resources, Inc., 1 Morton Drive, Suite 400, Charlottesville, Virginia 22901 Telephone: [phone]

* A diagnostics program, added last year, now extends to monitoring electronic filing and can be invoked when a return is calculated or closed. Up to 40 print configurations can be chosen, speeding the printing process. Network users can specify individual print configurations and individual users can set up several print modes.

Input from the client organizer module can be entered by accessing the questionnaire window, which follows the same format. When data are entered, the diagnostics program alerts the preparer to related forms and schedules. The software prepares an analysis to compare the benefits of a joint versus separate return. Client billing options were expanded to allow computed amounts to be overridden manually. An estimated payments feature allows automatic application of overpayment. Wage information carries forward to the state return.

1040 Advantage

Prentice Hall Professional Software, P.O. Box 723597, Atlanta, Georgia 31139 Telephone: [phone]

* Introduced in 1992, 1040 Advantage is an improvement over the 1040 batch program designed for midrange IBM computers. The interface, with pull-down menus, hot keys and pop-up windows, is similar to that of other Advantage line products.

The program's diagnostics compare client returns with IRS statistics and alert tax preparers to omitted or overridden items. An instant tax summary enables preparers to view overall results from any form. A built-in tax planner and filing status comparison aid in developing tax strategy.

1040 Solutions

1040 Solutions, Inc. (CCH Computax, Inc.), 21250 Hawthorne Boulevard, Torrance, California 90503 Telephone: [phone]

* 1040 Solutions added corporation, S corporation and partnership modules. It also supplemented state coverage. Prices for its products were revised.

Turbo Tax ProSeries

Chipsoft, Inc., 6256 Greenwich Drive, Suite 400, San Diego, California 92122 Telephone: [phone]

* The GoTo function allows users to jump directly to the source of any calculation or diagnostic message and then to return to their original positions. The program requires only half the disk space for client data files as it did last year. The "new preparer's assistant" feature provides step-by-step instructions for various functions, including customizing client letters, entering passive activity information, electronic filing and setting program options. Soft fonts, which eliminate the need to purchase an optimal tax font cartridge, were included with the basic program, which is available in DOS, Windows and Macintosh versions.

WHAT'S AHEAD FOR TAX

SOFTWARE

Now that the new tax law has been approved, software publishers probably will make major enhancements of their products next year. The emphasis will be on practice management tools to monitor client data, to-do lists, scheduling, return preparation and internal productivity.

Work will continue on Windows products, resulting in software that is more efficient and easier to use. Also, there should be more "smart" tax software - that is, software that integrates with tax reference sources and with other software applications.

Further down the road, larger software companies will offer fully integrated solutions to professional packages, encompassing client write-up, audit review, tax, practice management and time and billing functions - just as general accounting packages do for business applications.

Clearly, technology is leading CPAs to work more effectively and efficiently. The question every CPA must ask is: Am I taking advantage of what the new technology has to offer?