Now that another tax season has passed, this is the time many CPAs evaluate their tax software. As CPAs look at what worked and what did not work, how do you determine if you are using the “right” package for your needs? There are several questions:
• Are you getting the most value from your investment in Tax Preparation Software?
• What would it take for you to consider changing your tax software?
• How “married” are you to your tax software?
• Do you know what your alternatives are?
To provide the tax practitioner the resources to evaluate these questions, we studied the 2009 Tax Preparation Software and present the latest information.
Is the grass greener on the other side of the fence?
We were not doing grading or rankings, but rather attempting to define a genre of tax software packages. We looked at how and why firms select a particular product and the types of benefits from the different products. We contacted the companies that produce the tax software to compare, contrast, and describe some of the high level features and benefits (and drawbacks) of each of the selected products. We were able to reach out to each of these vendors and have their senior product managers arrange demonstrations. The major things we considered in the reviews were integration, workflow, pre-return preparation (getting data in the system), ease of use, and delivery and storage of returns. Interestingly enough they seem to be almost mutually exclusive. Not surprisingly, they all said their product excelled at ease of use.
We looked at the following tax products (product name and vendor):
- Drake, Drake Software
- Lacerte, Intuit
- ProSeries, Intuit
- TaxWise, CCH SFS Wolters Kluwer
- ATX, CCH SFS Wolters Kluwer
- ProSystem FX, CCH Wolters Kluwer
- UltraTax CS, Thomson Reuters
- GoSystem Tax, Thomson Reuters
- Orange Door, Orange Door
- Tax Work, Tax Works
Our approach was a fair assessment based on reviewing product. To assist our readers in determining the best products for their firm we’ve reviewed the best of many possible solutions. It is intended to deliver enough information to set a platform for you, the CPA, to move ahead with your own research and analysis. Rating them would be a disservice as each application has features and qualities that may make one or another better or worse for any one practitioner. These types of tax preparation offerings fit into distinct segments, and appeal to practitioners of different sizes: small practitioner, medium size firm, and full service firm (enterprise).
Where possible, we tried to get the following information for the Tax Compliance Software
• The sweet spot for product
• The target firm
• Future roadmap
In compiling the data from the vendors, we have some overall the tax preparation software market observations:
1. Most offer unlimited e-filing but state support varies
2. Most everything has moved online (support, tax research, updates, etc)
3. Most tech support is based in the United States (less overseas tech support)
4. There is a move for portals to allow the tax clients to securely view their return online
5. Many tax preparers are using some form of online forum/ live community to discuss the tax software and other issues facing the practitioners. Some of these forums are hosted by the vendor
6. Various packages offer the ability to import and convert the tax data from competitors products to ease conversion.
There were some interesting findings:
• There is hosted tax software that can be run completely over the internet. A tax preparer could work from almost any computer in the world the an internet connection
• There is tax software that allows the preparer to work in Spanish (both screen entry and return)
Resistance to change?
In discussions with various CPAs on tax software, there appears to be a great amount of loyalty to their respective tax package. Other CPAs just commented it would be too hard to change software. Most CPAs stated they have been using the same package for many years. They had worked with their package long enough to know it well and learn the quirks. In general, they said the obstacles to change were the learning curve to adopt a new program and being locked into a suite that had integration with related products for write-up, scanning, etc. Still, many CPAs said they were concerned with price they had to pay for the tax software. In today’s economic situation, every cost is under review and tax software is not excluded. In addition, CPAs were concerned about efficiency for the tax process, they want to reduce the total time spent on the whole tax return cycle. They are frustrated with time spent on too many screens and poor layout. On the positive side, several CPAs reported benefits from scanning and integration.
As expected for tax software, many of the products are similar in function. Also, since this is a mature software market, the products do a good job of preparing tax returns or they would not be in business. It was more interesting to find the differences between products. For instance:
• Does the return calculate automatically or only when a ‘recalc’ button is used?
• Is a worksheet is used for data entry vs data entry straight into the return?
• Is the product designed for a “tax driven” practice or a firm that wants a full suite of software (tax, write-up document management, etc)
• Is the product designed for electronic data entry from a scanned in form or electronic tax planner or manual data entry?
The following identifies a few of the vendors of tax preparation software:
Drake reports they offer a newer product at lower price, and are offering a full suite. The sweet spot for their product is EA and CPA market, targeting smaller CPA offices. They support single desktop to multi-office online reporting. They also offer hosting returns at Drake’s servers.
This product is positioned as having good software speed and fast calculations. The programming platform was designed for efficiency. The design and data entry philosophies is keep it looking like the tax forms (just follow the form from top down), this product uses a calculate button to produce the results, offers ease of use, and has a client status manager. They offer Federal tax packages: 1040, 1040NR, 1041, 1065, 1120, 1120S, 706, 709, 990, and 990PF
The product is delivered as an initial CD shipment in November, with the full package ready by the end of December. Drake will post updates via web as needed and the software can automatically update at night. They also offer an archive CD final version at the end of tax season. When asked about the future road map, they were not ready publish at the time of the interview, but would release the information in the summer. We did learn they plan a web portal in next 1-2 years for taxpayer to fill out tax organizer.
For integration, the Drake product includes client communications with a built in email component. Document manager software is included for archiving tax returns. The product can use client write-up via trial balance import from Excel or QuickBooks. Drake offers a tax planner and a scheduler for tax appointments.
Inuit designed Lacrete for the full service firm segment. Lacrete was designed for “heads down” data entry using the keyboard’s 10 keypad instead of the mouse, i.e. press ‘escape’ key jump back, and ‘enter’ key to move forward. This product is designed with a tab layout. The tabs are clients, details, forms, and diagnostics, (with optional analysis and trial balance). This product is positioned as having ease of use, allowing the user to jump to forms at any time, it has customizable views on the client screen, the user can mark fields as missing data for follow-up (missing data utility), and driven by tabs with filters for sorting, it follows the flow of the tax return.
For integration, Lacrete offers automatic mapping of QuickBooks Premier Accountant data to a tax line. The tax research is integrated into the product. This product integrates a component for a “Live community” (online forum at the bottom of the screen) for all customers share information. Lacrete offers unlimited e-File, paperless solutions, a data import utility plus tax analyzer and planner. They offer a version of the product to network up to four users and consolidate returns. Lacrete has an online training center. The return can be printed to PDF or to the portal (the portal offering was in beta in 2008)
Intuit also offers ProSeries for tax preparation. It comes in two versions: Basic and Professional Editions. ProSeries is positioned as a value product. The target segment is the tax driven firm (primary tax and tax preparation) that does an average of 250 returns a year. This product is positioned as having tools to manage and grow a CPA practice and gain efficiency. They offer Federal tax packages: 1040, 1040NR, 1120,1120s, 1041, 1065, 990, 706, 709. ProSeries is worksheet based which means it looks like the tax return forms. It also has a Quick entry mode similar to Lacrete. Intuit offers a Pay-as-you-go option or regular pricing for ProSeries. ProSeries has a new feature called “live community” and alerts live community. It appears as a panel on right of screen, Intuit found peers were contacting each other via “virtual walk down the hall” to ask tax practice question. It had 1.5 million views in 2008 and 93% replies to questions.
For support, ProSeries has an alert feature which allows ProSeries to communicate real time to the software users, i.e. program issues for a dot net update. The Help system has tax help that is relevant to field or form where the cursor is positioned. Also it has “can’t find a form” look up help and “where do I enter?”
ProSeries offers multiple options for tax research: tax help, government instruction, cross reference, research library, tax almanac (international coverage), and live community. The company was not able to offer the future roadmap when asked, but said later in summer watch for a few things up Intuit’s sleeves
TaxWise is one of several products by CCH. CCH has packages for professionals who prepare a wide range of 1040 and business returns. CCH Small Firm Services has positioned Tax Wise for retail tax preparation with high volume.
For ease of use, the workflow starts with data entry. TaxWise has 7 different versions that vary by feature and price. The full version includes the federal 1040, 1120, 1120S, 1065, 1041, 706, 709, 990 and 5500 TaxWise offers bilingual ability in the program (both on screen and print).
TaxWise can integrate with the Client Write-Up program, Fixed Asset Manager program, Document Manager program, and an expanded TaxWise Research Library. TaxWise allows review levels (called Interview Plus Online (IPO)) which offer the firm to have “offshoot” locations staffed by less experienced staff, i.e. setup a point of business at car lot or in booth at mall for data entry, then have the return prepared in real time at main office then sent back to deliver to the customer.
ATX/Kleinrock joined forces with CCH. CCH Small Firm Services has positioned ATX for the small firm (1-4 people), and retail tax preparation. The target is small professional (CPA or EA) with boutique and small business services (25-100 clients) offerings a wider range of service, The sweet spot for the ATX product is high value for price.
The ease of use paradigm is based on looking at form onscreen as the return appears as printed
For integration, CCH offers bundles - Full suite of products for other product lines, forms based product. They offer different levels (from complete office with research to pay per return packages) and integration with accounting and write-up products. It works with Fixed Asset manager to handle depreciation asset updates during year.
The ATX full version includes the federal 1040, 1120, 1120S, 1065, 1041, 706, 709, 990 and 5500. ATX Max (has 10,000 tax forms for complete tax practice i.e. sales tax return) and Total Tax Office (bundles in complete tax research and resources) – add-on options like Ohio cities package.
For paperless integration, they offer a “Scan and Flow” to scan W2, 8879s and 1099s and process with OCR. It automatically reads the name and SSN to save in a subfolder. They report the Auto file feature offers time savings. This scanned in data is then imported into tax return. Also payroll They are finding a find growing need to serve Spanish speaking clients and small businesses. The Client write-up product is also offered in Spanish.
Print to document manager – store returns electronically, save as PDF (with password option for security), or protected file format (unique to document manager) They offer all e-filing options (pricing varies depending on version) For future roadmap, CCH is paying attention to customers and making various improvements, ease of use and workflow improvements (i.e. s/w downloads). Their goal is customer empowerment to allow practitioners to support themselves.
CCH has positioned ProSystem fx for all firms. The sweet spot for ProSystem is the CPA mid-market and above. ProSystem fx offers all forms, states, and extensive foreign returns. For ease of use, ProSystem offers numerous features, these include: the choice of two interfaces as a recent enhancements, both interview form and worksheet. It has a customizable toolbar per user and the category bar. The worksheet view includes a display column of prior year data for due diligence in data entry. It has import and export with Excel. ProSystem offers the consolidated 1099, to enter data from brokerage statements and make it easy to match totals to the statements. It has K-1 pass-through to the individuals return by linking client id. It has “Global notes” to store items for review notes into the return electronically (resulting in less paper), Tax scripts (allow power of attorney to view IRS docs), Estimate feature (feeds into estimate summary), Return QA (Diagnostics which shows e-file qualifying first on results).
For integration, ProSystem offers tax planning product, an Organizer for data input including an online version “tax notebook” to import electronically into the system. It can work with ProSystem fx document package for e-file cabinet. It integrates with ProSystem fx Scan to scan source documents into an organized PDF file with bookmarks. It integrates with Client portal allowing the user to publish return to portal securely. For the future road map, CCH is investing into product to create an enhanced platform for 4th quarter of 2009, and offering a hosted environment option.
Orange Door Tax Suite Pro
There is a newer product on the market. The sweet spot for Orange Door is new, growing firms and single users. They also mentioned an updated target for 3-15 user firms, and service bureaus. Orange Door has positioned themselves based on pricing plans (including no minimums) and an online platform (work from anywhere) that appeals to younger and new practices.
Orange Door started in 2004, when they saw an opportunity for something new in the tax software marketplace. They developed an all web based, rapid internet application (RIA) tool using xml. As a result, it can work from anywhere that has an internet connection (just a flash player required). Orange Door stated this is great for firms using overseas workers. It meets the IRS rules for encryption by using SSL 3.0 128 bit encryption. Since it is a host solution, the user information is saved as soon as the user moves off that field plus the data is entered into an audit log. All of the data is stored on the servers.
For ease of use, it is designed with a Customer view which shows the time spent per return. The features include: exporting to excel, color coded fields (i.e. green is calculated, yellow for drop down choices), and a floating menu button replaces the right click button. They offer conversions and imports from other packages.
Orange Door includes the federal 1040, 1120, 1120s, 1065, 1041, 1040nr, 1116, and 2555. With Orange Door, calculations are done in real time, no calc button required to be pressed.
For future enhancements, Client portal is expected for end of 2009. For e-filing, federal and 13 states were included last year; all available states are planned for next year.
UltraTax CS is one of many products by Thomson Reuters. The sweet spot for this product is small to large firms that offer full service. For its target, UltraTax is designed specifically for practicing accountants and offers advanced productivity features that eliminate manual effort to save time preparing returns. UltraTax has a higher price point but the full suite can leverage efficiency.
UltraTax says they include all returns done, including states and cities, Puerto Rico, 1040, 1120, 1120s, 1065, 1041, 1040nr, 1116, 2555 (foreign individuals) 990, 5500, 706, 709 and full e-filing. For ease of use, it was designed to input the data once. There are several options for input: web tax organizers, printed organizer view, UltraTax CS Source Data Entry (for temp workers), or scanned forms (w/ OCR) using File Cabinet CS. It was designed for data sharing from Write-up Solution (W2, K1, trial balance, rental properties, etc). The input sheet is organized in ‘folders’ or allows the form view. It was designed to take advantage of dual monitors. UltraTax can customize the views, for instance reorder the forms for data entry. It offers customizable client forms (transmittal letter, etc) in English or Spanish. UltraTax uses ‘Client Status’ events which are automatic (such as print date) or manual (2nd review) that can be used for reporting and graphs.
For storage of returns, UltraTax can send the return to the electronic file cabinet, or print versions for government, client, preparer, etc. It also has watermark feature (i.e. ‘client copy’) for the returns.
UltraTax is part of an integrated suite of products by Thomson Reuters. Client profiles are shared within Creative Solutions applications, but not with Outlook or Exchange.
They have a chart demonstrating the integration of the products:
The pricing for UltraTax CS is based upon selected entity modules and states. In addition, a per-return pricing model is also available. UltraTax CS enhancements for next year include:
• A new Firm/Office tab to the UltraTax CS Homepage providing metrics such as who is currently working in UltraTax CS, the number of each type of return prepared (Form 1040, 1120, etc.) comparing the current and prior year, a preparer summary report displaying the number and types of returns completed by each preparer in the office.
• Enhancements for the tax return client portal, a feature to automatically populate the client portal with both the completed tax return and copies of the scanned client source documents (W2, 1099, etc.).
• For the Federal 1040 and all 1040 States, the ability to compare the prior year calculated tax projection worksheet with the current year calculated tax return.
GoSystem is an online product by Thomson Reuters. Thomson Reuters offers this product as “Sophisticated Tax Compliance Software” using an online platform. The sweet spot for GoSystem Tax RS is the enterprise tax professionals. Thomson Reuters reports it used by many of the top firms in the country. For ease of use, GoSystem standardizes tax preparation work in a secure online environment, which can be scaled up or down as business needs change. Since it uses remote server technology, GoSystem allows the practitioner to access, share, and store the data and tax applications from any Internet connection. Since it is online, it incorporates multiple layers of security include network security including virus protection, application security, and data encryption. GoSystem offers more than 2,500 federal and state forms and schedules (they have a list at CS.ThomsonReuters.com/GSTforms). It also has built-in electronic filing (e-filing) features, online conferencing, reviewer notes, interactive diagnostics, and much more. They offer the Custom Tax Equalization module to handle complicated expatriate calculations.
For integration, GoSystem can import tax data from multiple sources, such as data from general ledger programs, balances from Engagement CS, and spreadsheet data. GoSystem Tax RS is also part of the Creative Solutions Enterprise Suite of tax processing, audit and accounting workflow applications.
As an online solution, this product offers concurrent multi-user access, enhanced business continuity, integration with other accounting tools, and reduced maintenance costs and storage needs at the practitioner’s office.
TaxWorks is part of the RedGear Technologies group. TaxWorks focuses on tax preparation software for the professional preparer. Tax Works traces its beginnings to 1972 when the company began and has grown and evolved to meet their clients' needs. For ease of use, TaxWorks offers full conversions from many competitors' software packages, as well as state-of-the-art electronic filing and bank services, tax planning software, per unit processing, importing from accounting software and a convenient tax guide. This product also offers multi-state processing, fixed asset manager, e-mail capability for returns/organizers, and real-time calculations. TaxWorks has a "Hover" feature allows that the user to view prior year information and import it directly into the current year's return. The “Flip” feature allows the user to easily flip between the entry window and the corresponding form containing real-time data.
TaxWorks includes the federal 1040, 1041, 1065, 1120, 1120S, All States, Entities 706 (Estate Tax), 709 (Gift Tax), 990 (Tax Exempt) & 5500 (Employee Benefit). The integrated e-file module is included for e-filing as part of TaxWorks 1040 or TaxWorks per unit processing. In addition, there is an option for bank services such as refund anticipation loans, advance refund anticipation/refund transfer loans, refund transfers, refund transfer direct deposits, and state refund transfers.
For integration, TaxWorks offers a Tax Planner, their online research library, and ArkWorks which is a paperless office and document management system. It also includes client management with a client database, instruction letters, reports and more.
TaxWorks offers various pricing and bundle packages.