Magazine article The CPA Journal

A Hard Look at Tax Software

Magazine article The CPA Journal

A Hard Look at Tax Software

Article excerpt

New York State practice survey

In Brief

Wide Usage and High Satisfaction

In a survey of New York State CPA firms, the authors find a high level of satisfaction with tax preparation and research software. Tax practitioners prepare taxes using software from an array of vendors, research tax problems using a variety of Internet and computer resources, and market and develop tax practices with their firm's website. They also use the growing number of electronic filers and other new technologies. The CPA Journal plans an annual update on tax software. If your vendor was not covered, if you would like to participate, or if you have other comments for the authors, please e-mail the editors at with "tax software" noted in the subject line.

Through computer technology, local and regional tax practitioners have access to many resources that were once available only to firms able to develop these resources internally. An obvious, and important, tax compliance resource is tax return preparation software. Tax practitioners also use computers in legal research, information gathering, and communication with clients.

The authors surveyed local and regional practitioners in New York State about their choice of tax preparation software and their assessment of their current software. The survey also asked respondents to rate tax research software and addressed how tax professionals use technology to complement other aspects of tax practice. Finally, the survey assessed the extent to which New York practitioners use their own website to communicate with clients and develop potential clients.

The survey instrument was mailed to 196 New York State CPA firms selected at random from an online phone directory. Sixty-five completed surveys were received. Since the survey focused on tax software and Internet usage, nonrespondents might not use such resources to the same extent or in the same ways as the survey respondents.

Tax Preparation Software

Tax practitioners face more changes in tax preparation software than just the annual reforms in the tax law. The tax software industry has witnessed substantial consolidation and the growth of online tax services for professional preparers.

There are several important things to consider when choosing a tax software package or an online service, including cost, user-friendliness, customer support, available features, updates, statespecific features, company reliability, and familiarity. The survey examined 23 of the most commonly used tax return software vendors, based on a review of print and electronic media. All 65 respondents indicated that they used at least one tax preparation software package, eight packages in total, as seen in Exhibit 1. Several firms used more than one product; consequently, 72 total ratings were received. CCH ProSystem fx and Lacerte Software had the most users, at 22 each. Intuit ProSeries, Creative Solutions, and RIA GoSystem had nine, eight, and seven users, respectively. Three of the companies (ATX Forms, Drake Software, and TaxWorks) had only one or two users, so their ratings should be interpreted with caution.

Respondents ranked the vendors on a scale from 1 (very dissatisfied) to 5 (very satisfied). The average overall rating for all eight vendors was 4.40, which indicates that users were highly satisfied with their tax preparation software. The highest overall rated vendor was Lacerte (4.57), followed by Creative Solutions (4.50), and Drake (4.50). Ratings of individual features (also in Exhibit 1) are generally consistent with these high overall ratings. The notable exception was the dissatisfaction with cost.

User familiarity ratings were similar to the overall ratings, with the exception of Drake, which had a lower familiarity rating. This may be because Drake has grown substantially in recent years by acquiring several other tax software vendors. Given that only two respondents rated Drake Software and their familiarity ratings were low, the ratings for Drake may be less reliable than the others. …

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