New York tax practitioners encountered new challenges during the 2017 tax season, most notably meeting the new driver’s license reporting requirements and obtaining assistance from IRS and state representatives. Respondents to The CPA Journal’s 2017 Tax Software Survey expressed overall satisfaction, however, with the tax preparation and research software that enabled them to meet taxpayers’ needs for compliance and planning. Although value for cost continues to be a concern, the 2017 ratings for both tax preparation and research software increased slightly to levels higher than in the early years of the survey. Most survey participants continue to use the IRS and state tax department websites and have discovered a variety of other helpful free online resources to assist in tax research, including professional discussion forums, where they can share insights with other tax professionals.
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The 2017 tax season brought new filing deadlines for corporations, partnerships, and FinCEN Form 114 (FBAR) reporting. But most of the excitement surrounded several provisions of the Protecting Americans from Tax Hikes (PATH) Act of 2015, with a particular emphasis on preventing tax fraud. Form 8867, originally a tax preparer’s due diligence checklist for the Earned Income Tax Credit (EITC), was expanded to include the Child Tax Credit and the American Opportunity Credit. The PATH Act also delayed issuance of refunds for taxpayers claiming the EITC or the Additional Child Tax Credit until February 15, 2017, to attempt to curtail tax fraud from identity theft and fraudulent credit claims. To provide the IRS with more time to verify wage and withholding information, the PATH Act expanded the January 31 filing deadline for employer reporting to all federal Forms W-2 and certain Forms 1099, and related penalties for the late filing of information returns were increased and indexed for inflation.
The IRS filing season statistics reported that, as of January 27, 2017, the total number of e-filed individual income tax returns was down 33%, and the amount of refunds was down over 50%, compared to the same time period in 2016 (http://bit.ly/2i2qeEP). By February 3, 2017, e-filings and refunds were down 24% and 78%; however, the filing and refund process appeared to catch up, with a late filing surge before the April deadline.
Additional efforts to combat fraudulent tax filings included Form W-2 verification codes, an IRS pilot program of 16-digit codes to appear on 50 million Forms W-2 (http://bit.ly/2i2ZiEZ). The potential issues here are evident: not all Forms W-2 will bear verification codes, software providers might not properly update their programs, and taxpayers might not realize that they are supposed to enter the new code. Fortunately, this appeared to be a minor issue for New York CPAs, as only 21% of survey respondents indicated minor-to-significant problems with it.
Another initiative to prevent tax fraud was the IRS’s proposal to potentially require driver’s license numbers to be entered in tax software. Unfortunately for New York tax preparers and taxpayers alike, this requirement was adopted by New York, as well as Ohio and Alabama; several other states made it optional (http://bit.ly/2yhe7cs). Thus, in addition to Social Security and income information being at risk, individuals’ driver’s license numbers are also potential loot for identity thieves. New York’s rollout of this new requirement was rather quiet, and many tax preparers first learned about it as they began entering client data on their tax preparation software (http://on.ny.gov/2i4qVgX). Adding to these concerns, different software products had varying applications for requiring the data entry or allowing it to be bypassed. This particular issue wins the 2017 survey’s “pain and suffering” award for making 83% of respondents (and their clients) miserable.
In 2016, tax preparers were adversely affected by state and local delays in the release of New York State and New York City corporation and partnership tax forms. In 2017, the delay was in the acceptance of state tax forms generated by software providers, although some vendors had their state-approved versions ready before others. More than half (58%) of respondents had minor-to-significant problems with state form readiness.
Even though the National Taxpayer Advocate’s Objectives Report to Congress for FY 2018 reported improved customer service, with 79% of telephone calls answered (up from 72% in 2016) and hold time reduced from 11 minutes to 7 minutes, this responsiveness masked a 32% reduction in calls received (http://bit.ly/2yg3cAu). Participants in the 2017 survey reported no significant improvements; similar to 2016, more than half (54%) had significant problems with wait time, another 28% had minor problems, and only 18% had no problems or did not contact the IRS. Almost two-thirds (63%) of survey participants had minor to significant problems obtaining assistance from a New York State or New York City tax representative.
2017 is the 16th year that New York State tax professionals have participated in sharing their insights with the CPA Journal tax software survey. Invitations were e-mailed to approximately 9,000 individuals from the NYSSCPA’s database of members with an indicated interest in tax in their membership information. Participants completed a total of 256 surveys, yielding a similar response rate to recent years. The firms represented include a wide range of practice sizes, reflecting national demographics of tax professionals.
The 2017 survey included the tax software ratings questions from prior years, with the option to write in a package not listed. In addition to evaluating tax preparation and research resources, respondents answered requests for information on product purchase decisions, such as bundled software, and firm practices, such as workflow management and outsourcing routine tasks. The list of possible tax season issues was also updated to include topics identified through news articles and discussion forums during and after tax season, such as difficulties in contacting tax authority personnel and complying with several initiatives intended to reduce tax fraud and identity theft.
Exhibit 1 provides a profile of survey respondents, including representatives from small, midsized, and large practices. The average and maximum number of tax returns prepared, as well as the number of full-time tax preparers, increased relative to 2016 and prior years, driven by the inclusion of more respondents from large firms. The percentage of practice in tax (65%) is, however, similar to prior years. The median number of individual returns and entity returns was somewhat lower than in 2016, indicating that respondents from smaller firms had a voice in the survey results. The increased size diversity of 2017 respondents resulted in tax software ratings and other tax practice information consistent with prior years. Overall, the demographics for 2017 indicated coverage of firms of all sizes. The respondents were again experienced tax preparers, with over 80% reporting that they had more than 20 years of experience.
Profile of Survey Respondents
A Few Highlights
As in previous years, CCH, Intuit, and Thomson Reuters were the most prominent tax software vendors, with each offering multiple tax preparation or tax research products designed to serve different sizes of tax professional firms. Ratings for these vendors’ tax preparation products represented 275 (81%) of the 340 tax preparation software ratings received in 2017. CCH, Intuit, and Thomson Reuters’s tax preparation packages were used by 33%, 28%, and 20% of respondents, respectively. With 14% of the ratings, Drake Software was the only tax preparation package rated by a significant number of users that did not fall under the umbrella of one of these three vendors.
CCH and Thomson Reuters products represented 121 (67%) of the 180 commercial tax research software package ratings submitted for the 2017 survey; CCH tax research software materials were used by 33% of respondents, and Thomson Reuters’s resources were used by 34%, in comparison to 30% and 33%, respectively, in 2016. Only two other tax research packages received more than 10 user ratings, with Bloomberg BNA and Parker Tax Pro receiving 17% and 6% of the commercial tax research package ratings, respectively.
Most respondents also rated free web-sites for tax research. The IRS website, state tax websites, and other Internet sources received 70% of the total tax research ratings in 2017, compared to 72% in 2016 and 68% in 2015.
Value for cost continues to be the lowest-rated feature of tax preparation software; however, this rating has increased every year since 2012 to reach the highest level in the history of the survey. The value for cost rating for the commercial tax research software packages decreased slightly from 2016, but is still higher than ratings for this feature since 2005, even with the popularity of free research options. In fact, for the third straight year, value for cost was rated somewhat higher than customer support for commercial tax research products.
Tax Preparation Software
The survey listed 15 of the most commonly used commercial tax return software vendors and gave respondents the option of writing in the name of a package not listed on the survey. Of the 256 respondents, approximately 94% rated at least one tax preparation software package, and 27% evaluated two or more products. Respondents reported using 12 out of the 15 tax return software packages listed. In addition, three write-in ratings were submitted, but only two listed the name of the package rated, and each was different.
The survey asked participants to rate each tax preparation software package on six factors: value for cost, ease of use, customer support, availability of forms, accuracy (low error rate), and overall rating. Each factor was rated on a scale of 1 (very dissatisfied) to 5 (very satisfied). Respondents also provided an overall rating for the package using the same scale. The average overall rating of 3.94 in 2017 represented a modest increase from the average overall rating of 3.88 in 2016, and a return to the somewhat higher ratings of 3.95 and 3.93 in 2015 and 2014, respectively.
Exhibit 2 presents the 2017 ratings of the tax preparation software packages (340 ratings in total) and compares averages to the previous three years. Almost two-thirds (66%) of the ratings received were for CCH ProSystem fx (66 ratings), UltraTax CS (61), Lacerte Tax (49), and Drake Software (47). Four other packages were rated by more than 10 respondents: Intuit ProSeries (39 ratings), ATX (29), TaxACT (15), and CCH Axcess Tax (13). Together, these eight packages represent approximately 94% 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 users.
Ratings of Tax Preparation Software
Of the eight packages with more than 10 ratings, the overall ratings ranged from 3.68 and 4.24, a modest increase from 2016. The top five programs all maintained or increased their overall rating from the previous year. Drake Software, which had been the highest-ranked tax preparation package for five straight years prior to falling to third place in 2016, once again received the highest overall rating in 2017, rising from 4.00 to 4.24. UltraTax CS was ranked second and maintained the 4.12 overall rating that earned it the highest overall ranking in 2016. Intuit ProSeries was third, with a notable increase in its overall rating from 3.75 in 2016 to 4.08 in 2017. CCH Axcess Tax and CCH ProSystem fx were ranked closely in fourth and fifth place, respectively, with overall ratings of 4.00 and 3.97, representing no change from 2016 for CCH Axcess Tax and an improvement for CCH ProSystem fx. TaxACT, Lacerte Tax, and ATX were ranked sixth, seventh and eighth, respectively, with overall ratings of 3.87, 3.74, and 3.68. These ratings reflect a decrease from 4.00 for TaxACT, no change for Lacerte Tax, and a significant drop from 4.11 for ATX, whose ratings have fluctuated more than those of most other packages over the years.
The average overall rating for tax preparation software packages increased from 3.88 in 2016 to 3.94 in 2017. In the three prior years, the average overall ratings ranged from 3.88 to 3.95; thus, the current year’s rating is in line with previous years and reflects overall satisfaction on the part of the respondents. As noted above, of the eight packages receiving more than 10 ratings, three had increases in the overall ratings, three saw no change, and two had decreases. Consistent with recent years, the changes in overall ratings generally paralleled the changes in ratings of individual features.
The weighted average rating for each feature in 2017 was compared to the rating for that same feature in 2016. Despite the increase in average overall ratings, only one of the individual features (value for cost) experienced a slight increase (from 3.63 to 3.65), while the other individual features saw small decreases.
As stated above, the value for cost rating has steadily increased since 2012, but it was still the lowest-rated feature for the tax preparation software. Similar to previous years, the next lowest-rated feature was customer support, which at 3.77 was rated lower than ever before in the history of the survey. Customer support ratings varied significantly among the packages, but it is noteworthy that top-rated Drake Software had by far the highest customer support rating, followed by second highest–rated UltraTax CS. Ratings for ease of use have been very consistent over the past several years; the average rating of 3.93 in 2017 was within the range reported since 2013. Drake Software’s ease of use rating increased substantially, from 3.73 in 2016 to 4.15 in 2017, while UltraTax CS experienced a slight decrease from 4.19 to 4.11; both are among the highest rated packages for ease of use in 2017. Accuracy (low error rate) and availability of forms continued to be the highest-ranked individual features at 4.25 and 4.22, respectively. When considering the eight packages ranked by more than 10 respondents, UltraTax CS had the highest rankings on both of these individual features. In comparison, one of the low-cost options, Drake Software, had the third best ranking for accuracy, but was one of the lower-rated products for availability of forms.
Similar to previous years, the average ratings of all of the features for the tax preparation software packages were higher than 3.5 and are close to or exceed averages reported in recent years. Top-rated Drake Software received the highest rating for value for cost and customer support, while second-place Ultra Tax CS received the highest ratings for accuracy and availability of forms. Intuit ProSeries, which ranked third overall, was the highest-ranked package on ease of use.
Respondents were also asked to indicate how long they had been using the software packages that they rated. As shown in Exhibit 2, all packages, with the exception of CCH Axcess Tax, had been used an average of five or more years by the respondents providing the rankings. Although this represents a reduction compared to 2016, most of the respondents would still be characterized as experienced users. This may help to explain why the rankings have been relatively stable over time, as well as why users are generally satisfied with the products that they are using.
Exhibit 3 provides descriptive information about the tax preparation software users for the packages rated by 10 or more participants. The sizes of the firms utilizing these vendors in 2017 were generally similar to what has been reported in previous years. Overall, respondents rating CCH Axcess Tax and CCH ProSystem fx represented a cross-section of firm size categories, including the larger practices, as well as more midsized firms. ATX was used by slightly more smaller firms than in 2016, and Intuit ProSeries was used by slightly more larger firms. The other packages were used primarily by firms preparing fewer returns, with fewer full-time tax preparers, and with 50% or more of their practice in tax.
Tax Preparation Software Usage
Tax Research Software
Survey participants were asked to rate five features and the overall performance of the nine most commonly used tax research software products, based on a review of print and electronic media, on a scale of 1 (very dissatisfied) to 5 (very satisfied). They had the option to write in a package to review, 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 respondents rated several options. Two-thirds of the respondents indicated that they used at least one commercial tax research software package or resource, while 59% used more than one subscription or free option. Approximately 60% of participants used the IRS website, state tax websites, or other free Internet tax resources. The ratings for the free products are summarized in Exhibit 4, after those for the commercial software.
Ratings of Tax Research Software
Respondents submitted a total of 180 ratings for the commercial tax research software packages, and an additional 415 ratings were received for the free tax research resources. Two write-in ratings were submitted, one of which did not identify the provider. Four products received at least 10 ratings: Checkpoint (62 ratings), CCH (59), Bloomberg BNA (31), and Parker Tax Pro (11). (Interestingly, this represented an increase in the number of ratings for all of these packages except Parker Tax Pro.) Intuit ProLine, LexisNexis, Tax Analysts, and The Tax Book were rated by fewer than 10 respondents; while their ratings are presented for completeness, they should be interpreted with caution. Similar to last year, Westlaw did not receive any ratings and thus is omitted from the 2017 survey results. Of the free tax research resources, the IRS website had the most ratings (147), closely followed by state tax department websites (137) and Google searches (112). Survey respondents provided 19 ratings for other Internet searches. Of the four commercial tax research packages with more than 10 ratings, only Parker Tax Pro experienced an increase in its overall rating; however, it was the lowest rated of the four packages. Consistent with prior years, the overall ratings for the most-used tax research products were lower and much closer together than those for the tax preparation packages, ranging from 3.70 to 3.87 for 2017.
The overall ratings decreased for three of the four commercial packages with more than 10 responses, although none of the decreases were dramatic. Bloomberg BNA maintained its position as the top-rated provider with an overall rating of 3.87, compared to 3.96 in 2016. CCH had a very small decrease in its overall rating and was effectively tied with Bloomberg BNA for first place, with an overall rating of 3.86 (compared to 3.88 in 2016). Checkpoint and Parker Tax Pro were ranked third and fourth, respectively, with overall ratings of 3.79 and 3.70 (compared to 3.88 and 3.63 in 2016). The decrease in the number of ratings for Parker Tax Pro may be an indication that concentrated use of the commercial packages is continuing to narrow. Free resources are seeing increased access, with more ratings each year since they were added to the survey.
The weighted average overall rating for the commercial products was 3.81, essentially unchanged from 3.82 in 2016 and higher than 3.65 in 2015. Similarly, the overall rating of all products (commercial plus free internet resources) was 3.57 in 2017, compared to 3.58 in 2016 and 3.31 in 2015. Just as most of the commercial tax research ratings slipped from 2016 to 2017, survey participants rated the IRS and state tax websites, as well as Google searches, slightly lower in 2017, while the average rating for other Internet searches increased modestly.
For the commercial providers, the average ratings of individual features showed a mix of increases and decreases in 2017 compared to 2016. The ratings for value for cost, ease of use, and customer support all decreased, although none of the decreases were dramatic. In fact, all of the average ratings for these features are still higher than in 2014 and 2015. The average ratings for timely updates and company reliability increased relative to 2016 and are at the highest levels since 2006.
Of the four commercial tax research packages with more than 10 ratings, only Parker Tax Pro’s value for cost rating rose. The increase from 3.89 in 2016 to 4.64 in 2017 was more significant than most of the ratings changes, and provided Parker Tax Pro with the highest value for cost rating of any commercial package. Checkpoint, Bloomberg BNA, and CCH were ranked closely together, with average value for cost ratings of 3.47, 3.45, and 3.37, respectively.
Bloomberg BNA was the only package to earn a higher ease of use rating in 2017 than in 2016, increasing from 3.68 to 3.87 during that time, the top rating in this category. CCH, Parker Tax Pro, and Checkpoint were ranked second through fourth on this feature with ease of use ratings of 3.57, 3.45, and 3.42, respectively, and again relatively close in value.
While CCH maintained its customer support rating, the other three packages saw this rating drop from 2016 to 2017. Bloomberg BNA’s customer support rating of 3.60 was the highest of the four commercial packages, followed by CCH (3.53), Checkpoint (3.40) and Parker Tax Pro (2.56). The decrease for Parker Tax Pro was especially notable, as its rating in 2016 was 3.50.
The ratings for timely updates stayed the same or increased modestly for all packages except Parker Tax Pro, although its rating of 3.63 represented just a small decline from 3.68 in 2016. CCH’s rating on this feature of 4.29 was the highest, followed by Bloomberg BNA (4.13), Checkpoint (4.08), and Parker Tax Pro (3.63).
Finally, the company reliability ratings increased somewhat for all of the packages except Checkpoint, which experienced a small decline (from 4.29 to 4.20). CCH had the highest rating for this feature (4.41), closely followed by Bloomberg BNA (4.35) and Checkpoint (4.20). The more budget-conscious Parker Tax Pro was ranked fourth, at 3.67.
With the exception of Parker Tax Pro, all of the commercial tax research products rated by more than 10 respondents had been used by most respondents for seven or eight years. Parker Tax Pro is a newer package, with most respondents having used it for just four years.
As in the past several years, 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 of tax research material for tax professionals. The overall ratings for the IRS and state tax department websites were essentially unchanged from 2016, while the overall rating for Google searches declined slightly, and the rating for other free tax research resources increased. Respondents’ comments on the survey indicated that many of the free sites are quite helpful to tax practitioners. In addition, some respondents identified professional discussion boards as a very helpful resource that enables them to supplement or replace commercial tax research software with a free resource. As one practitioner stated, professional exchanges offer “tremendous accumulated knowledge.”
The IRS website once again received the most ratings (147) of all commercial and free research tools, closely followed by ratings of the state tax websites (137 ratings) and Google searches (112). Other Internet searches received a comparatively small number of ratings (19). Similar to past years, value for cost was the most highly rated feature for all of the free tax research resources, and customer support was the lowest-rated feature. Ratings for value for cost, ease of use, and timely updates for the IRS web-site all decreased slightly in 2017 relative to 2016; however, the ratings for customer support and company reliability both increased, resulting in an overall rating of 3.48, essentially unchanged from the 2016 rating of 3.50 and reflecting general satisfaction with the website.
The overall rating of 3.38 for state tax department websites is also comparable to the 2016 rating of 3.40. For state tax department websites, the ratings for value for cost, timely updates and customer reliability increased somewhat from 2016, while the average ratings for ease of use and customer support declined. The overall ratings for Google searches (3.52) and other Internet resources (3.61) are similar to one another, and slightly higher than those for the other free resources. The individual feature ratings for both Google searches and other Internet resources reflected a mix of increases and decreases, although none of these changes were large.
Of the free tax research resources, all are rated similarly on value for cost. Google searches have the highest rating on ease of use, while other Internet searches have the best rating for customer support. Not surprisingly, the IRS and state tax department websites are rated higher on timely updates and company reliability than Google and other Internet searches. While survey respondents find Google and other Internet searches to be a helpful tool, they undoubtedly recognize that the official IRS and tax department websites are more reliable for obtaining and confirming technical tax guidance.
Exhibit 5 provides descriptive detail on the tax research software users. Similar to past years, Bloomberg BNA, CCH, and Checkpoint had users across all firm sizes, but Parker Tax Pro was used almost exclusively by small firms. Bloomberg BNA was used by slightly more larger firms, and Parker Tax Pro by slightly more smaller firms, than in 2016. The IRS website, state tax department websites, and other Internet resources were used across all firm sizes, but have a disproportionate amount of usage by smaller firms, similar to previous years.
Tax Research Software Usage
Other Technology Issues
There were major changes for 2017 in the top-rated packages by feature, continuing a multi-year pattern of “musical chairs.” Respondents made some interesting comments in this regard; one tax practitioner stated, “Tax software, in general, excels in one area, then fails in another.” A second comment was quite on point: “Almost all tax software programs have their own issues. Some are too expensive for small firms. Some are not user friendly.” It is hoped that this annual survey can help readers to sort out their options and make the choices that best suit their practices.
Exhibit 6 reports the providers with the highest ratings for each feature. For tax preparation software, Drake Software maintained the highest ratings for cost and customer support, and regained the highest overall rating. Intuit ProSeries retained the highest rating for ease of use, which it shared in 2016 with Lacerte Tax. UltraTax CS lost the highest overall rating from 2016, but reclaimed the highest ratings for availability of forms and accuracy (low error rate).
Providers with Highest Ratings
Of the four commercial tax research software products with 10 or more users, three received the highest rating on at least one individual feature. Parker Tax Pro retained the highest rating for value for cost, but lost its 2016 tie for ease of use to Bloomberg BNA. Bloomberg BNA was also the highest-rated product for customer support. CCH maintained the top position for timely updates and company reliability. Bloomberg BNA and CCH shared the highest overall rating in 2017.
Which features do practitioners consider the most important? Exhibit 7 shows the 2017 participants’ averaged preferences, which reflect some interesting changes from 2016. For tax preparation software, accuracy and ease of use continued as the first and second most important features in 2017. There was some interesting shifting between value for cost (ranked third in 2017), availability of forms (fourth), and customer support (fifth); availability of states remained at sixth most important feature. Familiarity came in at seventh most important, up from eighth in 2016. Data security moved up to eighth, and company reliability dropped to last. The declines in rank for customer support and company reliability may be related to the fact that 23% of participants had switched tax preparation software in recent years, and the decrease in the average number of years used (Exhibit 2) compared to 2016.
Important Software Features
A pattern that has existed in recent years is the substantial gap between the two most important features—accuracy and ease of use—and the remaining qualities for tax preparation software. UltraTax CS received the highest rating for the most important feature, accuracy, and had the second highest overall rating, behind Drake. ATX fell from the highest accuracy rating in 2016 to the lowest in 2017, and also had the lowest overall score for packages with 10 or more ratings in 2017. Intuit ProSeries had the highest ease of use rating for both 2016 and 2017; its accuracy rating improved for 2017, which helped pull it up to third place in the overall rating for 2017.
For tax research products, ease of use was the most important feature in both 2016 and 2017; similarly, cost was the second most important feature in both years. Timely updates was tied with ease of use in 2016, but came in at the third slot in 2017. Like the tax preparation rankings, there is a gap between these top features and the next closest item, company reliability. The popularity of the free tax research resources, which have no cost but also generally offer no customer support, is probably reflected in the rankings that respondents placed on the various features; that is, value for cost as the second most important feature and customer support as the least important. The tax research software ratings for the most important feature, ease of use, improved substantially for Bloomberg BNA, which has been the highest overall rated product in 2016 and 2017 (tied with CCH). Parker Tax Pro has had the highest value for cost rating in recent years, but in contrast received the lowest overall rating for 2016 and 2017. CCH has held the top spot for timely updates for the past two years, and tied for overall highest rating with Bloomberg BNA for 2017.
Overall value for cost ratings have been fairly constant for the last three years for both tax preparation and tax research software. Of the survey respondents who had switched software providers in recent years, 37% indicated the change was made for cost considerations, down from 55% last year. Other reasons given for changing software included customer support issues, desiring more features or functions, requiring a higher-quality resource, and discontinued products. Technology problems, ease of use, and accuracy received new emphasis as reasons to switch software in 2017. In slight increases from 2016, 23% reported that they had switched tax preparation software and 3% had switched tax research software; however, only 4% had switched both within the past five years, down from 6% in 2016. Most participants (69%) had not switched packages within the past five years, and, similar to 2016, 89% of respondents did not plan to switch software products within the next year. Regarding plans to change tax software within the next year, only 7% expected to switch tax preparation software, over 1% tax research products, and almost 2% both resources. Difficulties in carrying over client data and integrating with accounting software may create disincentives to change tax preparation software, while the availability of free tax research resources and the trend of using more than one tax research product may do the same for tax research software.
Customer support was given as one of the most common reasons for switching software, although its importance decreased from third most important feature for tax preparation software in 2016 to fifth in 2017. Some respondents indicated that their vendor’s customer support staff was friendly, but not knowledgeable, or as one practitioner stated, “quick but not competent.” For tax research resources, customer support decreased in importance from fifth in 2016 to last in 2017. In fact, a few participants specifically mentioned relying on fellow professionals as their go-to source for tax research. Overall, reliance on customer support increased in 2017, specifically through live chat. Use of live chat continued to grow from prior years among survey respondents, with 15% using it often or frequently, and 36% using it occasionally. Telephone assistance was used often or frequently by 51% of participants and occasionally by 45%, and continued to be the most popular form of technical support for tax preparation software. Online support was used often or frequently by 24% of respondents and occasionally by 45%, and slightly exceeded email contact, which was used often or frequently by 21% of survey respondents and occasionally by 47%.
More survey participants use the online version of software (31% in 2017, vs. 25% in 2016), but respondents considering future online use has declined to 8%. On last year’s survey, only one of the newer exclusively online providers, Intuit Tax Online, received any ratings in this category; for 2017, Intuit Tax Online and CCH Axcess Tax were both rated (although Intuit was rated by fewer than 10 respondents). Participants’ use of portals for clients to upload tax data documents had remained relatively constant (34% in 2016), but increased to 40% in 2017. The number of practitioners considering future adoption of online software stayed at 12% for 2017. The inclusion of many larger firms in the participant population may be responsible for the above increases, so it will be interesting to see if the trend holds for 2018.
Respondents to the survey have not historically reflected a high usage of accounting software integration with their selection of tax products, although one respondent mentioned that “the ease of integration may play a large role in the decision making process.” For 2017, only 18% purchased workflow or data management tools in connection with their tax preparation package. It should be noted that, of the tax preparation products rated by 2017 survey participants, ATX, CCH ProSystem fx, GoSystem Tax RS, Lacerte Tax, and UltraTax CS offer advanced workflow options. In addition, 36% acquired their tax research software along with their tax preparation software; this is particularly notable, as many tax practitioners are making increasing use of free tax research options. Finally, there may be a better way to explore the integration issue than this survey has previously taken.
Tax Season Problems
The use of pay-per-return pricing as a way to reduce tax return preparation costs increased slightly to 36% in 2017, although only 4% reported considering it for the future. One respondent mentioned that pay-per-return pricing on entity returns had resulted in almost doubling the cost of the software, so practitioners will want to look at this option very carefully before committing.
The 2017 survey found that 27% of participants were offering a telecommuting option for their staff, although only an additional 4% were considering it. Similar to last year’s results, a relatively small portion (6%) of respondents indicated that they outsourced routine tax or bookkeeping preparation tasks. While this human resource option receives much coverage in industry news, it does not appear to be very popular with New York practitioners.
Participating firms that allow employees to use mobile devices (58%) for work remained consistent with 2016 (59%), although only one-third allowed devices that were personally owned by the employees. On a related note, only 10% of participants indicated the use of mobile applications available for tax return or tax research software, in spite of substantial promotion by vendors and industry news. Data security has been scored as one of the less important software features (Exhibit 7), although it will be interesting to see if any future increase in the use of mobile devices, as tax professionals take greater advantage of portable technology, impacts the rating on this feature. It has been pointed out that using mobile devices while meeting with a client may set a bad precedent for 1) devaluing the tax professional’s skills and services and 2) providing incorrect advice that has not been thoroughly researched.
Identity theft issues continued to be reported in the news and by survey participants. In remarks before the Council for Electronic Revenue Communications Enhancement in May 2017, IRS Commissioner John Koskinen stated that the number of individuals reporting cases of identity theft to the IRS dropped from 698,700 in 2015 to 376,500 in 2016, a decline of 46%. Furthermore, the IRS stopped the payout of more than $6.5 billion in fraudulent refunds on 969,000 returns of confirmed identity thieves (http://bit.ly/2wPeTKA). Tax survey respondents have also reported reductions in identity theft issues. Just over half of 2017 respondents (52%) had minor to significant problems with rejection of e-filed returns due to identity theft, compared to 67% for 2016.
CPAs are also targets for fraudsters, and the IRS reported that in the first five months of 2017, 177 tax professionals or firms reported thefts of client information affecting thousands of taxpayers (http://bit.ly/2i48FE8). In response, the Security Summit partnership of the IRS, state tax agencies, and members of the tax community have initiated an education series titled “Don’t Take the Bait,” which launched in July 2017 (http://bit.ly/2g30Zhq). In a startling result, almost half (48%) of survey participants reported minor-to-significant problems, from the receipt of phishing or malware emails pretending to be a software provider. This was a new question added to the 2017 survey, and a trend that should be monitored in the future.
Tax practitioners were apparently able to manage the 2017 tax season challenges, although not without effort. One respondent expressed serious concerns about the late availability of New York–approved forms and summed up the most recent tax season by saying, “The IRS had long wait times to reach an agent, and it was the same with New York State. The driver’s license requirement was difficult, and the software provider had longer wait times to reach tech support.” Although the survey did not ask tax practitioners for specific reasons, 79% of respondents indicated minor-to-significant problems with “more than usual” client procrastination. Potential causes include hearing that refunds would be delayed (although this only affected certain taxpayers) and having to furnish driver’s license information to their tax preparer.
The biggest headache of all was the new driver’s license reporting requirement, which took tax preparers by surprise and generated minor-to-significant problems for 83% of respondents.
The Cost of Tax Software
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. Furthermore, not all tax software vendors publicize their prices. Only two of the tax research software products make price information readily available—Parker Tax Pro and The Tax Book, which are the lowest cost options of the commercial providers.
An unofficial list of prices (as of September 2017) for products covered in this survey will be available with the online version of this article at http://www.cpajournal.com.
Analysis and Summary
New York CPAs expressed general satisfaction with commercial tax preparation and tax research software resources in this year’s survey, as well as with free online tools. Drake Software, a lower-cost option for tax preparation software, regained its top ranking, while Parker Tax Pro, a lower-cost option for tax research software, received fewer ratings and was again ranked fourth of the four tax research packages with more than 10 ratings. With tax research resources in particular, participants have concentrated on a small number of commercial products while increasing their use of free resources, such as the IRS, state tax websites, Google, and other Internet searches. Some respondents indicated that they rely more on fellow practitioners by participating in online discussion boards and other professional groups to discuss tax issues.
The average ratings for both tax preparation and tax research software were consistent with previous years, although ratings for some features on individual packages experienced more substantial changes. Consistent with previous years, respondents rated accuracy and ease of use as the most important features for tax preparation software. Ease of use was also the most important feature for tax research software, followed somewhat distantly by cost and timely updates.
The increasing use of free online tax research tools is an interesting trend, and tax practitioners are making choices with full knowledge of whether they want to take advantage of low (or no) cost resources versus high-cost (and potentially higher quality) resources. The subscription tax research services are affected not only by the availability of free options, but also by users’ preferences. “The Future and Past of Tax Research” (Ted Needleman, Accounting Today, October 3, 2016, http://bit.ly/2i2UYpd) discusses how software providers are incorporating natural language search and also explains that there is still a market for hard copy resources.
Identity theft continues to be a problem. More than half (52%) of 2017 survey respondents experienced rejection of e-filed tax returns due to fraudulent use of their clients’ Social Security numbers. Tax preparers themselves have now become victims, and 48% of participants reported receiving phishing and malware e-mail scams from fake software vendors. In addition, a security breach caused the IRS to disable the Data Retrieval Tool, which automatically fills in portions of the online Free Application for Student Financial Aid (FAFSA), in early March 2017 after reports that 100,000 taxpayer records may have been illegally accessed (http://bit.ly/2ycHBH5).
Survey participants reported their successes and difficulties on several new tax processing initiatives. The new Form W-2 verification codes were handled relatively smoothly, and only 21% of respondents reported any problems. On the other hand, the new Form 8867 tax preparer due diligence requirements created minor-to-significant problems for 42% of participants, and more than half (58%) had problems with the late acceptance of their software providers’ state forms. A similar number (59%) reported minor-to-significant problems with seemingly random New York State notices requiring taxpayers to furnish itemized deduction documentation, although a common factor appeared to be that the returns in question showed refunds due. The biggest headache of all was the new driver’s license reporting requirement, which took tax preparers by surprise and generated minor-to-significant problems for 83% of respondents. Such an overwhelmingly negative response points to a very flawed implementation.
The IRS reported that, as of May 12, 2017, the percentage of total e-filed individual income tax returns submitted by tax professionals had declined from 64% in 2012 to 58% in 2017, while self-prepared tax returns were up to 42% of total e-filed individual returns (http://bit.ly/2i2qeEP). The IRS also announced in March 2017 that 70% of individual taxpayers were eligible for IRS free file software, although the filing season statistics do not break down the sources of self-prepared returns (http://bit.ly/2wO9S4Z). Approximately 1% of 2017 survey respondents reported losing a large enough share of business to do-it-yourself software or free-filing alternatives to be concerned; 50% of respondents acknowledged they have lost some clients who started preparing their own returns.
Tax practitioners have many options when it comes to tax software, but, as one of the respondents to the survey commented, each package has its own strong points and weak points. The ratings of individual features and overall satisfaction reported from the 2017 survey should help those who wish to choose amongst them. Exhibit 10 lists the websites of each of the software vendors, which represents the best place to continue the search.
Tax Software Vendors