Academic journal article Journal of Accountancy

Users Size Up Tax Software: Product Ratings Gain, but Vendor Support Slips

Academic journal article Journal of Accountancy

Users Size Up Tax Software: Product Ratings Gain, but Vendor Support Slips

Article excerpt

Although AICPA tax practitioners rated this year's crop of tax-preparation software superior to the products they used last year, they gave lower grades to vendors' technical support. But for many tax practitioners, the bigger story was that the number of tax-software products continued to decline, forcing newly orphaned customers to go through the agony of selecting a new package and converting their client tax files to make them compatible. Such were the highlights of the Journal of Accountancy's spring 2004 survey of 2,010 AICPA tax-department members.

The average satisfaction rating for the nine professional products included in the survey was 4.09--out of a possible 5.00--up from last year's average of 3.61, with Intuit's Lacerte posting the highest overall ratings with a score of 4.43 (see exhibit 2, page 72). Three products tied for third place with a score of 4.35: Drake Software, Thomson Creative Solutions' UltraTax and CCH Tax and Accounting's ProSystem fx Tax.

The average cumulative rating for technical support slipped sharply to 2.44 from 3.50 last year, although respondents reported an improvement in the way their software ran on their networks--4.09, up from 3.50.

For a list of the vendors included in the survey, see exhibit 1, below.


The survey also revealed that not only is the field of vendors dwindling, but the existing market is becoming more concentrated, with four products appearing to lead the field with the most customers: Intuit's Lacerte and ProSeries, CCH's ProSystem fx Tax and Thomson Creative Solutions' UltraTax.

Evidence of the growing concentration can he deduced from the data in exhibit 2. Although more than twice as many tax practitioners responded this year than last (2,010 vs. 993), making the 2004 data more statistically reliable, only nine products received the 10 or more responses needed to qualify for inclusion in the survey. That's down from 12 last year.

In addition, tax year 2004 will see at least three fewer tax software products on the market. Thomson Creative Solutions, which owns UltraTax and RIA's GoSystem Tax RS, acquired the customer lists of Tax Relief and Exact Tax, both of which withdrew from the market. Also, Best Software sold its CPA Software Visual Tax customer list to CCH, which will he attempting to migrate those customers to its ProSystem fx Tax.

Caveat: The lopsided response in favor of just four products makes the individual scores of the remaining five products statistically unreliable. GoSystem Tax RS received just 50 responses, Max Plus 44, TaxWorks 29, Drake 17 and TaxWise 12. However, we believe the cumulative average of all nine product scores in exhibit 2 is statistically reliable.

Currently, there are only 16 tax software products on the market that provide all the necessary federal forms and can calculate taxes for every state with an income tax. That's down about 20% in the past decade. Aside from the packages reviewed in this survey, other products on the market include GreatTax, Orrtax, Dunphy, Taxslayer, Petz Crosslink, TaxSimple and TaxAct.

When a software publisher acquires a competitor, it usually just wants the customer list; the acquired product usually becomes defunct and the buyer seeks to convert the orphaned customers to its brand. But when Intuit acquired Lacerte a few years ago, it took a different tack: Because both the Lacerte brand name and product were so popular, Intuit decided to continue the package under a joint name.


The current turnover rate--the percentage of customers voluntarily moving to a new product or being forced to switch because their current product was being withdrawn--ran at about 13% last year (see exhibit 3, page 72).

Most tax practitioners are not happy about market consolidation--and for good reason. Switching tax packages is no small matter. First of all the CPA firm has to install the new product on its network, praying its computer system is sufficiently robust to handle the change; if it isn't, the customer must go through the often difficult and expensive process of upgrading the hardware. …

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