New York State CPAs faced significant challenges during the 2016 tax season, but maintained their focus on serving their clients. Tax preparation and research software provided resources that enabled them to meet clients’ needs and deal with ever-changing filing requirements and long-delayed release of tax forms. Respondents to the 2016 survey on tax preparation software generally reported satisfaction with tax preparation and commercial tax research packages, although both of the top-ranked tax preparation and tax research packages from last year’s survey dropped in the rankings. The overall ratings decreased modestly for tax preparation software, but increased for the third consecutive year for tax research software. Although value for cost continues to be a concern, the 2016 ratings reflected an improvement for both tax preparation and research software, continuing a trend seen in the last few years. Survey participants made widespread use of the IRS and New York State tax department websites and have discovered a variety of other helpful free online resources to assist in tax research.
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The 2016 tax season brought new federal health insurance and foreign asset filing requirements, an IRS e-filing shutdown, and the late issuance of New York State and New York City tax forms. New York State CPAs managed these new challenges admirably and focused on serving their clients in spite of the trials. Survey respondents readily adapted to new technologies such as the 2015 electronic signature guidance, which allowed the e-filing process to be completely paperless by providing options for taxpayers’ signatures.
Affordable Care Act (ACA) information returns required to be filed by insurance companies and designated large employers for the first time in 2016 included Form 1095-B, Health Coverage, and Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, along with their related transmittal forms. These forms were originally required to be furnished to individual taxpayers by February 1, 2016; however, extensions were granted to March 31 and June 30. This no doubt eased the paperwork for insurers and employers, but made ACA reporting a bit more confusing for individuals.
The Foreign Account Tax Compliance Act (FATCA) required foreign financial institutions and certain other entities to report on the foreign assets held by their U.S. account holders. Relatedly, U.S. persons may have to submit information on their foreign financial accounts and foreign assets to the Financial Crimes Enforcement Network on FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR) (formerly TD F 90-22.1). Beginning in 2016, certain U.S. taxpayers holding financial assets outside the United States must also report to the IRS on new Form 8938, Statement of Specified Foreign Financial Assets, with the first filing due June 30, 2016. The IRS website offers a helpful one-stop FATCA compliance landing page at https://www.irs.gov/businesses/corporations/foreign-account-tax-compliance-act-fatca.
Tax preparers reaching out to the IRS Practitioner Priority Service in 2016 received better results than in 2015. According to the National Taxpayer Advocate’s official report delivered to Congress in July 2016 (http://www.taxpayeradvocate.irs.gov/2017ObjectivesReport), the IRS answered 83.7% of calls from tax professionals in an average of 7.3 minutes. In addition, 73% of calls from taxpayers were answered within 11 minutes, reducing the wait time by 50% and doubling the number of calls accepted in 2015. Participants in the 2016 survey did not, however, see the reported improvements in quite the same light. More than half of respondents (57%) reported significant problems with wait time to talk to IRS, another 27% reported minor problems, and only 16% reported no problems or did not contact the IRS.
Given the above snafus, tax professionals had a real need to reach the IRS. Early in the season, the IRS shut down the modernized e-file system due to reported computer hardware problems. Other IRS services were also affected, including the “Where’s My Refund” tool. CPAs responding to the 2016 survey retained their professional attitudes and dealt with the situation. While 50% indicated they had minor problems with the temporary e-file shutdown, only 4% had significant problems with this issue.
In addition to new federal reporting requirements, tax preparers were also affected by state and local delays in the release of tax forms and were advised by officials to file extensions.
In addition to new federal reporting requirements, tax preparers were also affected by state and local delays in the release of New York State and New York City corporation and partnership tax forms and were advised by officials to file extensions. The postponed release of tax forms caused significant problems for 44% of survey participants and minor problems for 35% of respondents.
Invitations to participate in The CPA Journal 2016 tax software survey were e-mailed to approximately 9,000 NYSSCPA members with an interest in tax. (Incidentally, the current survey marks the 15th year it has been conducted, and the 10th year for the online format.) The firms represented by the respondents include a wide range of practice sizes, reflecting national demographics. The 234 completed surveys represent a similar response rate to recent years.
The 2016 survey included the tax software ratings queries from prior years, including the option to write in a package not listed. New questions included bundled software purchases and outsourcing of routine tasks; additionally, a few questions were modified, primarily in response to participant comments from previous years. The list of possible tax season issues was also updated to include topics identified through news articles during and after the tax season, such as the late issuance of tax forms and new filing requirements.
Exhibit 1 provides a profile of survey respondents, which demonstrates that the 2016 survey participants included representatives from small, mid-sized, and large practices. The average and maximum number of tax returns prepared decreased relative to 2015, but was similar to those reported in 2014. The median number of individual returns (250) and entity returns (75) was somewhat lower than prior years, suggesting a larger number of respondents from small firms. The slight decrease in the mean and median number of full-time tax professionals and increase in the percentage of professional practice in tax also indicate greater participation from small firms. Nevertheless, the overall demographics for 2016 encompassed firms of all sizes. The respondents were again experienced tax preparers, with over 80% reporting that they had more than 20 years of experience as tax professionals.
Profile of Survey Respondents
Brief Comparison with Prior Years
Consistent with previous years, the most prominent tax software vendors were CCH, Intuit, and Thomson Reuters, with multiple tax preparation or tax research products designed to serve small, medium, and large firms. The 2016 ratings for these vendors’ tax preparation products represented 240 (84%) of the 288 ratings received. Intuit tax preparation packages were used by 28% of respondents and CCH by 35%, while Thomson Reuters’ products were used by 21%. Although Drake Software was rated by significantly more users than in 2015, primarily smaller firms, it lost its top rating, which it had held for five consecutive years.
CCH and Thomson Reuters products represented 88 (63%) of the 140 commercial tax research software package ratings submitted for the 2016 survey. CCH tax research software materials were used by 30% of respondents, and Thomson Reuters’ resources were used by 33%, in comparison to 36% and 37%, respectively, in 2015. Parker Tax Publishing continued to gain responses, with almost 14% of the total in 2016, compared to 11% in 2015. The ratings for Parker Tax Publishing, however, decreased overall and on most features, while the ratings of the other commercial packages generally increased.
In addition to commercial tax research products, many respondents rated web-sites for tax research. The IRS website, state tax websites, and other Internet sources received 72% of the total tax research ratings, up from 68% in 2015 and 47% in 2014. Google has gained prominence as a free alternative to subscription services and, as a new option on the 2016 survey, was rated by more than one-third of the participants.
Although value for cost continues to be the lowest rated feature of tax preparation software, ratings increased from 2015 and are at the highest level since the survey was first administered in 2002. The average value for cost rating for commercial tax research software packages also increased relative to the past three years and is at the highest level since 2012, even with the popularity of free research options. In fact, value for cost was rated somewhat higher than customer support for commercial tax research products.
Tax Preparation Software
The survey questionnaire listed 17 of the most commonly used commercial tax return software vendors and also gave respondents the option of writing in a package not listed. Approximately 92% of the 234 respondents indicated that they used at least one tax preparation software package, and more than 23% evaluated more than one product. Respondents reported using 12 of the 17 packages listed. In addition, four write-in ratings were submitted, but only two listed the name of the package rated, and each was different. The 288 ratings for these vendors are analyzed and compared to the previous three years in Exhibit 2.
Ratings of Tax Preparation Software
Participants rated each software package on six factors: value for cost, ease of use, customer support, availability of forms, and accuracy (low error rate). Each factor was rated on a scale of 1 (very dissatisfied) to 5 (very satisfied). In addition, respondents provided an overall rating using the same scale. The average overall rating of 3.88 in 2016 represented a modest decline from 3.95 and 3.93 in 2015 and 2014, respectively, but is consistent with the range of the overall rating for recent years.
Approximately 53% of the ratings received were for CCH ProSystem fx (65 ratings), Lacerte Tax (45), and UltraTax CS (43). Four other packages were rated by more than 10 respondents: Drake Software (37); Intuit ProSeries (30); ATX (27); and GoSystem Tax RS (17). Together, these seven packages represent about 92% of the total ratings received. The discussion that follows is limited to these providers, as the results for those receiving fewer than 10 ratings may not be representative of a broader survey of the software users.
Of the seven packages with more than 10 ratings, the overall ratings were between 3.65 and 4.12, with UltraTax CS (average 4.12) rated highest for the first time, despite a slight decrease from last year. ATX (4.11) experienced a notable increase from its overall rating of 3.85 in 2015, which moved it up to a virtual tie for first place in 2016. With a decrease in its overall rating (from 4.45 in 2015 to 4.00 in 2016), Drake Software fell to third place after being rated highest overall for five years in a row. CCH ProSystem fx (3.82) fell from third to fourth place after experiencing a decline in its overall rating. With overall average ratings of 3.75 and 3.74, respectively, Intuit ProSeries and Lacerte Tax were effectively tied for fifth place. While the overall average rating for Intuit ProSeries was about the same as in 2015, Lacerte Tax’s overall average dropped somewhat. Finally, GoSystem Tax RS fell from a tie for fourth place in 2015 to last place, with an overall average rating of 3.65 in 2016.
Ironically, although there was an increase in the weighted average rating for each individual feature relative to 2015, the overall average rating declined from 3.95 in 2015 to 3.88 in 2016. It appears that respondents were weighing value for cost quite heavily, as this was the only feature with a lower average rating than the overall average. Despite the increase in value for cost as compared to previous years, it was still the lowest rated feature. The next lowest-rated feature was customer support, but its overall average rating of 3.91 was higher than 2015 (3.83). Furthermore, the two highest rated packages both demonstrated increases in their customer support ratings in 2016. Ratings for ease of use have been very consistent over the past several years, ranging from 3.94 to 3.97 since 2013. The average rating of 3.96 in 2016 fell within this range. Once again, both of the top rated packages experienced increased ratings for ease of use in 2016. Two features were rated for the first time in 2015: accuracy (low error rate) and availability of forms. These were the highest and second-highest rated features, respectively, in both 2015 and 2016. The average ratings for both of these features increased somewhat in 2016.
In the three prior years, the average overall ratings ranged from 3.79 to 3.95; the current year rating (3.88) was still in line with previous years and reflects overall satisfaction on the part of the respondents. Of the seven packages receiving more than 10 ratings, only ATX’s overall rating increased, continuing a trend observed in the last several years; furthermore, nearly all of the individual feature ratings for ATX increased (except value for cost). While Intuit ProSeries and UltraTax CS received overall average ratings very close to 2015, both saw increases in the ratings of most individual features relative to last year. The overall ratings of the remaining four packages declined in 2016. GoSystem Tax RS, CCH ProSystem fx, and Lacerte Tax showed a mix of increases and decreases in individual feature ratings, but Drake Software’s ratings decreased for all individual features, and its average overall rating decreased the most of any single package.
Despite the decrease in the average overall rating for all tax preparation software packages, the average ratings of all features were higher than 3.50 and exceeded the 2015 averages. Interestingly, top-rated UltraTax CS did not receive the highest rating for any single feature. Nevertheless, with the exception of accuracy (for which it received a relatively high rating of 4.40), its ratings increased from 2015 and it was ranked second for ease of use, customer support, and availability of forms. The other top-rated package, ATX, had the highest rating for availability of forms and was ranked second in value for cost and accuracy. Drake Software, ranked third overall, was the highest rated product on value for cost and customer support, as in 2015. CCH ProSystem fx was the highest rated package on accuracy. Finally, Lacerte Tax and Intuit ProSeries tied for the highest rating on ease of use.
The rankings for value for cost have been very consistent for several years. Since 2013, Drake Software, ATX, and Intuit ProSeries have consistently ranked first, second, and third on this feature. Top-rated UltraTax CS and ATX both showed improvements in ease of use, as did GoSystem Tax RS and Intuit ProSeries. Drake Software and Lacerte Tax showed declines in ease of use, while CCH ProSystem fx was stable. Customer support ratings also increased for the two top-rated packages, UltraTax CS and ATX. Intuit ProSeries was the only other package that reported improvements in customer support. Drake Software and Lacerte Tax both showed declines in customer support ratings, while ratings for the other providers did not change relative to 2015.
Despite the decrease in the average overall rating for all tax preparation software packages, the average ratings of all features were higher than 3.50 and exceeded 2015.
Availability of forms was a new feature on the survey in 2015, and this rating improved for UltraTax CS, ATX and Lacerte Tax in 2016, while declining for Drake Software and GoSystem Tax RS. The ratings for Intuit ProSeries and CCH ProSystem fx did not change. These ratings were relatively high, with an average of 4.23 across all packages, and only one (Intuit ProSeries) rated below 4.00. Accuracy (low error rate) was again the highest rated individual feature in 2016, with an average of 4.39. CCH ProSystem fx received the highest rating on this feature (4.56), with ATX and Lacerte Tax (4.48 and 4.47, respectively) close behind. All other packages received ratings of at least 4.00.
In summary, only ATX showed a substantial increase in its overall rating, while UltraTax CS and Intuit ProSeries had overall ratings very similar to 2015. The ratings of all of the other packages declined. With the exception of Drake Software, most respondents indicated that they had used the software package for seven or more years; the average for Drake was approximately four years. As its users acquire more experience, it will be interesting to see if Drake’s ratings, which have dropped in each of the last two years, stabilize.
Exhibit 3 provides descriptive information about the users for the software packages rated by 10 or more participants. The size of the firms is generally similar to what has been reported in previous years. Overall, respondents rating CCH ProSystem fx and GoSystem Tax RS represented a cross-section of firm size categories, including larger practices and more mid-sized firms. The other packages were used primarily by firms preparing fewer returns, with fewer full-time tax preparers, and with a majority of their practice in tax.
Tax Preparation Software Usage
Tax Research Software
Respondents also rated the eight most commonly used tax research software products, based on a review of print and electronic media. They had the option to write in a package, as well as to rate free resources such as the IRS and state tax websites. Survey participants were more likely to use multiple tax research products than to use multiple tax preparation providers, and many rated several options. More than 65% of the respondents indicated that they used at least one commercial tax research software package or resource, and 59% used more than one subscription or free option. Approximately 59% of participants used the IRS website, state tax websites, or other free Internet resources. The ratings for these products are summarized in Exhibit 4.
Ratings of Tax Research Software
The survey produced 334 ratings, of which 140 came from seven commercial tax research software packages and 224 came from the free tax research resources. Five write-in ratings were submitted, each for a different provider. Four products received at least 10 ratings: Checkpoint (46 ratings), CCH (42), Bloomberg BNA (23), and Parker Tax Pro (19). Intuit ProLine, LexisNexis, and Tax Analysts were each rated by fewer than 10 respondents; while their ratings are presented for completeness, they should be interpreted with caution. Interestingly, Westlaw did not receive any ratings and thus is omitted. Of the free tax research resources, the IRS web-site had the most users at 129, closely followed by state tax department web-sites at 122, and Google and other Internet searches at 113 responses. While individual provider ratings reflected a mix of increases and decreases from 2015, the overall tax research software ratings of subscription products reflected increases from the prior year, with the notable exception of Parker Tax Pro. The overall ratings for the most-used tax research products continue to be somewhat lower and closer together than those for the tax preparation packages, ranging from 3.63 to 3.96 for 2016.
Respondents ranked five features and the overall performance of the software packages on a scale of 1 (very dissatisfied) to 5 (very satisfied). The weighted average overall rating for the commercial products was 3.82, an increase from 3.65 in 2015 and 3.59 in 2014; this also represents the highest overall rating since 2005, also 3.82. The overall rating of all products was 3.48 in 2016, compared with 3.31 and 3.55 in 2015 and 2014, respectively. Just as the commercial tax research ratings have increased somewhat over the past few years, survey participants rated both the IRS and state tax websites more favorably in 2016, with improved ratings for every feature. Satisfaction with other free resources, however, declined in 2016.
The overall ratings increased for three of the four commercial packages with more than 10 responses. Bloomberg BNA was the top-rated provider, with an overall rating of 3.96, as compared to 3.50 in 2015. CCH and Checkpoint were tied for second place with overall ratings of 3.88, as compared to 3.46 and 3.79, respectively, in 2015. With an overall rating of 3.63, as compared to 3.94 in 2015, Parker Tax Pro fell from first place to third. The trend over time appears to be a narrowing use of commercial packages and an increased use of free resources. In survey comments, respondents expressed some dissatisfaction with the value for cost of commercial tax research packages; based on the ratings, it appears that users are expanding beyond traditional providers.
Continuing a trend noted in 2015, the average ratings of individual features for the commercial providers generally increased in 2016. With the exception of timely updates, all features had increased ratings in 2016. The value for cost ratings for the commercial packages increased overall (3.61 in 2016 versus 3.55 in 2015).
The value for cost rating for Bloomberg BNA and CCH rose, while both Checkpoint and Parker Tax Pro fell. Nevertheless, Parker Tax Pro once again received the highest rating, followed by CCH, Checkpoint, and Bloomberg BNA. The average ease of use rating (3.62) also increased relative to 2015 (3.47), and was the highest since 2004. Although it decreased for Parker Tax Pro, it increased notably for Bloomberg BNA, resulting in a tie between these two packages for best ease of use, followed by Checkpoint and CCH, which tied for second place. Checkpoint’s rating declined for this feature, while CCH increased.
Customer support ratings increased overall for the commercial packages to 3.58 (from 3.37 in 2015) and for Checkpoint, Bloomberg BNA, and CCH, which were ranked first, second, and third on this feature. Although Parker Tax Pro maintained its customer support rating compared to 2015, it still ranked fourth.
The average rating for timely updates for the commercial packages was 3.99, a decrease from 4.10 in 2015, and the only feature for which average ratings declined. CCH and Checkpoint’s ratings for timely updates were comparable to the previous year, ranking them first and second, respectively, on this feature. Bloomberg BNA’s rating for timely updates increased, and it was ranked third of the commercial packages. Finally, Parker Tax Pro’s rating for timely updates declined, dropping it from first to fourth place.
The ratings for company reliability increased modestly, with an average of 4.15 in 2016, as compared to 4.10, 4.07, and 4.08 in the three previous years. This rating increased for CCH and Checkpoint, which were ranked first and second, respectively. The company reliability ratings of both Bloomberg BNA and Parker Tax Pro decreased, and they were ranked third and fourth, respectively. With the exception of Parker Tax Pro, all of the commercial tax research products rated by more than 10 respondents have been used by most respondents for seven or more years. Parker Tax Pro is a newer package, with most respondents having used it for only three years.
For the second consecutive year, the number of ratings received for the free tax websites exceeded those received for commercial tax research packages, suggesting that they are becoming a more popular source for tax professionals. The overall ratings for the IRS and state department tax websites increased from 2015, while the ratings for other free tax research resources decreased. Respondents’ comments on the survey indicated that many of the free sites are quite helpful.
The IRS website once again received the most ratings (129) of all commercial and free research tools, but it was closely followed by ratings of the state tax web-site (122) and other Internet searches (113). Ratings of all individual features for the IRS and state websites increased compared to those reported in 2015, as did overall ratings. For both the IRS and state websites, value for cost was the most highly rated feature, likely reflecting the free access. The lowest rated feature for both sites was customer service, but this category improved from 2015. The overall rating for the IRS website increased from 3.06 in 2015 to 3.50 in 2016, while the rating for state tax department websites increased from 3.11 to 3.40. The overall rating for other Internet resources showed a decrease from 3.54 to 3.30. Google was a new option on the 2016 survey: of the free research tools, it had the highest overall rating, at 3.61.
The value for cost ratings for both the IRS and the state tax department web-sites improved from 2015, with the IRS and state websites receiving ratings of 4.53 and 4.30, respectively, as compared to 4.13 and 4.14 in 2015. Other web sites received an average value for cost rating of 4.43, as compared to 4.49 in 2015, representing a slight decrease. Since this rating combines those for multiple free tax research websites, however, it is not possible to identify a single “best value.” Google had the highest value for cost score of the free options. Customer support ratings increased for both the IRS and state tax department websites, to 1.96 and 2.43, respectively, while decreasing to 1.89 for other websites. Google came in the highest at 2.28. The ratings for timely updates increased for all of the free tax research resources. Finally, company reliability ratings increased for the IRS and state tax department websites while decreasing for other Internet websites. These websites appear to be used by firms of all sizes, reflecting survey respondents’ broad demographics.
Exhibit 5 provides descriptive detail on tax research software users. Similar to past years, Bloomberg BNA, CCH, and Checkpoint have users across all firm sizes, but Parker Tax Pro is used almost exclusively by small firms. Only Checkpoint had fewer ratings from small firms than from medium and larger firms, although CCH and Bloomberg BNA both were used by a substantial number of large firms. The IRS website, state tax department web-sites, and other Internet resources were used across all firm sizes, but were used disproportionately by smaller firms. This is similar to what has been reported in previous years.
Tax Research Software Usage
Other Technology Issues
The top-rated packages by feature reflected significant changes from 2015. Exhibit 6 reports the providers with the highest ratings for each feature. For tax preparation software, Drake Software retained the highest ratings for value for cost and customer support, but lost the highest overall rating to UltraTax CS and ATX. Lacerte Tax maintained the highest rating for ease of use, but in 2016 had to share the distinction with Intuit ProSeries. Although UltraTax CS gained the highest overall rating, for 2016 it lost the highest availability of forms rating to ATX, and highest accuracy to CCH ProSystem fx.
Providers with Highest Ratings
All four of the commercial tax research software packages with 10 or more users were able to claim best-in-class on at least one individual feature. Parker Tax Pro retained the highest rating for value for cost, but had to share the ease of use championship with Bloomberg BNA. Checkpoint was the highest-rated provider for customer support. CCH came out on top for timely updates and company reliability. After finally achieving the top rank in any single feature in 2015 (company reliability), Bloomberg BNA had the highest overall rating in 2016.
Of the features respondents were asked to rate, which did they consider the most important? Exhibit 7 reveals the 2016 participants’ average preferences, which reflected some interesting changes from 2015. For tax preparation software, ease of use was the most important feature in 2014 and 2015, but fell to second place (behind accuracy) for 2016. Value for cost was ranked second in 2015, but fell to fourth in 2016, behind customer support. Familiarity dropped from fifth in 2015 to eighth in 2016. Data security continued to be ranked lowest. The declines in rank for ease of use and familiarity may be related to the fact that 19% of participants had switched tax preparation software in recent years and probably accepted a small learning curve in mastering the new products.
Important Software Features
A remarkable pattern that continued in 2016 was the substantial gap between the two most important features—accuracy and ease of use—and the remaining qualities. Users of CCH ProSystem fx, GoSystem Tax RS, and Intuit ProSeries selected accuracy as the most important feature. Oddly, the tax preparation software with the highest overall rating, UltraTax CS, received one of the lower ratings for this feature, albeit still quite favorable at 4.40. The product in second place overall, ATX, had the highest accuracy score. At the individual provider level, ease of use was identified as the most important feature for ATX, Lacerte Tax, and UltraTax CS. The only tax preparation product for which value for cost was the most important feature was Drake Software.
For tax research products, value for cost fell from first place in the 2015 rankings to second. Ease of use was rated as the most important characteristic in 2016, tied with timely updates, which moved up from third place in 2015. Company reliability essentially retained its third place position from 2015. Similar to the tax preparation software ratings, there is then a substantial gap down to familiarity, customer support, and availability of states. The tax research software ratings for the most important feature, ease of use, were actually relatively close for all of the packages, with Bloomberg BNA and Parker Tax Pro at 3.68 and CCH and Checkpoint at 3.60. Examining the individual products, the most important features were as follows: CCH, ease of use; Bloomberg BNA and Checkpoint, timely updates; and Parker Tax Pro, value for cost.
Overall value for cost ratings have improved in the last two years for both tax preparation and tax research software—perhaps due to refining the feature from simply “cost.” Of the survey respondents who had switched software providers in recent years, 55% indicated the change was made for value for cost considerations, and 9% experienced discontinued products. Other reasons given for changing software included customer support issues, desire for more features or functions, and requirement of a higher quality resource. Only 19% of total respondents, however, reported that they had switched tax preparation software, only 2% had switched tax research software, and only approximately 6% had switched both within the past five years. The majority (73%) had not switched packages within the past five years, and 89% of respondents did not plan to switch software products within the next year. Regarding such plans, over 8% expected to switch tax preparation software, over 1% tax research products, and almost 2% both resources. It should be noted that tax professionals might be less inclined to switch tax research software due to the supplemental availability of free resources and the tendency to use more than one tax research product.
Customer support was given as one of the most prevalent reasons for switching software and was rated as the third most important feature for tax preparation software, but it was a substantially less important feature for tax research resources. Regarding specific modes of customer support in 2016, usage of live chat increased substantially from 2015, with 9% using it often or frequently and 36% using it occasionally. Telephone assistance decreased from 2015 but continued to be the most popular form of technical support for tax preparation software, with 50% using it often or frequently and 44% using it occasionally. E-mail was used often or frequently by 17% of survey respondents and occasionally by 51%, and online support was used often or frequently by 21% of respondents and occasionally by 47%.
Exhibit 8 details the frequency of use of some of the newer technological features available in tax preparation and research software packages. Fewer survey participants used the online version of software (25% in 2016 versus 29% in 2015), with only 10% considering future use. Only one of the newer exclusively online providers, Intuit Tax Online, received any ratings in the 2016 survey. No ratings were received in 2016 for similar online products, Agile Tax and CCH Axcess Tax. The use of portals for clients to upload tax data documents has remained relatively constant (34% in 2016 versus 35% in 2015), although those considering future adoption declined to 12% in 2016. New York State CPAs are certainly not shy about adopting new technologies when they make sense for serving taxpayers, and more than half have incorporated obtaining client signatures electronically to complete tax return submission, first permitted as recently as 2015.
Use of Other Technologies
A few respondents mentioned the necessity of integration with other software in their selection of tax products; however, only 19% purchased workflow or data management tools in connection with their tax preparation package. Of the tax preparation products rated by 2016 survey participants, ATX, CCH ProSystem fx, GoSystem Tax RS, Lacerte Tax, and UltraTax CS offer such advanced workflow options. Thirty-four percent of respondents acquired their tax research software along with their tax preparation software, an increase from 26% in 2015. This is particularly notable, as many tax practitioners are making increasing use of free tax research options. The use of pay-per-return pricing to reduce tax return preparation costs remained fairly constant at 33% in 2016, although only 3% reported considering it for the future.
The 2016 survey found that fewer participants (26%) offer a telecommuting option for their staff, although another 7% were considering it. Perhaps as an alternative, 6% of respondents indicated that they outsourced routine tax or bookkeeping preparation tasks. Reflecting a similar decrease, 59% allowed employees to use mobile devices for work, compared to 70% in 2015, and the employees personally owned more than half of the allowed devices. It remains to be seen whether data security will become more important as tax professionals take greater advantage of portable technology. On a related note, less than 10% of participants indicated use of mobile applications available for tax return or tax research software.
Tax practitioners were apparently able to manage the 2016 tax season challenges reasonably well, although not without effort, as seen in Exhibit 9. Although most survey participants experienced some difficulties with the new ACA compliance requirements, 45% reported only minor problems, while 19% had significant problems. Similarly, regarding other issues related to the ACA, a small group (13%) had significant problems, and the majority (54%) had at least minor problems. The good news is that the majority (56%) reported no problems with preparing Foreign Bank and Financial Account (FBAR) filings.
Tax Season Problems
Identity theft issues continued to be reported in the news and by participants in this annual survey. The IRS reported a 400% increase in phishing and malware e-mail and text messages sent to taxpayers during the 2016 filing season (https://www.irs.gov/uac/tax-scams-consumer-alerts). Approximately 2.7 million taxpayers need Identity Protection PINs in order to submit their tax returns electronically, but the online authentication process was shut down in 2015 due to the large number of returns flagged for false positive identity theft suspicions by the Taxpayer Protection Program. To make matters worse, the IP PIN letters issued for 2016 tax returns incorrectly indicated that the PINs were to be used on 2014 filings (http://bit.ly/2dnrIoy). Almost half (47%) of survey participants reported minor or significant problems in obtaining Identity Protection PINs for identity theft victims. Two-thirds (67%) had minor or significant problems with rejection of e-filed returns due to identity theft. CPAs have also become targets for fraudsters. IRS information release IR-2016-103 (August 11, 2016) warned tax professionals about phishing schemes targeted to practitioners in the form of e-mails with supposed links to install software updates (http://bit.ly/2dmaJ8N).
The website information for the tax software vendors rated by 2016 survey participants is listed in Exhibit 10.
Tax Software Vendors
The Cost of Tax Software
Among the tax preparation providers, the value for cost rating appears to parallel the products’ prices; however, not all of the vendors publicize their prices. The pricing structures for tax preparation software vary across products, with some offering a flat fee for unlimited returns and others using per-return pricing. In addition, some software package prices include both individual and entity returns, while others are priced separately. Only one of the tax research software products ranked in the survey, Parker Tax Pro, makes price information readily available. Parker Tax Pro also has the highest value for cost rating of the commercial providers.
A hyperlink to an unofficial listing of prices, as of September 2016, for products covered in this survey will be available with the online version of this article.
Analysis and Summary
New York State CPAs expressed general satisfaction with commercial tax preparation and tax research software resources, as well as with free online tools. Lower cost providers, such as Drake Software and Parker Tax Pro, continued to gain users among the annual survey respondents, although both experienced decreases in their ratings. With tax research resources in particular, participants have concentrated on a small number of commercial packages, while increasing their use of free resources, such as the IRS and state tax websites, as well as Google. Many practitioners indicated, however, that they had moved up to products with more features or functions, or with higher quality or software integration options.
Although the average overall rating for tax preparation software was down slightly, the average of individual features rose from 2015. There were substantial fluctuations among individual products, with notable changes from the prior year. The overall rating for commercial tax research software was the highest of the past several years, and the average of individual features, with the exception of timely updates, also increased from 2015. Similar to the tax preparation data, specific tax research providers’ ratings reflected a mix of increases and decreases. Ease of use was rated as the most important feature for tax research software and the second most important for tax preparation software. Value for cost dropped to second most important for tax research products and fourth for tax preparation tools.
The identity theft problem continues to escalate. Two-thirds of 2016 survey respondents experienced rejection of e-filed tax returns due to fraudulent use of their clients’ Social Security numbers, and almost 50% encountered difficulties in assisting taxpayers with obtaining IP (Identity Protection) PINs. Unfortunately, tax preparers themselves have now become the victims of e-mail scams from fake software vendors.
The 2016 survey results show that substantially more respondents are relying on free resources for tax research. Taxpayers apparently like help for free, too; Intuit-owned TurboTax gained market share over paid preparers and other online vendors by advertising free preparation of simple tax returns using Forms 1040EZ and 1040A. (See “TurboTax is Killing it This Filing Season,” Ben Steverman, Accounting Today, March 1, 2016, http://bit.ly/2dEX2Nn.) More broadly, the IRS reported that as of May 13, 2016, the percentage of total e-filed individual income tax returns submitted by tax professionals had declined from 64% in 2012 to 58% in 2016. Self-prepared tax returns were up to 42% of total e-filed individual returns (http://bit.ly/2dENGph). Although less than 1% of the 2016 tax software survey respondents reported losing a large enough share of business to do-it-yourself software or free-filing alternatives to be concerned, more than half (51%) acknowledged they have lost some clients to these options. This is a slight decrease from the 55% that reported losing some clients in 2015. Although in an ideal world, taxpayers should be able to prepare and file their own simple tax returns, it remains to be seen whether doit-yourself software creates more errors than it prevents.