New York tax practitioners encountered old and new challenges during the 2018 tax season, most notably with planning ahead for changes enacted by the Tax Cuts and Jobs Act (TCJA), obtaining assistance from IRS and state tax department representatives, and the IRS system shutdown on April 17. But survey respondents once again expressed overall satisfaction with the tax preparation and research software that enabled them to meet clients’ needs for compliance and planning. The overall weighted average ratings decreased slightly for both tax preparation and research software. Although value for cost continues to be a concern, the 2018 ratings for tax preparation software showed only minor changes, the ratings for tax research software increased notably, and ratings for both categories are at higher levels than in the survey’s early years. Most survey participants continue to use the IRS and New York Department of Taxation and Finance websites and have discovered a variety of other helpful free online resources to assist in tax research. New York CPAs have once again provided valuable practice information to their colleagues by responding to this survey.
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Tax professionals began the 2018 tax season with a mission to provide tax compliance services based on the prior existing tax law, while also looking ahead to the coming changes under the Tax Cuts and Jobs Act (TCJA) passed by Congress in December 2017. While most provisions of the TCJA did not affect 2017 tax returns, many taxpayers still needed to consider making timing adjustments to itemized deductions, specifically medical expenses, mortgage interest payments, income and property tax payments, charitable contributions, and the miscellaneous expenses subject to the 2% of adjusted gross income (AGI) limitation. In what has become something of a tradition, on February 9, Congress also passed the Bipartisan Budget Act, which retroactively extended several expired provisions for both individuals and businesses. In addition, the Protecting Americans from Tax Hikes (PATH) Act of 2015 continued to affect tax return preparation by delaying the issuance of refunds until February 15 for taxpayers claiming the Earned Income Tax Credit or the Additional Child Tax Credit in an attempt to curtail tax fraud from identity theft. Finally, the IRS indicated that it would no longer electronically process individual tax returns that omitted the healthcare coverage information required under the Patient Protection and Affordable Care Act (ACA) of 2009.
Although the IRS reported an overall increase (0.9%) in the number of individual tax returns filed by April 20, the season was off to a slower start than the previous year, and return processing did not begin until January 29. Self-prepared returns caught up by mid-February, but professionally submitted returns lagged behind the 2017 pace until the filing deadline (http://bit.ly/2P0Zvr2). Overall, self-prepared returns were up 3.4%, while professionally prepared filings increased only 0.9%.
On April 17, the IRS experienced a systems outage that prevented it from receiving electronically filed tax returns. The Treasury Inspector General for Tax Administration (TIGTA) later identified the source of the problem as a firmware bug that took down a storage array (“Review of the System Failure that Led to the Tax Day Outage,” Reference Number 2018-20-065, September 19, http://bit.ly/2OqgYJY). While the IRS was able to resume processing in less than 24 hours, it appears that the problem may have been avoidable. The good news is that approximately one-third of 2018 survey respondents reported no problems with the tax day glitch; however, 48% had minor problems, and 11% indicated significant problems.
The National Taxpayer Advocate’s ”Objectives Report to Congress for FY 2019” stated that the IRS increased its percentage of telephone calls answered to 80%, the highest in over 10 years; however, the average hold time more than tripled to 24 minutes. Demand on the IRS phone lines also increased due to taxpayers whose returns fell under the additional wage verification requirements, which slowed down the issuance of some refunds (http://bit.ly/2PCudns). Participants in the 2018 survey saw some small improvements in their attempts to communicate with tax agencies. Those reporting significant problems reaching the IRS dropped from 54% in 2017 to 43% in 2018; however, indications of minor problems increased substantially, from 28% in 2017 to almost 37%. The remaining 20% had no problems or did not contact the IRS. A similar shift was seen in obtaining assistance from New York State or New York City, with a decrease in participants reporting significant problems, from 31% to 26%, but an increase in reporting minor problems, from 32% to 36%. Overall, there was only minimal improvement in tax practitioners’ ability to reach federal, state, or city representatives.
In addition to serving clients with accurate 2017 tax law compliance, tax professionals had to think ahead to the effect of the TCJA on 2018 tax liabilities. Although the TCJA did not affect 2017 taxes for many taxpayers, 87% of survey respondents indicated that they fielded questions from clients about the impact of the TCJA on individual and or business taxes. Over 18% of clients asked about individual-only tax changes, and approximately 1% asked about business-only changes; an amazing 68% of clients voiced questions about both. This is particularly interesting, as a study published by the National Federation of Independent Business (NFIB) in May indicated that 24% of their respondents were not familiar with the TCJA, and of those who were more knowledgeable, 28% obtained their information from news media—not their CPA (“Small Business Introduction to the Tax Cuts and Jobs Act,” https://www.nfib.com/surveys/tax-survey/).
New York residents, as well as other taxpayers in states with high income and property taxes, may have an incentive to be particularly interested in the impact of the TCJA, as the reduced federal itemized deduction for state and local taxes (SALT) has been a cause for concern. As of August, the IRS indicated that New York, New Jersey, and Connecticut legislative workarounds to provide tax credits or charitable deductions would not be considered acceptable. On a related note, some New York taxpayers are having difficulty claiming itemized deductions on their state returns. More than 55% of survey respondents reported that some of their clients have had minor to significant problems dealing with New York State notices disallowing itemized deductions for their clients.
In 2018, New York tax professionals participated in the 17th annual tax software survey, sharing their insights with readers of The CPA Journal. Invitations were e-mailed to approximately 1,500 individuals from the NYSSCPA’s database of members with an indicated interest in tax. This was a reduction from the 9,000 contacted in prior years, with a more focused selection on member characteristics. To make the survey available to all members, however, the survey link was highlighted on three online newsletters, including one targeted to all members, as well as an “Exchange” discussion forum on the Society’s website. The total number of surveys received, 190, was somewhat less than prior years, but the yield rate was much higher (over 12% for 2018, compared to approximately 3% in the past). In addition, the number of ratings was consistent with prior years, and the data provided conformed with previous reports. The respondents represented firms with a wide range of practice sizes, which reflects national demographics of tax professionals, although New York practitioners do not necessarily report the same views as those found in national survey results.
The 2018 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 questions about firm practices such as workflow management and the outsourcing of routine tasks. The list of possible tax season issues was also updated to include topics identified through news articles and discussion forums, such as difficulties in contacting tax authority personnel, issues complying with several initiatives intended to reduce tax fraud and identity theft, the impact of the above-mentioned IRS computer shutdown, and clients’ preliminary interest in changes under the TCJA.
Exhibit 1 provides a profile of survey respondents, demonstrating that the 2018 survey participants included representatives from small, mid-sized, and large practices. Although the mean number of individual and entity returns decreased substantially relative to 2017, and the mean number of full-time tax professionals decreased, these values were unusually high in 2017 due to one outlier respondent with a much larger practice than average. The 2018 values are relatively close to those reported in years before 2017. In addition, the percentage of practice in tax (65%) is identical to that reported in 2017 and similar to prior years. The median number of individual and entity returns was slightly higher than 2017, but as in previous years, the median was significantly lower than the mean, suggesting that respondents from small firms had a voice in the survey results. Overall, the demographics for 2018 indicated coverage of firms of all sizes, with participation from both small and large firms.
Profile of Survey Respondents
The respondents were again experienced tax preparers, with 76% reporting that they had more than 20 years of experience as tax professionals.
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 research products designed to serve different sizes of firms. Ratings for these vendors’ tax preparation products represented 207 (84%) of the 247 tax preparation software ratings received in 2018. CCH, Intuit, and Thomson Reuters’ tax preparation packages were used by 35%, 29%, and 20% of respondents, respectively. With 13% 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 the “big three” vendors.
CCH and Thomson Reuters products represented 90 (59%) of the 153 commercial tax research software package ratings submitted for the 2018 survey; CCH tax research software materials were used by 27% of respondents, and Thomson Reuters’ resources were used by 31%. Two other tax research packages received more than 10 user ratings, with Bloomberg BNA and the Tax Book receiving 16% and 11% of the commercial tax research package ratings, respectively. Most respondents also rated free websites for tax research. The IRS website, state tax websites, and other Internet sources received 68% of the total tax research ratings in 2018.
Value for cost continues to be the lowest-rated feature of tax preparation software, with the mean rating dropping somewhat in 2018 as compared to 2017, but still above historical levels. The value for cost rating for the commercial tax research software packages increased notably relative to 2017, and is at the highest level since this survey was first administered.
Tax Preparation Software
The survey listed 12 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. Of the 190 respondents, approximately 92% rated at least one tax preparation software package, and 26% evaluated two or more. Respondents reported using all of the listed tax return software packages, but four of the packages received fewer than 10 ratings. Three write-in ratings were submitted, but only one listed the name of the package. In addition, one package received only one rating; that package was added to the “Other” ratings in the summary. For 2018, 247 ratings were analyzed, and those ratings are summarized in Exhibit 2.
Ratings of Tax Preparation Software
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. These are the same factors considered in the survey since 2015. 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 3.89 dipped somewhat relative to 2017, but is consistent with prior years. The overall ratings for the past five years have not varied much, ranging from 3.88 to 3.95.
Exhibit 2 presents the current-year ratings of the tax preparation software packages and compares the averages to the previous three years. More than half (52%) of the ratings received were for three packages: CCH ProSystem fx (52 ratings), Lacerte Tax (39), and UltraTax CS (38). Five other packages were rated by more than 10 respondents: Drake Software (31 ratings), Intuit ProSeries (30), ATX (20), CCH Axcess Tax (11), and GoSystem Tax RS (11). Together, these eight products represent 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 software users.
Of the eight packages with more than 10 ratings, the overall ratings were between 3.33 and 4.37 (out of 5), a wider range than in 2017, but generally in line with overall ratings observed in the last several years. Drake Software was the highest-rated tax preparation software package, with an overall rating of 4.37, a modest increase from its overall rating of 4.24 in 2017. With the exception of 2016, Drake has received the highest overall rating each year since 2010.
UltraTax CS was ranked second, and earned an overall rating of 4.13, virtually unchanged from its 4.12 overall rating in 2017. Third through seventh were CCH ProSystem fx (3.90), CCH Axcess Tax and Lacerte (tied at 3.82), Intuit ProSeries (3.76), ATX (3.74), and GoSystem Tax RS (3.33). These overall ratings reflected increases for Drake, Lacerte, ATX, and GoSystem Tax RS; the overall ratings of CCH ProSystem fx, CCH Axcess Tax and Intuit ProSeries decreased from 2017, while that of Ultra Tax CS was essentially unchanged. While these changes generally paralleled the changes in ratings of individual features, this was not always the case. Most notably, CCH ProSystem fx received higher ratings for each individual feature in 2018 versus 2017, but a modestly lower overall rating (3.90 versus 3.97).
The weighted average rating for each feature in 2018 was compared to the rating for that same feature in 2017. Although the changes were moderate, ratings for two features (value for cost and customer support) decreased. Interestingly, respondents’ comments reflected some frustration with both of these factors, at least for some products. While the ratings for two other features (ease of use and availability of forms) were unchanged, the rating for accuracy increased; the average overall rating decreased slightly, from 3.94 to 3.89.
The value for cost rating decreased somewhat, and this continues to be the lowest rated feature for tax preparation software. Similar to previous years, the next lowest-rated feature was customer support, which at 3.72 was its lowest rating since the survey began in 2002. Customer support ratings varied significantly among the packages, but it is noteworthy that, similar to the 2017 results, top-rated Drake Software had by far the highest customer support rating, followed by second-place overall UltraTax CS. The customer support ratings for UltraTax CS have declined in recent years, although some of its other features help to maintain its overall high ranking.
Ratings for ease of use have been very consistent over the past several years; the average rating of 3.92 in 2018 was within the same range (3.92–3.97) reported since 2013. Respondents rated ease of use as the most important factor for tax preparation software, but the package with the highest ease of use rating (Lacerte) received a middle-of-the-pack overall rating, apparently hurt by its relatively low value for cost rating. Drake Software’s 2018 ease of use rating was second overall and essentially unchanged from 2017. Accuracy (low error rate) and availability of forms continued to be the highest-ranked individual features, at 4.31 and 4.22, respectively. When considering the eight packages ranked by more than 10 respondents, CCH ProSystem fx had the highest rankings on both of these individual features. In comparison, one of the lower-cost options, Drake Software, had the fourth best ranking for accuracy (4.32) and the sixth best ranking for availability of forms (4.13). It appears that rankings for these two features do not factor heavily in distinguishing packages, since almost all packages received relatively high ratings on accuracy and availability of forms.
Consistent with previous years, the average ratings of all of the features for tax preparation software packages were higher than 3.5 (out of 5). Top-rated Drake Software received the highest rating for value for cost and customer support; second-place UltraTax CS did not receive the highest rating for any individual feature; CCH ProSystem fx, which ranked third overall, was the highest ranked package on both availability of forms and accuracy; and Lacerte, which ranked fourth, earned the highest ratings for ease of use.
Respondents were also asked to indicate how long they had been using the software packages they rated. As shown in Exhibit 2,with the exception of CCH Axcess Tax, all packages had been used an average of five or more years by the respondents providing the rankings; thus, most of the respondents would be characterized as experienced users of the software that they rated. This may help to explain why the rankings have been relatively stable over the last several years and why the ratings are generally strong.
Exhibit 3 provides descriptive information about the tax preparation software users for the packages rated by 10 or more participants. The size of the firms utilizing these vendors in 2018 was 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 and more mid-sized firms. Both ATX and Intuit ProSeries were used primarily by smaller firms. The other packages had users of all sizes, but 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 the eight most commonly used commercial tax research software products, based on a review of print and electronic media. They also 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. Approximately 54% of respondents indicated that they used at least one commercial tax research software package or resource, while 66% used more than one. The percentage of multiple-product users for tax research products increased notably (66% versus 56% in 2017), most likely driven by the large number of respondents who use free resources in addition to a commercial package. Approximately 68% of participants used the IRS website, state tax websites, or other free Internet tax resources. Although more than half of respondents used a commercial tax research package, the survey has documented a shift toward greater reliance on free tax research resources; some comments from the respondents confirmed this trend. The ratings for commercial and free products are summarized in Exhibit 4.
Ratings of Tax Research Software
For 2018, 153 ratings were received for the commercial tax research software packages, and an additional 326 ratings were received for the free tax research resources. Six write-in ratings were submitted, three of which did not identify the provider; the other three write-in ratings were each for a different product. In addition, one of the listed packages was included in “other,” as only one rating for that product was received. Four products received at least 10 ratings: Checkpoint (48 ratings), CCH (42), Bloomberg BNA (25), and The Tax Book (17). This is the first time the survey generated more than 10 ratings for the Tax Book, a relatively new product; in addition, Parker Tax Pro, which had received more than 10 ratings in each of the last several years, dropped below 10 ratings in 2018 and thus is not included in this year’s analysis. Intuit ProLine, LexisNexis, and Tax Analysts also were rated by fewer than 10 respondents; while their ratings are presented for completeness, they should be interpreted with caution. Of the free tax research resources, the IRS website had the most ratings at 117, closely followed by state tax department websites at 106. Survey respondents provided 88 ratings for Google searches and 15 ratings for other Internet searches.
The average overall rating of 3.76 reflects a small decrease from 3.81 and 3.82 in 2017 and 2016, respectively, but higher than the average ratings from 2011 to 2015. Of the four commercial tax research packages with more than 10 ratings, only the Tax Book experienced an increase in its overall rating; however, it received fewer than 10 ratings in 2017. The Tax Book’s overall rating of 4.11 made it the top-rated commercial tax research package in 2018. Bloomberg BNA was ranked second with an overall rating of 3.83 as compared to 3.87 in 2017; Checkpoint maintained its overall rating of 3.79 and was ranked third, while CCH was ranked fourth with an overall rating of 3.55, as compared to 3.86 in 2017. Consistent with prior years, the overall ratings are lower than those for the tax preparation packages. The range of overall ratings was somewhat wider than in recent years, from 3.55 to 4.11. The average overall rating of all products (commercial plus free Internet resources) was 3.52 in 2018, as compared to 3.57 in 2017 and 3.58 in 2016, respectively. Just as most of the commercial tax research ratings slipped somewhat from the prior year, survey participants rated all of the free tax research options slightly lower in 2018 than in 2017.
While most provisions of the TCJA did not affect 2017 tax returns, many taxpayers still needed to consider making timing adjustments to itemized deductions, specifically medical expenses, income and property tax payments, and charitable contributions.
Respondents ranked five features and the overall performance of the tax research software packages on a scale of 1 (very dissatisfied) to 5 (very satisfied). Interestingly, although the average overall rating for commercial tax research software declined somewhat, the average rating for several individual features improved in 2018 relative to 2017. The average rating for value for cost was 3.75, as compared to 3.56 in 2017; this represents the highest rating observed for this feature. The average ratings for customer support and timely updates also increased, although the increases were modest. The average rating for ease of use declined slightly, while that for company reliability was essentially unchanged. The average ratings for all features are still higher than was observed prior to 2016.
Three of the four commercial tax research packages with more than 10 ratings had improved value for cost ratings. The Tax Book, Checkpoint, and CCH all reported increases in their value for cost ratings, while Bloomberg BNA’s rating declined modestly. The Tax Book has emerged as the new favorite; its value for cost rating of 4.33 was the highest rating of any commercial package by a comfortable margin. Checkpoint, CCH, and Bloomberg BNA were ranked closely together, with average value for cost ratings of 3.63, 3.57, and 3.40, respectively.
Ease of use ratings declined from 2017 to 2018 for all four of these packages. The Tax Book earned the top rating of 4.11 in this category, followed by Bloomberg BNA, CCH, and Checkpoint, with ratings of 3.52, 3.40, and 3.29.
Checkpoint was the only package to see an increase in its customer support rating, from 3.40 in 2017 to 3.70 in 2018, earning it the highest rating for this feature. The other packages all experienced modest decreases in their customer support ratings. The Tax Book (3.53), Bloomberg BNA (3.44), and CCH (3.20) were ranked second, third, and fourth on customer support.
The ratings for timely updates increased modestly from 2017 for all packages except CCH, although all four of the providers received ratings in excess of 4.00. This feature has generally been improving over the last several years. Checkpoint’s rating on timely updates of 4.33 was the highest, followed by Bloomberg BNA (4.20), CCH (4.12), and the Tax Book (4.06).
Finally, the company reliability ratings increased for all of the packages except CCH, which declined from 4.41 to 4.05. Otherwise, company reliability has been increasing over the past few years. The Tax Book had the highest rating for this feature (4.53), closely followed by Bloomberg BNA (4.48), Checkpoint (4.31), and CCH. Notably, all packages earned ratings in excess of 4.00 on this attribute.
All of the commercial tax research products rated by more than 10 respondents had been used by most respondents for six or more years. Thus, respondents would generally be characterized as experienced users of the software.
Consistent with 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. Some of the written comments on the survey confirmed this observation, such as, “I don’t currently have a tax research product. I rely on the Internet, state and IRS web-sites, and other professionals.” The overall ratings for the IRS website and Google searches were essentially unchanged from 2017, with very minor decreases, while the average overall rating for state tax department websites and other free tax research resources declined somewhat compared to 2017.
The IRS website once again received the most ratings (117) of all commercial and free research tools, closely followed by ratings of state tax websites (106) and Google searches (88). Other Internet searches received comparatively fewer ratings (15). Similar to past years, value for cost is the highest-rated feature, and customer support is the lowest rated feature, for all free tax research resources. Ratings for value for cost and timely updates for the IRS website increased slightly in 2018 as compared to 2017, while the ratings for ease of use and company reliability both decreased; the rating for customer support was unchanged. The overall rating of 3.46 is essentially unchanged from the 2017 rating of 3.48 and reflects general satisfaction with the website.
The overall rating of 3.26 for state tax department websites is somewhat lower than the 2017 rating of 3.38. The rating for value for cost increased slightly in 2018 relative to 2017, but the ratings for all other attributes decreased. The overall rating for Google searches (3.49) was very similar to the 2017 (3.52), while the overall rating for other Internet resources (3.43) decreased from 3.61 in 2017. The individual feature ratings for Google searches showed increases for all features except customer support and timely updates, both of which were essentially unchanged. For other Internet resources, the ratings decreased for all features except ease of use. This category is obviously the most open to variation and tends to show the most fluctuation from year to year.
Of the free tax research resources, all were rated similarly on value for cost except for other Internet searches, which at 4.00 was the lowest rating for this feature. Similar to the last three years, Google searches were the highest rated on ease of use. State tax department web-sites and other Internet searches have the best rating for customer support, but these ratings are still quite low at 2.14. Consistent with previous years, the IRS and state tax department websites are rated higher on timely updates and company reliability than are 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 users of tax research software. Similar to past years, Bloomberg BNA, CCH, and Checkpoint have users across all firm sizes. The Tax Book was used almost exclusively by small firms; this seems to mirror the profile of Parker Tax Pro, which dropped off of this exhibit due to the low number of ratings for 2018. 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; this is similar to what has been reported in previous years.
Tax Research Software Usage
Other Technology Issues
The 2018 ratings for tax preparation software revealed some changes in the top-rated packages by feature, with the exception of Drake Software continuing to dominate in certain categories. The top contenders for tax research software, on the other hand, experienced major turnover, especially with one of the lower-cost options failing to receive enough ratings to be included. Write-in comments also demonstrated the diversity of practitioners’ opinions, as a software package that received high praise from one respondent might be disparaged by another. The participants made for an interesting mix; some professionals needed high quality and functionality, while others required low-cost options. 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 the tax preparation software, Drake Software maintained the highest overall rating, as well as the highest ratings for value for cost and customer support.
Providers with Highest Ratings
Popular with small- to mid-sized firms, Drake has consistently been a highly rated product. Lacerte Tax is back in the top spot for ease of use, although Drake Software and ATX are in close second and third places. CCH ProSystem fx regained the top ranking in availability of forms and accuracy (low error rate), replacing UltraTax CS, which was a close second on availability of forms. CCH ProSystem fx and UltraTax CS have been similarly rated on these two features for several years.
Each of the highest-rated tax research software products changed for 2018, which has been a typical result for the survey. In addition, this was the first year that the Tax Book obtained enough ratings to be included in the detailed analysis. Of the four commercial tax research software products with 10 or more users, two received the highest rating on at least one individual feature. The Tax Book received the highest rating for value for cost, replacing Parker Tax Pro, which received fewer than 10 ratings. The Tax Book also earned the top value for cost, ease of use, and overall ratings. Although the Tax Book was the lowest-rated product on timely updates, its rating of 4.06 is well within “satisfied” territory. Checkpoint is in first place for timely updates and customer support. Overall, the ratings by feature for tax research tools are much closer together than the tax preparation feature data, and there is not as much distinction among performance.
Which tax software features do practitioners consider the most important? Exhibit 7 reveals the 2018 participants’ averaged preferences, which reflect more minor switches than any substantial movement. For tax preparation software, ease of use and accuracy traded places as the first and second most important features in 2018. Cost remained in third place, and availability of forms in fourth. Availability of states moved up to fifth, overtaking customer support, which shifted back to sixth. Familiarity continued to hold the seventh most important slot from 2017. Company reliability moved up to the eighth most important feature, and data security dropped back to last. Although it is cited as an important reason for switching software, the relatively low ranking of customer support may just indicate tax practitioners’ lowered expectations or even tenacity.
Important Software Features
In recent years, there has been a substantial gap between the two most important features—ease of use and accuracy—and the remaining features for tax preparation software. In 2018, Lacerte Tax was rated highest for ease of use, with Drake Software and ATX close behind. CCH ProSystem fx had the top rating for accuracy, and UltraTax CS was next in line for this feature.
For tax research products, the top three features have played musical chairs again. Value for cost has been the second most important feature in recent years, but was number one in 2018. Ease of use slipped back to the second most important feature for 2018, while timely updates remained third. 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 (i.e., cost as the most important feature and customer support as the least important).
Similar to the tax preparation rankings, the most important tax research features also show a gap between the top three and the others. In 2018, the Tax Book had the highest ratings for the two most important tax research features, value for cost and ease of use; a higher-end product, Checkpoint, scored highest for timely updates. Repeating the same rankings as in 2017, company reliability was reported as the fourth most important feature for tax research software, familiarity as fifth, availability of states as sixth, and customer support as the least important.
Overall, value for cost ratings have been fairly constant since 2015 for tax preparation software, although individual packages have shown fluctuations. For tax research software, on the other hand, there was a substantial improvement in the value for cost rating for 2018, although only two of the four most-rated products, CCH and Checkpoint, showed serious improvements. Of the survey respondents who had switched software providers in recent years, 52% indicated the change was made for cost considerations, substantially up from 37% last year. One participant stated, “The cost increases for both the tax software and research are excessive.” Another practitioner was able to bargain for some cost savings after confronting the provider with a plan to switch vendors.
Although software companies promote the use of pay-per-return pricing as a way to reduce tax return preparation costs, the employment of this model by survey respondents decreased slightly in 2018, to 34%, with only 4% considering it for the future. Responding to a combination of concerns, one practitioner stated that the quality of the vendor’s customer service had declined for three years running: “They have hired an army of people to bother my practice in multiple sales venues and it is a total turnoff. They have assigned a fee structure to every step of their cost structure to pay this army of useless representatives.”
Other reasons given for changing software included requiring a higher-quality resource, customer support issues, desiring more features or functions, technology issues, the need to integrate with other applications, and discontinued products. In slight differences from 2017, 17% reported that they had switched tax preparation software, and 6% had switched tax research software; however, only 3% had switched both within the past five years, compared to 4% in 2017. Most participants (72%) had not switched packages within the past five years, and similar to 2017, 86% of respondents did not plan to switch within the next year. Regarding plans to change tax software within the next year, almost 12% expected to switch tax preparation software—up from 7% in 2017—more than 1% planned to change tax research products, and almost 2% planned to change both. The trend of using more than one tax research product and the availability of free tax research resources may explain this reduced motivation for practitioners to switch tax research software.
Customer support was one of the most common reasons for switching software. The lack of customer support was the subject of many respondent comments, such as “Customer support stinks. I have to take stomach meds before I call.” The ranking of customer support has decreased to sixth most important feature for tax preparation software in 2018, although respondents continue to comment each year. For tax research resources, customer support remained in last place for feature importance in the 2018 rankings. It is interesting to note that, while vendors continue to spend their advertising dollars promoting technology or integration improvements, respondents continue to comment on customer support (and cost) each year on this survey.
The good news is that approximately one-third of 2018 survey respondents reported no problems with the tax day glitch.
Overall, reliance on customer support was similar to 2017, with the exception of greater usage of online assistance in 2018. Online support was used often or frequently by 22% of respondents and occasionally by 45%. Telephone assistance was used often or frequently by 50% of participants and occasionally by 43%; e-mail contact was used often or frequently by 17% of survey respondents and occasionally by 42%. Live chat declined slightly from 2017, with 17% using it often or frequently and 32% using it occasionally.
As seen in Exhibit 8, the use of online tax software has been steadily growing among survey participants, reaching 38% in 2018 (compared to 31% in 2017 and 25% in 2016), but the share of respondents considering future use has declined to 7%. Of the exclusively online providers, CCH Axcess Tax received 11 ratings for 2018, while Intuit Tax Online received only three; therefore, it was not analyzed in detail. Use of portals for clients to upload tax documents grew substantially to 46% in 2018 (versus 40% in 2017). Those considering future adoption increased from 12% in 2017 to 18% in 2018. The continued increased use of portals appears to be consistent across all sizes of firms, including the more typical small- to mid-sized practices represented in this survey.
Other Technology Issues
The need to integrate practice management software or other applications with tax preparation software has historically been mentioned as a reason for switching tax software packages. It should be noted that, of the tax preparation products rated by 2018 survey participants, ATX, CCH ProSystem fx, GoSystem Tax RS, Lacerte Tax, and UltraTax CS offer advanced workflow options. In an effort to try to understand the prevalence of integration of office workflow or client data management software with tax preparation software, this year’s survey asked about the use and importance of such integration. Over 26% of participants answered that they do use integrated applications, with another 14% considering it. Almost 40% indicated that integration was important to their practice, although for 34% integration was not important, and 26% did not integrate at all.
The IRS has continued to tackle taxpayer identity theft with its Taxpayer Protection Program and Pre-Refund Wage Verification Program. The National Taxpayer Advocate’s “FY2019 Objectives Report to Congress” indicated, however, that the IRS’s fraud detention filters were overly broad and had a high false error rate, estimated at up to 66% in 2017 (http://bit.ly/2PCJsga). IRS Tax Tip 2018-152 provides a long list of warning signs that a taxpayer’s identity has been stolen, beginning with the rejection of an e-filed tax return (http://bit.ly/2OrMqHY). According to the National Taxpayer Advocate, reports of taxpayer identity theft declined 65% in 2017, to 242,000 instances. Tax survey respondents continue to report identity theft issues at a similar level, indicating no improvements in 2018. More than half of respondents (52%) had minor-to-significant problems with rejection of e-filed returns due to identity theft for both 2017 and 2018.
Survey participants essentially worked two tax seasons at once, trying to look ahead to 2018 and responding to substantial client interest in how the TCJA would affect their individual and business tax liabilities.
Tax returns are a major source of identifying information about individuals and companies, and tax authorities’ approach to combat fraud—requiring more and more private information—is probably making the problem worse, not better. CPAs’ computers, filing systems, and Wi-Fi networks hold a great deal of information sought by identity thieves, making tax professionals as much targets as their clients. IRS Tax Tip 2018-137 discusses “spear phishing e-mails,” which are specifically targeted to the recipient and hence more likely to appear as coming from a trusted source (http://bit.ly/2NKFZdM). The e-mail attachments may include malicious keylogger software that records every keystroke made on the computer. Over 44% of participants in the 2018 tax software survey continued to report minor-to-significant problems from the receipt of phishing or malware e-mails pretending to be a software provider, which is not a substantial improvement over the 48% revealed in 2017.
The Cost of Tax Software
The cost of tax software options is often tailored to specific customer needs and thus is not publicly available for many of the packages discussed in this article. The pricing structures for tax preparation software also vary widely across products, with some offering a flat fee for unlimited returns and others using per-return pricing. In addition, some software prices include both individual and entity returns, while others are priced separately. Not all tax software vendors publicize their prices, and many prefer to discuss this information on a one-on-one basis with potential customers. A hyperlink to an unofficial listing of prices, as of September 2018, for products covered in this survey is available on the CPA Journal website (https://www.cpajournal.com/2018/11/19/tax-software-survey-for-2018).
Analysis and Summary
The 2018 tax season got off to a late start, and e-filed returns from paid preparers did not reach last year’s submissions numbers until the final April 17 deadline. Or rather, they would have reached the filing goal if the IRS computers had not shut down unexpectedly on deadline day. Survey respondents met the challenge admirably, although 59% indicated they experienced minor-to-significant problems due to the IRS systems outage (see Exhibit 9). Ultimately, IRS national statistics reported that e-filed returns from paid preparers were up 0.9% over 2017, but e-filed returns from taxpayers were up substantially more, at 3.4%.
Tax Season Problems
New York CPAs expressed continued satisfaction with commercial tax preparation and tax research software resources, as well as with free online tools, in the 2018 annual survey. Drake Software, a lower cost option for tax preparation software, retained its overall top rating, while the Tax Book received enough ratings to be included in detailed reporting for the first time, and was rated highest overall of the tax research products. 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 and state tax websites, as well as Google and other Internet searches. Some participants indicated that they currently rely on free Internet resources and knowledgeable colleagues rather than commercial tax research offerings.
The average overall ratings for both tax preparation and tax research software were consistent with previous years, although ratings for some products reflected more substantial changes. In a variation from 2017, ease of use was selected as the most important feature for tax preparation software, followed by accuracy and value for cost. In a similar movement for tax research software, value for cost became the most important feature, followed by ease of use and timely updates.
Identity theft continues to be a problem for tax preparers. More than half (52%) of 2018 survey respondents experienced rejection of e-filed tax returns due to possible identity theft issues, which figure showed no improvement from 2017. IRS programs to catch or prevent identity theft and tax fraud are overly sensitive and slow down the processing of tax return submissions. In addition, tax professionals themselves are now fraud targets, and over 44% of participants reported receiving phishing and malware e-mail scams from fake software vendors—down only slightly from 2017 (Exhibit 9).
Survey participants essentially worked two tax seasons at once this year, trying to look ahead to 2018 tax changes and responding to substantial client interest in how the TCJA would affect their individual and business tax liabilities. More than half of respondents (55%) reported minor-to-significant problems with seemingly random New York notices disallowing their clients’ state itemized deductions. Preparers cannot count on reaching tax authorities if they have questions, however, as 80% had minor-to-significant problems in contacting the IRS, and 62% had similar problems in obtaining help from state tax personnel.
Tax practitioners have many options when it comes to tax software, including free resources for tax research applications. Participants in the 2018 survey reflected an interesting mix of professionals requiring high functionality and quality and others needing low cost options. Write-in comments also demonstrated the diversity of practitioner opinions, as a software package that is well liked by one respondent might be criticized by another. The ratings of individual features and overall satisfaction reported from the 2018 survey should help those who wish to consider the different packages. The website information for the tax software vendors rated by 2018 survey participants is listed in Exhibit 10.
Tax Software Vendors