How Automatic Should Software Be

[erchess]

I had a private discussion with another board member who was horrified to find that TRX Orrtax does not automatically calculate the saver's credit. That got me to thinking of a broader question. What tax issues should software be able to handle automatically based on information that is always entered and thus can be handled by a computer operated by someone who does not know about that issue? Here are the thoughts I came up with.

For example, in most situations Wages will be handled correctly if the W2 is keyed correctly.

EIC could be calculated automatically by the software but the IRS wants us to do our due diligence so the most prompting I have seen a computer give is an overridable diagnostic.

In every software package I have seen the Schedule D tax calculation is automatic if the schedule d transactions to make it available have been properly entered.

Interest and Dividends get handled automatically if you properly understand how to label the different stuff in your software.

[Snaggletooth]

Semi-Automatic

A good question.

Do we all want to be brain-dead TurboTax idiots? I hope not. Artificial intelligence should be started and stopped somewhere. Your question, I suppose, is "where?"

I believe the software should provide EVERY relevant item automatically. However, it should not populate ANYTHING without a prompt for the preparer to acknowledge. The software should assume no elections on the part of the preparer without acknowledgement.

I think we ALL want the software to grind out such things as the Sch D tax calculation, the EIC calculation, and the Social Security taxable calculation. As preparers, we should not lose the understanding of how these calculations work.

The subject is very much akin to the electronic hand-held calculator. We should not lose the capability to add, subtract, multiply, and divide on paper.

[David1980]

I had a private discussion with another board member who was horrified to find that TRX Orrtax does not automatically calculate the saver's credit.

It doesn't? Do you mean the two questions that have to be answered as to whether the taxpayer/spouse is a student and whether roth/retirement distributions were made within the last 3 years?

I would have to say I'm on the fence on that issue. It certainly would be nice and 90% of the time those kinds of questions will be answered the same way, so software could "guess" the questions for you and then allow you to change them as necessary. But the 10% of the time the answers aren't the normal responses you would have to realize you need to go in and change it. Software could generate a diagnostic of some kind I suppose, something like "Hey buddy, we guessed these questions answers for you and if we guessed wrong you need to change them."

Basically I would say 100% calculations that can be done based on the input given should be done. That is things like if you put in a W-2 program can calculate how much to carry to line 7. How much the tax liability is based on taxable income. Etc...

Things that are almost always the same should also be calculated. The social security withheld on a W-2 for example, I like my software to fill that in after I type in the taxable wages. If it needs an adjustment for a rounding error or something I can do that manually.

Things that are less certain I feel should be upto me to do. I wouldn't want my program assuming all my Schedule E rentals are for real estate professionals without requiring me to specify that. There could be diagnostic suggestions for them, depending on how probable the answers are.

Things that are very rare but "could be" based on input shouldn't be calculated at all. I don't want my software to fill in an amount for charitable contributions because "most people" have it or anything like that.

[DonPriebe]

Load the forms and tell me if you need more data

I'll go with the program loading any forms that I could need, and then telling me if I don't fill them out.

TRX does that with the saver's credit. If there is a 401(k) shown on the W2 and the filing status and AGI indicate that a saver's credit is possible, it loads an 8880 and populates it with the data it has. If you do nothing else, when you run the diagnostics it brings up the worksheet that asks about student status and past retirement withdrawals. There is a note in BOLD that says the saver's credit will not be processed unless the student and past withdrawal data questions are answered, but you are free to ignore the diagnostic if you wish.

TaxAct and (IIRC) ATX handle this the same way.

A more serious problem was the way ATX used to handle AMT. You had to explicitly load the 6251 if you thought AMT was a concern. Their fix in 2006 was an option to always load a 6251. Not the most elegant solution in the world, but better than not loading it at all.

[BOB W]

I say, give me ALL the auto-fill forms that may apply based on my input. I can always delete if necessary. In the rush of tax season I depend on my program to be intuitive and then I review my diagonastics for finalization.

[Zee]

I also vote for all.

[Jiggers]

Have to learn somewhere

The software should do all the math calculations: Tax, EIC, Child Tax Credit, Depreciation, AMT, etc.

However, you should know how and where to enter the the information correctly.

Way back when we used to manually do the returns and then have them typed, we knew how to do a return. Then we became computerized and all those manual calculations were great. You could make a change on 4562, and it carried to Schedule C, then to SE, Schedule A and the tax calculation, and EIC. Very efficient.

We entered the data on Guides/Proformas.

Then we hired a kid out of college and set him on doing returns. He got to where he was copying information onto the Guides/Proformas based on the prior year return's Guides/Proformas. He had no clue on the various types of depreciation available, property types (1245, 1250, etc.), He had no clue on the AMT. And he couldn't manually calculate the tax using information on the Guides/Proformas. He had a hard learning experience and he finally adjusted his thinking.

[taxxcpa]

Let the program do it with warnings as needed

A lot of things should be done completely automatically. Others need a message to appear such as "client may be eligible for XXX" so that you can go to the related form and fill it out if it applies.
If conditions must exist which the program cannot verify automatically, it should not automatically generate something because it usually applies.

[Lion]

Automatic

I'm tired and cranky and sleep-deprived and working alone during tax season. I want my software to do everything it can with the information it has and give me a set of diagnostics recommending other things I should look into or other information it wants from me (I forgot to enter a birthdate, for instance). I don't want it putting in national averages for donations or other guesstimates. But, I want it to give the PA resident a credit on his PA return for the tax paid on his non-resident NY return. Now, if it's a PY PA and PY NY, it should give me a suggestion that a credit is possible if such and such conditions are met.

[Chief]

Automatic

The first IRS Tax Forum I attended had as its theme "Tax Software Is No Substitute for Tax Knowledge." That statement has meant a lots to me over the years as a tax preparer.
I want my software to do as much as it can to let me speed the processing. I dont care about national averages or the like. But the software should generate forms that I might likely use. Only I will make that decision. Some of the low cost software programs dont do a very good job of that. One poster mentioned that speed, speed, speed were the factors he was interested in. The cost of software is minimal when compared to additional staff for your firm. I am not a Turbo junkie and dont wish to be

[David1980]

I say, give me ALL the auto-fill forms that may apply based on my input. I can always delete if necessary. In the rush of tax season I depend on my program to be intuitive and then I review my diagonastics for finalization.

That sounds overly broad, but perhaps it's just interpretation into those terms.

I guess the question here is what does "ALL" mean and what does "auto-fill" mean? If we define "auto-fill" as "a form the program fills in automatically" then all auto-fill forms will be forms that the program fills in automatically. So I don't think that's the right definition, but I'm unsure what is.

Let's say for example you have single filing status taxpayer with 1 W-2. Should the program present you with a 2555 because it "may apply"? After all, he could have been working abroad for a US based company right? Should the program automatically complete the required entries on the 2555 for you such that he gets the exclusion?

If not, is it because the 2555 doesn't fit in the "ALL" category, or because it isn't an "auto-fill" form?

Should the 8880 example given in erchess first post automatically assume they qualify for it without requiring input as to whether there were retirement distributions and/or taxpayer was a student? How much can software safely assume before it crosses that line -- obviously the 2555 is too far.

[BOB W]

I think "Auto-Fill" "based on items inputed" is self explanatory.. reading anything else into that remark is going over the top. 2555, now really.....

[David1980]

I think "Auto-Fill" "based on items inputed" is self explanatory.. reading anything else into that remark is going over the top. 2555, now really.....

So then applying this to the 8880, is that an "auto-fill" form based on input? It seems to be the same situation as the 2555. It could apply, but needs to ask questions -- specifically the student and retirement distributions in the last 3 years questions.

It would be poor software indeed that didn't generate an 8880 and ask you to answer those questions. Yet, I don't think this form meets the requirements of "auto-fill" "based on items inputed" either because based on items input they do not qualify until you answer those questions.

I think we're talking more like an 8812 as an "auto fill" that is "based on items inputed" as that would be 100% known based on entries elsewhere.

[BOB W]

Dave. I am not going to get into a debate on words but maybe I should of said AUTO-PROMT since you are assuming I want the program to do the tax return mindlessly.

The concept of Auto Anything is because some programs Auto NOTHING... Not even a prompt for the most common types of situations.

It also appears that you must be using ATX> they Auto Prompt Nothing and it is posible you don't understand what I and others on the board are talking about.

[Gene V]

So then applying this to the 8880, is that an "auto-fill" form based on input? It seems to be the same situation as the 2555. It could apply, but needs to ask questions -- specifically the student and retirement distributions in the last 3 years questions.

It would be poor software indeed that didn't generate an 8880 and ask you to answer those questions. Yet, I don't think this form meets the requirements of "auto-fill" "based on items inputed" either because based on items input they do not qualify until you answer those questions.

I think we're talking more like an 8812 as an "auto fill" that is "based on items inputed" as that would be 100% known based on entries elsewhere.

My software auto fill the 8880, base on my input and it keeps track of prior years information. For example, for the client’s occupation, if I do not put student and there has been no 1099R this year or in the pass, then it will auto-fill the 8880
With a reminder in the diagnostic to verify that the person is not a student and his total distribution for elective deferral, plan