For the last few years, the changes to tax software have been more those involve evolution than revolution. But that's starting to change as major players have introduced their online tax platforms. Still, for most professional preparers, the evolutionary changes are the most important as they remain in the world on on-premise tax software. And with the buying season well underway, this article provides a look at those.

Intuit had about a 1,000 paying customers ProLine Tax during the 2010 tax season, according to Jorge Olavarrieta, group product manager for the company's tax products. ProLine is a new product and not an Internet version of either Intuit's Lacerte or ProSeries packages. However, only 1040 returns could be prepared and not all states were available.

"We are going to have full 1040 content for the coming year," he says. The company hopes to provide partnership, corporate and S Corporation software, ready online for the next tax season. but is not promising delivery. Olavarrieta also says one major difference between the on-premise and Internet packages, single-screen input, was well received.

It's somewhat hard to tell how online preparation has been accepted by professionals since some of it has been done quietly. John Sapp, VP of marketing for Drake Software, says his company has had two versions of a 1040-only version on the market for about four years, one with the regular Drake interface and one with an interviewed-based system.

"We had thousands of folks that used in last year," Sapp says, noting the company has not heavily promoted the offering. He also observes that the interview format is popular with less-experienced preparers.

There's no difference between the on-premise software and the online application. "It integrates fully with our software. It has the same file structure," Sapp says.

Thomson Reuters has had a much different emphasis with online. It has always touted its hosted applications as being what many users want on the Internet, which the company says is as much a subscription-based purchase as anything.

And on its Web site, much of the description about its new Internet-based software centers around the buy-versus-lease discussion with hosting available through the Virtual CS Office, as it has been for several years, and leasing provided through the new SaaS for CS Professional Suite.

Leasing is probably the feature that draws customers to the SaaS offering, agrees Scott Fleszar, senior director of marketing. "I think that leasing is the first hook, the reason they reach out to us," he says. However, Fleszar says once users try the SaaS product, they are impressed with the features and wonder why they haven't switched to an Internet-based product before.

CCH was the most aggressive of the major players with its introduction of its next generation suite last year. Like the other vendors, it had only a limited number of customers utilizing the online version of ProSystem fx Tax, but they "processed quite a few returns," says Angela Askew, the ProSystem fx Tax product manager. Changes these users suggested are now being incorporated into the Next Generation system and several releases are planned over the next few months.

The online offering also provides greater integration between Tax and other products with the line, including the new Workstream application, which Askew says "is working very nicely."

Bank Products

For part of the market, bank products are among the most important elements of tax season. But bank products, in particular the status of refund anticipation loans, is the most uncertain element of tax software for the 2010 tax year. The best advice about what will happen in this area has probably been given by Drake's Sapp, who says all he can say is "stay tuned."

That's after regulators forced Santa Barbara Bank and Trust out of the refund loan business in December and then Chase Tax Related Products voluntarily withdrew after the season ended. The Santa Barbara unit, sold to a group of private investors, become the Santa Barbara Tax Products Group. It was funded by Meta Bank, but only for refund transfers, not for RALs. Observers think SBTPG will offer RALs if it can. In fact, the bank product section of Intuit's Web site has the following statement: "In addition, SBTPG has indicated its intention to offer a RAL program in January 2011 and is working towards that goal." SBTPG president Rich Turner has not returned calls on this subject.

Also uncertain is what the Internal Revenue Service plans to do with the direct deposit indicator, which is the element that loan providers rely on in assessing whether an applicant will get a loan.

Whatever the pace of adoption of online preparation and no matter what happens with RALs, users must still weigh what they are getting when the renew their purchases this year. And renewal is the key word since with few new preparers entering the market, most already have a tax package and most will stick with the application they used to prepare 2009 taxes.

However, tax is that strange application that users buy before the software has been written. And at this point, vendors haven't completed the decision about what features will go into the 2010 code. But the following lists elements that they say will be available when the software reaches customers.

ATX
CCH Small Firm Services is adding workflow features to ATX that will display  the status of returns, such as waiting for review, e-filed or refund received. That's being added, according to product manager Bowden Brown, because "we had overlooked the importance of workflow even in a small office. You have a junior preparer start preparing the return and a senior preparer reviews it."

Users will now be able to track billing via time in the return. They will also be able to import data from ATX-created W2s and 1099s into 1040 returns. There is alas an enhanced ability to search return data and run reports from Return Manager tabs and  improved K-1 worksheets and tracking calculation of the basis.

ATX customers will be paying more for their software, as will users of the sister TaxWise package. Prices have been raised by an average of 5 percent for 2010. The percentage increases are greater on the lower-end of the line, although the dollar amount of those increases aren't as great as those on the more expensive products.

Drake
For the 2009 tax year, Drake added eCollect, which enabled preparers to collect their fees from the taxpayers' refunds, all for $5 per customer. This year, eCollect will also be offered for consumers who use Drake's 1040.com, which means they don't even need a credit card to pay for the preparation, notes marketing VP John Sapp. Incidentally, Drake has been splitting money it makes on 1040.com with its professional preparer customers.

The company has always gotten customer feedback, but for the 2010 software, it is going to use that input more in designing the software. "We are making a concerted effort to evaluate base on customer feedback, we have looked at the statistics of things that people call in about and things that are less intuitive," says Sapp.

Drake is doing new thing it has never done previously, according to Sapp. It raised the price of its tax system with the price of the 1040 system going up by $100.

Intuit Lacerte, ProSeries
Lacerte is offering more efiling coverage, particularly with more business jurisdictions requiring efiling. A 10401 fiduciary organizer is also being introduced. "It's something our customers have been asking for years," says product manager Olavarrieta.

ProSeries gets more business forms, which Olavarrieta says Intuit admits that it has a few gaps. The company also wants to make sure "we have a good stock of vendors to support the RAL program," he says. Intuit used Republic Bank last year and its Web site says that it has expanded its relationship with Refund Advantage, which is funding by Ohio Valley Bank. The company is also building integration with Refund Advantage into the 2011 version of ProSeries.

Intuit is putting more effort into other areas that affect tax, but aren't part of the tax package. That includes an Internet-based office management suite called Office Online that is scheduled to debut later this year. It will integrate with both tax packages.

There are also big changes to the way efiling status can be displayed. Previously users had to select status via form, whether 1040 or 1120. Now, a drop-down system displays whether returns have been accepted or rejected and a user can look at all returns at once or all account numbers at one time. There is also a new capability that lets a state return to be electronically filed if the federal return has been disqualified. More state returns can also be efiled. Ten partnership returns and 15 corporate returns have been added.

Users will be able to access merchant services directly from within the tax software. Buttons on the application will link to payment  locations, whether by credit, debit or ACH check. The system links to the merchant service gates so that credit card numbers are entered there and not in the tax software itself.

TaxWise
TaxWise is focused on optimizing its core processing system, says product manager Shannon Bond. Reporting features are being enhanced so that the package offers something that is "more like real-time reporting." A new feature, Central Office Management, is aimed at the retail operations that have multiple locations. COM will enable them to manage all sites via the Internet. Bond says central offices could compare performance at any site against the prior year's performance, and determine answers to such issues as whether a particular site has too high a reject rate for refund loans.

TaxWorks, 1040 Works
For TaxWorks, there's quite a bit of work underway for the 2010 software to refine features that were added in the 2009 edition. Last year, Red Gear Technologies, the parent to TaxWorks, added a wage reporting program that was limited to federal payroll taxes.

This year, it plans to add weekly, monthly quarterly and annual payroll, reporting, according to Alan Haacke, the company's chief technical writer. Also being enhanced is the TaxWorks Audit Trail feature, which also debuted last year. "We are adding a lot more precision," Haacke says.

Red Gear's1040 Works software is getting an asset manager. It's a modified version of the asset manager in TaxWorks. Haacke notes the user has to manually add depreciation. There's also what is called a SPaR wizard that has been designed for very simple returns. It will walk the practitioner through returns that don't other forms or schedules, such as Schedule C, or have need to record information such as depreciation. "You want something that will go quick and easy," he says. The company is also working to simplify 1040 Work's interview process. He comments, "We are trying to make it more simple so it will handle more complex things but in a simpler, more intuitive way."

UltraTax CS
Thomson Reuters is constructing a client complexity factor for the 2010 version of its UltraTax CS. Ratings, based on forms and schedules, would be designed to assess the complexity of returns, enabling partners to understand which preparers might be most suited for any particular return. The ratings will be based on 2009 tax return information, notes Scott Fleszar, senior director of marketing for the unit that handles the CS Professional Suite. The ratings will be automatically generated so that preparers don't have to run any processes.

The Thomson unit also plans more robust tools for monitoring efiling. An automatic email would be sent to the client once a return has been accepted. In the eyes of the client the preparer, "is going to seem on top of the game," says Fleszar.

UltraTax will also be enhanced "to work gracefully in a dual-monitor environment," says Fleszar. Modifications are being built into the software so that when the application is displayed, "the maximum amount of real estate will be available" for use by the preparer. And the CS line will have increasing integration with UltraTax linked to the newly launched Accounting CS line.

The price of UltraTax products has gone up. For example, the first-year price of UltraTax 1040 is $2,375, up $100 from the 2009 software.