New York tax practitioners encountered several challenges during the 2019 tax season, most notably with obtaining assistance from IRS and Department of Tax and Finance (DTF) representatives, satisfying state requests for additional documentation, and dealing with the delayed start of IRS processing due to the government shutdown. Survey respondents nevertheless again expressed general satisfaction with the tax preparation and research software that enabled them to meet client needs for compliance and planning. Weighted average ratings decreased slightly for tax preparation software, but increased somewhat for tax research software. Although “value for cost” continues to be a concern for respondents, the 2019 ratings for this feature decreased only slightly; more notably, for both tax preparation and research software, customer support ratings were the lowest for any feature, highlighting concerns with customer support that have increased in recent surveys. Most survey participants continue to use the IRS and New York DTF websites, as well as several other free online resources to assist in tax research. New York CPAs have once again provided valuable practice information in responding to this survey.
Tax professionals faced multiple challenges in 2019, including a late filing start, late technical guidance, and late software updates. The IRS began accepting and processing individual tax returns on January 28, one day earlier than in 2018, following a partial federal government shutdown that lasted 35 days. More than two-thirds of survey respondents reported minor to significant problems due to the delay in IRS processing caused by the federal shutdown, perhaps because preseason issues were left unaddressed. Unfortunately, technology did not always fill the void, as more than half of participants experienced significant software problems due to changes from the Tax Cuts and Jobs Act of 2017 (TCJA).
Most provisions of the TCJA affected 2018 tax returns. The simplicity of a flat 21% tax rate for corporations was contrasted with a potentially incredibly complicated Internal Revenue Code (IRC) section 199A qualified business income (QBI) deduction for conduit entities. Standard deductions for individual taxpayers almost doubled, but this was tempered by the loss of the personal and dependency exemptions. Moreover, the dependent concept still affects filing status and tax credits, so technically the exemption deduction is not eliminated but reduced to $0, and tax preparers still must determine whether taxpayers have qualifying dependents.
Tax professionals continued to wait for guidance on international tax issues. The TCJA’s international reform provisions included the base erosion and anti-abuse tax, as well as special deductions for global intangible low-taxed income (GILTI) and foreign-derived intangible income (FDII). Proposed regulations for the deductions, however, were not issued until March 2019. The IRS provided frequently asked questions (FAQ) for 2018 reporting of deferred foreign income, but final regulations and FAQs on Foreign Account Tax Compliance Act (FATCA) procedures were not published until 2019. A good place to start a search for IRS resources on international issues is https://www.irs.gov/newsroom/international-taxpayers-and-businesses.
In addition to tax law changes, tax practitioners faced substantial changes on the Form 1040 for individual taxpayers. On paper, the “postcard-sized” Form 1040 was supposed to represent simplification, but in reality most of the line items were moved to attached schedules. The National Taxpayer Advocate’s Objectives Report to Congress for FY 2020 estimated that while 32% of individual taxpayers could prepare their tax filings with just the basic Form 1040 (pp. 1–2), 68% would have to complete at least one additional schedule, and 38% would require two or more (http://bit.ly/2W9dNH8). The form changes almost require the use of tax software, as some numbers are included in the total column without specific identification on Form 1040 (p. 2). The Treasury Inspector General for Tax Administration (TIGTA) report Tax Cuts and Jobs Act: Assessment of Implementation Efforts (Ref. No. 2019-44-027, April 18, 2019, http://bit.ly/2ogLhXN) found that the redesigned Form 1040 affected 113 tax forms, 66 instructions, and 64 publications. TIGTA also recommended additional changes for the 2019 tax forms.
Income tax withholding tables were reduced to correspond with the expected lower tax liabilities of many individual taxpayers; the result was balances due for some, and smaller refunds for others. Based on Government Accountability Office (GAO) estimates anticipating that a substantial number of taxpayers would owe tax with their returns, the penalty waiver threshold was reduced to 85% (IRS Notice 2019-11), and then 80% (IRS Notice 2019-25), of the prior year’s tax. The decrease in average refund amount was not as large as some predictions; the average refund of $2,729 as of May 10 compares favorably with $2,778 for the same period in 2018, although extended filers may lower the average refund amount (http://bit.ly/2Pncao9). IRS Publication 6187, Calendar Year Projections of Individual Returns by Major Processing Categories: 2019 Update, predicted a decrease in the number of refund returns by approximately 2.5% (http://bit.ly/2BG1Waf).
Although 2018 also had a slow start on e-filing submissions, the 2019 filing season did not catch up to it for self-prepared returns until mid-February (http://bit.ly/33WZfNy). Overall e-filing, including by tax professionals, did not match the 2018 tax season until April 12. Of course, tax specialists generally prepare more complicated returns, affected by late tax form availability and slow software updates. Even with TCJA changes that might have been expected to send taxpayers to seek professional help, as of May 10, self-prepared e-filing was up 4.2% from the prior year, in comparison to 2018’s increase of 3.4%. Although the IRS data only runs through May 10 (not through the October 15 extended deadline), e-filing by tax professionals was actually down by 0.5%. It will be interesting to see the complete statistics for 2019 filings.
Although 2018 also had a slow start on e-filing submissions, the 2019 filing season did not catch up to it for self-prepared returns until mid-February.
The National Taxpayer Advocate’s report stated that the IRS decreased its percentage of telephone calls answered to 67%, down from 80% last year. Only 23% of callers were able to get through, and the average hold time more than tripled to 24 minutes. Participants in the 2019 survey indicated approximately the same results in their attempts to communicate with tax agencies. Those reporting significant problems in reaching the IRS increased slightly from 43% in 2018 to 44% in 2019, while indications of minor problems remained at 37%. As one respondent stated, “IRS wait times and lack of customer service are resulting in more Powers of Attorney and drains on CPA time for minor issues.” A shift was seen in obtaining assistance from New York State or New York City, with a decrease in participants reporting significant problems from 26% to 20%, but an increase in the report of minor problems from 36% to 39%. Overall, there was no significant change in respondents’ ability to reach federal, state, or city representatives.
New York tax professionals participated in the 18th annual tax software survey in 2019, sharing their insights with readers of The CPA Journal. Survey invitations were e-mailed to practitioners from the NYSSCPA’s database of members with an indicated interest in tax. In an effort to include participants who may not have received the e-mailed invitation, the survey link was highlighted on several Society electronic newsletters, including one targeted to all members, as well as its Exchange discussion forum. The number of responses received was 187, comparable to 2018’s 190 responses. The number of ratings and profile of respondents were generally consistent with prior years. Respondents represented firms with a wide range of practice sizes, reflecting the national demographics of tax professionals, although New York practitioners do not necessarily report the same views as those in national survey results.
The 2019 survey included the tax software rating questions from prior years and provided a write-in option to rate a package not listed. In addition to evaluating tax preparation and research resources, respondents answered questions about firm practices such as use of client portals, pay-per-return pricing, and workflow management. The list of possible tax season issues was also updated to include topics identified through news articles and discussion forums during and after the tax season, 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 delayed start to IRS tax return processing due to the federal shutdown, and the Wolters Kluwer (CCH) outage due to a malware attack. There was also a question asking about software problems due to TCJA tax changes.
Exhibit 1 provides a profile of survey respondents, demonstrating that survey participants included representatives from small, mid-sized, and large practices and are generally similar to prior years of this study. The mean number of individual and entity returns was somewhat higher than in 2018 but in line with those observed over the past five years. The median values for the number of individual and entity returns are similar to those from 2018 and previous years. The mean number of full-time tax practitioners during tax season in the 2019 survey was considerably lower than in 2018 and 2017 but close to those reported in 2016 and earlier. Furthermore, the median number of tax professionals for 2019 was identical to that reported in the past several years. Finally, the percentage of practice in tax (64%) has been very consistent over time and was again in line with previous years. Overall, the demographics for 2019 indicated coverage of firms of all sizes, with participation from both very small and large firms. Similar to past years, the respondents were very experienced tax preparers, with 78% reporting that they had more than 20 years of experience as tax professionals. Only 2% of respondents reported that they had been tax professionals for five years or less.
Profile of Survey Respondents
The Top Thirteen Survey Takeaways
- More than half of participants experienced significant software problems due to changes from the Tax Cuts and Jobs Act of 2017 (TCJA).
- The IRS decreased its percentage of telephone calls answered to 67%. Only 23% of callers were able to get through, and the average hold time was 24 minutes.
- Value for cost is still one of the lowest-rated features of tax preparation software; however, the mean rating dropped lower in 2019.
- The average rating for customer support dropped to the lowest level since the inception of the survey in 2002.
- Top-rated Drake Software received the highest rating for value for cost and customer support.
- Ease of use ratings declined from 2018 to 2019 for three of the commercial tax research products—Bloomberg BNA, CCH, and Parker Tax Pro—while increasing for the Tax Book and Checkpoint.
- The ratings for timely updates decreased for all tax research products.
- Company reliability ratings also decreased for all tax research products, reaching their lowest level since this survey began in 2002.
- Ease of use was the most important feature for tax research options in 2019. Cost dropped to the third most important feature after being first in 2018. Timely updates moved up from third most important feature in 2018 to second in 2019.
- While most survey participants have not changed tax software in the last five years, 22% had changed tax preparation software (14%), tax research software (4%), or both (4%). The most frequently cited reason for changing software was cost (64%).
- Most respondents experienced problems arising from New York notices requiring additional documentation (e.g., W-2s), with 70% reporting minor or significant problems. While these initiatives are intended to improve taxpayer compliance, they are apparently creating problems for a large number of tax practitioners.
- Phishing e-mails, phone scams from criminals impersonating IRS agents, and identity theft continue to be at the top of the IRS’s annual Dirty Dozen list of tax scams.
- In a memorandum to Treasury Secretary Steven Mnuchin, Inspector General Russell George listed 10 top challenges for the IRS, with security over taxpayer data and protection of IRS resources as number one.
A Few Highlights
CCH, Intuit, and Thomson Reuters maintained their dominance in the tax software market, with each offering multiple tax preparation or tax research products designed to serve different sizes of firms. Ratings for these vendors’ tax preparation products represented 173 (84%) of the 206 tax preparation software ratings received in 2019. The ratings for CCH, Intuit, and Thomson Reuters’ tax preparation products represented 37%, 30%, and 17% of the total, respectively. With 15% of the ratings, Drake Software was the only tax preparation package outside of this “big three” rated by a significant number of users.
CCH and Thomson Reuters products represented 96 (64%) of the 149 ratings of commercial tax research software packages in the 2019 survey; with 47 and 49 ratings, respectively, CCH and Thomson Reuters each received approximately one-third of the total ratings. Three other tax research packages received more than 10 user ratings, with Bloomberg BNA, the Tax Book, and Parker Tax Pro receiving 13%, 13% and 8% of the commercial tax research package ratings, respectively.
Free websites for tax research continued to gain traction and were rated by most respondents. The IRS website, state tax websites, Google searches, and other Internet sources received 67% of the total tax research ratings in 2019.
Value for cost is still one of the lowest-rated features of tax preparation software; however, the mean rating for customer support dropped even lower in the 2019 survey. Similarly, customer support is the lowest-rated feature for commercial tax research software. Open-ended comments from the respondents highlighted concerns with customer support, as well as great appreciation for companies that provide outstanding support. Unfortunately, complaints about customer support far outweighed kudos to companies that do it right.
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 on the survey. Of the 187 respondents, 91% rated at least one tax preparation software package, and 19% evaluated two or more products. Respondents reported using all but one of the listed tax return software packages (TaxSlayer PRO was the outlier), and no write-in ratings were submitted; in addition, fewer than 10 ratings were received for four packages. For 2019, 206 ratings were analyzed; the ratings for these vendors 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 3.86 in 2019 represented a very slight decrease from the overall rating of 3.89 in 2018. The overall ratings for the past five years have not varied much, ranging from 3.86 to 3.95.
Exhibit 2 provides the 2019 ratings of the tax preparation software packages and compares averages to the previous three years. Five packages received more than 25 ratings and accounted for 78% of the ratings: CCH ProSystem fx (44 ratings), Lacerte Tax (32 ratings), Drake Software (30 ratings), UltraTax CS (29 ratings), and Intuit ProSeries (26 ratings). Two other packages were rated by more than 10 respondents: CCH Axcess Tax (19 ratings) and ATX (12 ratings). Together, these seven products represent 93% 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; however, the four packages that received between one and 10 ratings are included in Exhibit 2 for completeness.
Of the seven packages with more than 10 ratings, the overall ratings were between 3.46 and 4.61 out of 5, a wider range than observed in 2018 but generally in line with overall ratings reported in the last several years. Drake Software has, however, significantly increased its advantage in overall rating versus the other packages; it was the highest rated tax preparation software package, with an overall rating of 4.61, a notable increase from 4.37 in 2018 and 4.24 in 2017. With the exception of 2016, Drake has received the highest overall rating every year since 2010. CCH ProSystem fx received the second-highest overall rating of 3.95, up slightly from its third-place 2018 rating of 3.90. UltraTax CS was ranked second in 2018 but dropped to third in 2019, its overall rating decreasing from 4.13 to 3.93. Fourth through seventh were Lacerte (3.76), ATX (3.74), CCH Axcess Tax (3.50), and Intuit ProSeries (3.46). These overall ratings reflected increases for Drake and CCH ProSystem fx, essentially no change for ATX, and decreases for Ultra Tax CS, Lacerte, CCH Axcess Tax, and Intuit ProSeries.
The single most common theme in write-in comments was dissatisfaction with customer support.
The changes in overall ratings generally paralleled the changes in ratings of individual features, but for some packages, the overall ratings appear to be driven by something else. For example, except for “value for cost,” CCH ProSystem fx received lower ratings for each individual feature in 2019 versus 2018, but a modestly higher overall rating (3.95 versus 3.90). ATX received lower ratings for each individual feature in 2019 versus 2018, but its overall rating was unaffected (3.75 versus 3.74). Finally, UltraTax CS received higher ratings for three of the five individual features, but its overall rating decreased from 4.13 to 3.93. In summary, the overall ratings do not always correspond neatly to the changes on individual features.
A comparison of the weighted average ratings for each feature from 2019 to 2018 shows minor changes—except for one feature, customer support, for which the average rating dropped from 3.72 to 3.51, making it the lowest-rated feature for tax preparation software for the first time in this survey. Respondents’ comments reflected some frustration with customer support for some products, and poor customer support was the second most frequently mentioned reason for switching software, after cost. The average overall rating decreased slightly from 3.89 to 3.86.
The value for cost rating decreased somewhat from 3.57 to 3.52 and is at the lowest level since 2014. Respondents ranked value for cost as the third most important feature for tax preparation software, and consistent with past years, Drake Software had the highest average rating for value for cost (4.91). No other package received an average rating over 4.0, which may be a major contributor to Drake Software’s high overall ratings each year.
In previous years, the average rating for customer support was the second lowest rating, but in 2019, it dropped from 3.72 to 3.51, which represents the lowest average rating for customer support since the inception of the survey in 2002. 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 (4.69) in 2019. In addition, the single most common theme in write-in comments was dissatisfaction with customer support. The one exception was a comment that praised Drake Software’s customer support, suggesting that they could serve as an example to others.
Average ratings for ease of use have been very consistent over the past several years; the rating of 3.95 in 2019 was within the range from 3.92 to 3.97 that has been reported since 2013. Respondents rated ease of use as the second most important factor for tax preparation software, but the package with the highest ease of use rating (Lacerte Tax) received a middle-of-the-pack overall rating, most likely because of its relatively low value for cost rating. Drake Software’s 2019 ease of use rating was second overall and has been very consistent since 2017.
Accuracy (low error rate) was the highest-rated individual feature at 4.26 and also ranked as the most important feature for tax preparation software. UltraTax CS earned the highest individual rating for accuracy (4.61), followed closely by CCH ProSystem fx (4.50) and Drake Software (4.48). Thus, the top three rated programs also have the top three ratings for the feature that respondents consider most important.
Availability of forms was the second highest–ranked individual feature, with an average rating of 4.23. Ultra Tax CS had the highest rating on this feature (4.71), but CCH ProSystem fx (4.42), Lacerte (4.39), and Drake Software (4.34) also had above-average ratings. Consistent with previous years, the average ratings of all of the features for the tax preparation software packages were higher than 3.5 and have been relatively steady in recent years. Top-rated Drake Software received the highest rating for value for cost and customer support. Second-place CCH ProSystem fx did not receive the highest rating for any individual feature, while Ultra Tax CS, which ranked third overall, ranked highest on both availability of forms and accuracy. Similar to last year, Lacerte Tax, 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 that 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; 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 and high over the past several years, as dissatisfied users would be likely to switch to different software.
Exhibit 3 provides descriptive user information for the packages rated by 10 or more participants. The size of the firms utilizing these vendors was generally similar in 2019 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 midsized firms. ATX, Drake Software, 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 seven 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 product to review, as well as to rate free resources such as the IRS and state tax web-sites. Approximately 60% of respondents rated at least one commercial tax research software product or resource, while 18% rated more than one. Although more than half of the respondents used a commercial tax research product, the survey has documented a shift toward greater reliance on free tax research resources, with 71% of respondents rating at least one free resource and 59% rating two or more. In total, 79% of respondents rated at least one commercial or free tax research resource, and 68% rated more than one commercial or free resource. The ratings for the commercial resources still exceed those for the free resources, but tax professionals clearly find value in both. The ratings for the tax research software are summarized in Exhibit 4, with the free resource ratings shown after those for the commercial products.
Ratings of Tax Research Software
For 2019, 149 ratings were received for the commercial tax research software products, and an additional 302 ratings were received for the free tax research resources. (Two write-in ratings were submitted, but neither identified the provider.) Two products, Checkpoint (49 ratings) and CCH (47 ratings), accounted for 64% of the commercial tax research product ratings. Three other products received at least 10 ratings: Bloomberg BNA (20), the Tax Book (19), and Parker Tax Pro (12). Parker Tax Pro is included again in the analysis after dropping out last year, when its number of ratings dropped below 10. This is the second year the survey generated more than 10 ratings for the Tax Book, a relatively newer product. Interestingly, these two providers generated the highest overall ratings of the commercial tax research software and the highest ratings for all individual features except company reliability. The only other commercial products rated by respondents were the two unidentified write-in ratings.
Of the free tax research resources, the IRS website had the most ratings (112), followed by state tax department web-sites (94), Google searches (81), and other Internet searches (15).
The average overall rating of 3.82 for commercial tax research software reflects a modest increase from 3.76 and 3.81 in 2018 and 2017, respectively. Of the five products with more than 10 ratings, two experienced an increase in overall rating: the Tax Book (from 4.11 to 4.33) and CCH (from 3.55 to 3.59). The other three had modest decreases in their overall ratings. The Tax Book’s overall rating of 4.33 made it the top-rated commercial tax research product for the second year in a row, followed by Parker Tax Pro at 4.15. Bloomberg BNA (3.79) and Checkpoint (3.78) were tied for third place in the overall ratings, while CCH (3.59) was the lowest-rated product in terms of the overall ratings. CCH also earned the lowest rating on every other feature except ease of use, for which it effectively tied with Bloomberg BNA for last place. It may be noted that more than one-third of participants reported minor to significant problems due to the Wolters Kluwer (CCH) outage in May 2019. Checkpoint was the only other product that did not receive the top ranking for any single feature.
The range of overall ratings for 2019 was somewhat wider than in previous years, from 3.59 to 4.33. The overall rating of all research software (commercial plus free internet resources) was 3.47 in 2019, as compared to 3.52 in 2018 and 3.57 in 2017. 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 2019 than in 2018; this continues a trend observed for the past few years.
Respondents ranked the overall performance and five features of the tax research software packages on a scale of 1 (very dissatisfied) to 5 (very satisfied). The average rating for value for cost was 3.72, as compared to 3.75 in 2018, maintaining a relatively high level compared to past years. The average rating of customer support was also essentially unchanged, while that for ease of use increased somewhat. The average ratings for both timely updates and company reliability decreased relative to 2018. Notably, the average ratings for company reliability are at the lowest level since the start of this survey in 2002.
Two of the five commercial tax research products with more than 10 ratings, the Tax Book and Bloomberg BNA, saw their value for cost ratings improve, while Checkpoint’s rating was unchanged and both CCH and Parker Tax Pro declined. Despite the decline, Parker Tax Pro had the highest value for cost rating, as it did from 2015 to 2017. Its rating of 4.43 was closely followed by the Tax Book (4.38), while Checkpoint, Bloomberg BNA, and CCH were ranked closely together, with average ratings of 3.63, 3.55, and 3.41, respectively.
Ease of use ratings declined from 2018 to 2019 for three of the commercial tax research products—Bloomberg BNA, CCH, and Parker Tax Pro—while increasing for the Tax Book and Checkpoint. Similar to 2018, the Tax Book had the top rating (4.62) in this category, followed by Parker Tax Pro (3.93), Checkpoint (3.65), CCH (3.27), and Bloomberg BNA (3.25). It is interesting to note that the products with the highest value for cost ratings also received the highest ease of use ratings; these ratings take on particular importance, given that ease of use is rated as the most important feature for research software.
The Tax Book had a sizable increase in its customer support rating, from 3.53 in 2018 to 4.13 in 2019, earning it the highest rating for this feature. Bloomberg BNA was the only other product to see an increase in its customer support rating, from 3.44 in 2018 to 3.68 in 2019, and had the second highest rating for customer support. The other products all experienced decreases in their customer support ratings. Checkpoint (3.56), Parker Tax Pro (3.20), and CCH (3.16) were ranked third, fourth and fifth on customer support.
The ratings for timely updates decreased for all products, although four of the providers received ratings in excess of 4.0. Parker Tax Pro had the highest rating for this feature at 4.36, followed by Checkpoint (4.18), Bloomberg BNA (4.05), the Tax Book (4.00), and CCH (3.72). Since survey respondents consider this to be the second most important feature of research software, the decreases in timely update ratings are somewhat concerning.
Finally, the company reliability ratings also decreased for all of the products, reaching their lowest level since this survey began in 2002. Bloomberg BNA had the highest rating for this feature (4.42), followed by the Tax Book (4.16), Checkpoint (4.12), Parker Tax Pro (4.00), and CCH (3.70).
Except for Parker Tax Pro, all of the commercial tax research packages had been used by the survey respondents for five or more years on average; thus, respondents would generally be characterized as experienced users of the software. Parker Tax Pro was used on average for three years, making its raters somewhat less experienced with the software.
Similar to the past several years, the number of ratings received for free tax resources far exceeded those received for commercial tax research products, suggesting that they are becoming a more popular source of tax research material for tax professionals. The overall ratings for all of the free resources declined modestly from 2018 and are at essentially comparable levels in 2019, ranging from 3.25 for the state tax websites, to 3.29 for the IRS website and other Internet searches, to 3.39 for Google searches.
The IRS website once again received the most ratings (112) of all commercial and free research tools, but it was closely followed by ratings of state tax websites (94) and Google searches (81). Other Internet searches received a comparatively small number of ratings (15). Not surprisingly, value for cost is the most highly rated feature, and customer support is the lowest rated feature, for all of the free tax research resources. Although ratings for individual features changed slightly from 2018 to 2019, none of the changes were significant. It appears that the ratings for the free resources have reached a relatively steady level, and for some features the ratings do not vary significantly from one free resource to another. All of the value for cost and customer service ratings are similar; however, survey respondents consider Google and other Internet searches to be easier than searches on the IRS and state tax department websites (higher ease of use ratings). Conversely, ratings for timely updates and company reliability are generally higher for the IRS and state tax department websites, reflecting respondents’ increased confidence in the research results obtained from these sources. While survey respondents find Google and other Internet searches to be a helpful tool, they undoubtedly recognize that the official IRS and state 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 have users across all firm sizes, while Parker Tax Pro and the Tax Book are used almost exclusively by small firms. The IRS website, state tax department web-sites, and other Internet resources were used across all firm sizes, but have a disproportionate amount of usage by the smaller firms. This is similar to what has been reported in previous years.
Tax Research Software Usage
Other Technology Issues
A look at the top-rated software by feature, in Exhibit 6, shows that Drake Software continues to dominate the ratings for tax preparation packages in value for cost, customer support, and overall rating, a pattern that has been observed for several years. Although CCH ProSystem fx was rated second overall, it did not have the highest ratings for any individual feature; however, it had the second highest rating for accuracy—the feature that respondents rated as most important—and availability of forms. UltraTax CS, rated third overall, was rated highest on accuracy and availability of forms. Lacerte Tax, which was rated fourth overall, had the highest rating for ease of use for the second year running and the last four out of five years.
Providers with Highest Ratings
There has been less consistency in the ratings for tax research software. In 2019, the Tax Book was the highest-rated product overall and for ease of use for the second year in a row. Ease of use is the feature that respondents rated as most important for research software, so it is not surprising that a high ranking on this feature influences the overall rating. In the last four years, both Bloomberg BNA and CCH have also been the highest-rated tax research product overall, and Bloomberg BNA had the highest ease of use rating for two of the past four years. The highest rating for value for cost in 2019 was Parker Tax Pro, which was excluded from the 2018 analysis due to a lack of ratings. The highest rankings for this feature have alternated between Parker Tax Pro and the Tax Book over the last several years. The Tax Book also earned the highest rating for customer support in 2019, after Checkpoint and Bloomberg BNA each held this distinction during the previous three years.
Parker Tax Pro was the highest-rated research software package for timely updates, which was ranked by survey participants as the second most important feature for research software. Top rating for timely updates has also been held by Checkpoint and CCH during the last few years. Interestingly, for top-rated the Tax Book, timely updates was the only feature for which it did not hold the first or second highest rating; for this feature, it was fourth (out of five). The rankings for this feature were generally quite high, however, with an average of 4.00.
Finally, Bloomberg BNA was the highest-rated software for company reliability. CCH and the Tax Book also held the highest company reliability ratings during the last several years.
Which tax software features do practitioners consider the most important? Exhibit 7 reveals the 2019 participants’ averaged preferences. For tax preparation software, accuracy and ease of use have consistently been the two most important features, although they have switched between first and second in some years. Similar to previous years, cost remained in third place, and availability of forms was fourth. The remaining features—availability of states, customer support, familiarity, company reliability, and data security—were in fifth to ninth place, respectively, identical to 2018. As noted last year, the relatively low ranking of customer support, although cited as an important reason for switching software, may be indicative of tax practitioners’ lowered expectations, or possibly just a professional’s tenacity to stick to a project until it is done, regardless of a lack of support.
Important Software Features
Consistent with recent years, there is substantial gap between the two most important features—accuracy and ease of use—and the remaining features for tax preparation software. In 2019, Lacerte Tax was rated highest for ease of use, with Drake Software and ATX close behind. UltraTax CS had the top rating for accuracy, with CCH ProSystem fx second; these rankings are almost identical to 2018.
For tax research products, ease of use, timely updates, and cost have typically been the top three features in terms of importance; however, there has been less consistency in their rankings than with tax preparation software. Ease of use was the most important feature in 2019, although it ranked second in 2018. Cost dropped to the third most important feature after being first in 2018. Timely updates moved up from third most important feature in 2018 to second in 2019; however, the difference between the importance ratings of timely updates and cost is minor. The ranking of customer support as the least important feature may be due to increased reliance on free tax research resources, which provide little or no support, and general dissatisfaction with the level of customer support for commercial products.
Similar to the tax preparation rankings, the most important tax research features also show a gap between the top three and remaining qualities. In 2019, the Tax Book had the highest rating for the most important tax research feature (ease of use), while Parker Tax Pro had the highest ratings for the next two most important features (timely updates and cost, respectively). Repeating the same rankings as 2017 and 2018, 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.
Most vendors offer online versions of their software; as in 2018, 38% of respondents used the online version of tax software, as compared to 31% in 2017 and 25% in 2016. Another 6% do not currently use the online version, but are considering it. The use of portals for clients to upload tax data documents has increased to 51%, compared to 46% and 40% in 2018 and 2017, respectively. Another 10% of respondents indicated that they are considering adopting this practice, a decrease from 18% in 2018 and 12% in 2017, suggesting that the growth in the use of client portals may be slowing.
Other Technology Issues
Although software companies promote the use of pay-per-return pricing as a way to reduce tax return preparation costs, only 35% of survey respondents (compared to 34% in 2018) currently use pay-per-return pricing, and only 2% are considering it for the future.
Several of the tax preparation software packages allow adopters to integrate practice management software or other applications with tax preparation software. Similar to 2018, 26% of participants answered that they currently use integrated applications, with another 11% considering it. Respondents who consider integration important to their practice declined from 40% to 32%, with 37% indicating that integration was not important and 31% reporting that they did not integrate at all.
While most survey participants have not changed tax software in the last five years, 22% had changed tax preparation software (14%), tax research software (4%), or both (4%). These percentages are roughly similar to those reported in 2018. Another 16% of respondents indicated that they plan to switch tax software within the next year, including 5% who plan to switch both tax preparation and tax research software, an increase from 2018. The most frequently cited reason for changing software was cost (64%), but respondents also gave other reasons for switching. Other than cost, the most common reason given was dissatisfaction with customer service, which reinforces some of the general comments received on the survey and the decreases in customer service ratings observed in 2019. Other reasons given for changing software included technology issues, desiring more features or functions, and desiring a product that is easier to use.
Reliance on customer support was generally similar to 2018, with some shifts in the usage of support options. Consistent with previous years, telephone assistance was the common option, with 49% of participants using telephone assistance often or frequently and 47% of participants using it occasionally. E-mail contact was accessed often or frequently by 15% of survey respondents and occasionally by 43%. There was a modest increase in the use of online assistance in 2019; it was used often or frequently by 27% of respondents and occasionally by 49%, as compared to 22% and 45%, respectively, in 2018. Live chat usage was consistent with the last few years, with 17% using it often or frequently and 40% using it occasionally.
Several articles and practice surveys, such as the AICPA’s “2019 PCPS CPA Firm Top Issues Survey: Tackling Familiar and Emerging Challenges” (July 23, 2019, http://bit.ly/32IQVkd), have indicated that top concerns of small- to midsized firms included keeping up with tax law changes and finding qualified staff. Outsourcing has again been appearing in practice-related articles as a popular means to address both of these issues. Historically, outsourcing was utilized by only a small percentage of survey respondents, and the topic was dropped from the 2017 and 2018 questionnaires. Interestingly, approximately 6% of 2019 participants reported using outsourcing, consistent with the last time the question was asked in 2016.
Tax Season Problems
Tax Season Problems
In addition to the issues discussed above, the survey asked respondents about the extent to which several issues created problems for them during the 2019 tax season. The issues included in the survey were identified from news articles and discussion boards monitored during the past busy season. Most respondents experienced problems arising from New York notices requiring additional documentation (e.g., W-2s), with 70% reporting minor or significant problems; this compares to 56% of 2018 survey participants who reported minor or significant problems associated with New York notices disallowing itemized deductions. While these initiatives are intended to improve taxpayer compliance, they are apparently creating problems for a large number of tax practitioners.
The IRS received more than double the number of early submissions of Forms W-2 in 2019, allowing it to perform prescreening for taxpayer identity theft under its Taxpayer Protection Program and Pre-Refund Wage Verification Program. The TIGTA report Interim Results of the 2019 Filing Season (Ref. No. 2019-44-030, Apr. 2, 2019, http://bit.ly/2MHRDZC) indicated that as of February 23, the IRS had identified 3,529 tax returns claiming fraudulent refunds and 3,471 tax returns involving identity theft. Although the IRS appears to be making progress, the National Taxpayer Advocate’s report indicated that the IRS fraud detection filters continued to be overly broad and produced false identity theft refund fraud detection rates of 63% for 2019, down from 82% in 2018. The IRS’s Taxpayer Security Summit reported in IR-2019-66 that the number of taxpayers reporting identity theft declined 71% between 2015 and 2018 (Apr. 8, 2019, http://bit.ly/2Wdl48N). Tax survey respondents continue to report identity theft issues, but the level has declined from previous years, with 40% reporting minor or significant problems in 2019, compared to more than half in 2018 and 2017.
Phishing e-mails, phone scams from criminals impersonating IRS agents, and identity theft continue to be at the top of the IRS’s annual Dirty Dozen list of tax scams (IR-2019-49, Mar. 20, 2019, http://bit.ly/32UqCrH). The IRS Security Summit warns that criminals are targeting tax preparers to breach their computer systems and steal client data, as well as obtain their Electronic Filing Identification Numbers (EFIN) or Preparer Tax Identification Numbers (PTIN) to file false tax returns (IR-2019-66). One piece of good news is that the 39% of survey participants who reported minor to significant problems from the receipt of phishing or malware e-mails pretending to be a software provider represented a decrease from 44% of participants in 2018 and 48% in 2017.
Tax returns are an attractive source of identity information about individuals and companies, whether stored by taxpayers, tax practitioners, or taxing authorities. The use of Social Security numbers, drivers’ license numbers, and other identification increases security problems. In a memorandum to Treasury Secretary Steven Mnuchin dated October 15, 2019, Inspector General Russell George listed 10 top challenges for the IRS, with security over taxpayer data and protection of IRS resources as number one (http://bit.ly/2Wlgwh3). Some of the concerns expressed in this document are alarming. Unfortunately, the IRS is not the only vulnerable entity, as demonstrated by the May 2019 malware attack that caused an outage at Wolters Kluwer (CCH). The CCH event affected over one-third of the survey respondents, with 35% reporting minor or significant problems related to this event. This highlights the vulnerability of tax software users to attacks not only on their own systems but those of their providers.
The Cost of Tax Software
The cost of tax software options is not publicly available for many of the packages discussed in this article, as it is often tailored to specific customer preferences. 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 October 2019, for products covered in this survey is available on the CPA Journal website (https://www.cpajournal.com/2019/11/26/tax-software-prices).
Analysis and Summary
The 2019 tax season once again got off to a late start, and practitioner e-filed returns did not reach last year’s submissions numbers until April 12. Although some tax news articles predicted that TCJA changes would send do-it-yourselfers to tax professionals, IRS national statistics reported that practitioner e-filed returns were down 0.5% relative to 2018, while taxpayer e-filed returns increased 4.2%.
New York CPAs expressed continued satisfaction with commercial tax preparation and tax research software resources, as well as with free online tools. Drake Software, a lower-cost option for tax preparation software, retained its overall top rating, while the Tax Book was rated highest overall of the tax research products for the second consecutive year.
The average ratings for both tax preparation and tax research software were consistent with previous years, overall and for most packages, although ratings for some products reflected more substantial changes. In 2019, accuracy was selected as the most important feature for tax preparation software, followed by ease of use and cost. For tax research software, ease of use was rated as the most important feature, followed by timely updates and cost. While the order of the top three features has shifted from year to year, the same three individual features have consistently emerged as the most important for tax preparation and tax research software over the past several years.
Identity theft continues to be a problem; however, there was a notable decrease in the percentage of 2019 survey respondents who experienced rejection of e-filed tax returns due to possible identity theft issues. Tax professionals themselves are now fraud targets, and 39% of participants reported receiving phishing and malware e-mail scams from fake software vendors—down modestly from 2018.
Tax preparers have many options when it comes to tax software, including free resources for tax research applications. Participants in the 2019 survey reflected a mix of practitioners requiring high functionality and quality and others needing low cost options. Write-in comments were disproportionately focused on customer support, indicating that respondents are frustrated by poor support but greatly appreciate those firms that provide superior support. The ratings of individual features and overall satisfaction reported from the 2019 survey should help those who wish to consider the different packages. The website information for the tax software vendors rated by 2019 survey participants is listed in Exhibit 10.
Tax Software Vendors
Tax practitioners have many tax software options, ranging from low to high cost and basic to comprehensive packages. Although no single package is likely to meet all of a firm’s needs, most survey participants appear to be relying on a single tax preparation software product. While one respondent commented, “It is time for the IRS to provide one software to file returns,” there is no indication that this will happen any time soon, so preparers must evaluate a large array of choices to determine which package best meets their needs. This survey is intended to help in that process.