April 15 is the day of reckoning for many taxpayers in the United States, and tax-preparation programs have a huge impact. Do they affect you? What do you think of them?


I’ll make this initial disclaimer: I hate April 15 — Tax Day. I’ve vowed to keep politics from my User Support Blogs, but considering the fact that my posting deadline (Wednesday) just happens to fall on the same day as my tax deadline (April 15), I must admit that I’m torn between the two. Treading ever-so-lightly on the political aspect of my disclaimer, I should probably say this as clarification: It’s not that I don’t believe we should pay taxes, because that’s not the case at all. Taxes are necessary to maintain a functioning government. But rather I don’t believe they should be based on one’s income, one’s productivity, and the time one must spend earning a living. I would much prefer a consumption tax base over an income tax base. I’d also prefer a simpler tax system — one that provides room for few loopholes and even fewer mistakes.

But I digress from the intent of my piece. Without naming names or boundaries, I wanted to throw out for discussion tax-preparation software.

A month or so ago, I received a phone call from someone for whom I’ve provided computer support, who asked me which tax-preparation program I thought was best and which one I used myself. Being a computer support professional, I suppose I was considered to be an expert on which one was the best. But I hedged. I must admit — I have no idea. I don’t use one now, nor have I ever used one.

Over the years, I’ve set aside a couple of hours over the weekend immediately preceding April 15, and an hour or so on the evening of April 14 to trudge through the tax-preparation process the old way — manually — with the forms and manuals provided by the IRS. I always wait until the last minute, not because I procrastinate, but I simply schedule the work to be done the week of April 15. And in years I have to write the IRS a check, which is most of them, I have an added incentive to wait until the last day — letting my money work for me as long as possible.

I think I might be among a dwindling minority of people — those who not only figure their own taxes but do it manually, neither calculating or filing electronically. Out of about 135 million tax filers, over 70 million of them use professional tax preparers; I’ve read that upward of 40 million taxpayers will use some sort of tax-preparation program to do their own taxes; and I’ve read that over 80 million returns will be filed electronically. (Those numbers mostly come from my recollection and are no more than estimates, but they are probably close enough for illustration and discussion.)

Personally speaking, I’ve never found the tax-preparation process to be all that difficult, but perhaps that’s because I’ve kept up on it year after year, and my returns aren’t really that complicated. The time spent writing the numbers versus entering them into a software program are about the same, and it doesn’t take that long to double-check my math, so why spend the money for a software program I’ll use only once? But a lot of people do.

Moreover, I’m not sure about a lot of things concerning tax-preparation software. Are they totally secure? Are they reliable and accurate? Do they all meet IRS standards and approval? I’ve read that the IRS neither tests or approves any tax-preparation software, but rather provides only limited testing criteria that all software developers must follow and include when developing their test scenarios. (Source)

What about the other risks of using tax-preparation software, ones not only concerning accuracy but reliability and security as well? And the IRS is even discussing how tax-preparation pricing affects electronic filing. IRS Deputy Commissioner Linda Stiff agreed with all the GAO’s recommendations and outlined the actions that the IRS would take. “By February 2010, we will consult with Chief Counsel and develop a document summarizing whether and to what extent IRS is authorized to involve itself in the software industry’s development of tax preparation software, what actions IRS could take to drive software companies to make changes and under what circumstances, what sanctions IRS could impose on software companies that refuse to make requested changes, and what additional authority IRS would need to do all of the above,” she wrote. “Based on this information, IRS will determine its subsequent course of action.” (Source and full context)

What would be worse is the IRS NOT providing oversight or mandating that they will provide oversight? To me, that seems like bad news — worse news. The bad news is that they don’t. The worse news is that they might.

Those are my thoughts on tax-preparation software and electronic filing. What are yours?

Oh well, I’m off to mail my tax returns (and my check) — the ones I completed last night, by hand and on printed forms.

As an afterthought and just for fun, I included the following poll:

(I wonder if I’ll be the only one who doesn’t do it electronically.)