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PERSONAL FINANCE : For Some, It's Time to 'Byte' the Tax Bullet : Computer: Preparing an IRS return is not so hard when a $29.95 program asks you the questions and keeps track of your answers.

March 28, 1995|AARON CURTISS | TIMES STAFF WRITER

Perhaps the only good thing about being young and broke was that the Internal Revenue Service never paid me much mind and I never much minded them. Every year at tax time, while my parents groused about the welfare state, I was out dutifully recirculating my refund into the economy.

For all their rewards, age and its attendant financial success have made the IRS much more interested in me and me much less blase about it. April is no longer the month of blossoms and windfalls for me, but is instead a time of dread.

This year, for the first time since I left my dearly beloved 1040-EZ behind, I did my own taxes. Armed with a $29.95 computer program and a year's worth of computerized records, I set to work.

While not exactly EZ, it was not as hard as I expected.

Over the course of a couple of casual evenings, I was able to navigate my way through a stack of schedules and forms. The program was helpful, if not downright friendly, as it asked a series of questions to determine whether my wife and I qualified for a host of deductions.

As computers make their way into more and more homes, the number of taxpayers like me using them to prepare their own returns has risen dramatically. This year, the IRS expects more than 4.1 million people to do their taxes on the computer, up from 1.75 million in 1991, spokesman Keith Kimball said.

"The service is definitely in favor of those programs because we believe an educated taxpayer is a good asset to have," Kimball said. "The types of programs available permit taxpayers to take a closer interest in their financial situation."

Some of my friends thought I was crazy, though. They tried to spook me with tales of audits and regale me with the feats of their own accountants. I cannot count how many people in this city swear to have the best tax preparer on the planet.

Kimball said the odds of being audited are no different if taxpayers prepare their own returns or have a professional preparer do it. That is, unless the IRS has identified a preparer as "questionable."

Besides, I told myself, I have seen many of the preparers use the same program I did--TurboTax by Intuit. And, I reasoned further, every cent my wife or I spent had been recorded in another computer program--Quicken, also by Intuit.

How could I go wrong?

Right off the bat, computer buffs might say using the program I did was the first thing that could go wrong. Despite the recent brouhaha over Intuit's failure to inform consumers of glitches in TurboTax, I performed none of the operations in which problems have been noted.

So for me, the first order of business was to install the program on my computer's hard drive. When both the federal and state programs are installed, they gobble up a whopping 25 megabytes of space. Fortunately, though, it comes with its own uninstall program to free up that space as soon as the returns are finished.

Once installed, the program asked me to transfer my financial data from Quicken, a task that required a couple clicks of the mouse and a few minutes watching the hard drive light flicker--far easier than sorting a shoe box full of receipts and other scraps.

*

And then we began the actual task at hand.

The program offers a choice between entering data on a computerized version of the familiar--and often complicated--IRS forms or participating in an interview that prompts the user for information and then assigns the data to the appropriate schedules and lines.

I chose the interview and the computer began asking a series of questions just as an accountant would. Most had nothing to do with our financial situation. Others were straightforward. If we got stuck at any point, there was a list of pull-down menus that offered extra help.

The most helpful section dealt with the small business my wife started last year. Our big question was whether we could deduct our home office. The program asked us a series of questions and concluded that we were entitled to the deduction.

After we answered all of the questions, the program tallied everything and figured out what went where.

It also scans deductions and expenses in search of amounts that might flag a return for audit. In our case, it alerted us that the home office deduction might get close scrutiny and that travel expenses--although ours were relatively low--are generally examined twice.

Finally, the return was ready for printing--the single most time-consuming task of the entire process. The computer spent many, many minutes transferring the data to the printer, which spent nearly half an hour spewing out page after page of IRS-approved forms.

In the end, we will pay $1,417 in additional taxes on profit from our small business. Not bad, we concluded, considering our friends with the best accountant in town didn't do much better.

And they paid him $400.

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