Hard Look at Tax Software
Susan B. Anders and Carol M. Fischer
2005 - This article presents the results of the fourth annual
survey of tax software
used by New
York State CPAs, highlighting trends as well as some changes.
New York State CPAs continue to express a high level of
satisfaction with tax software, and have generally availed
themselves of the largest and most popular products. A large
proportion of survey respondents indicate that they use
tax preparation packages that are integrated with other
software products. The percentage that e-file tax returns
has increased substantially over the prior year’s
to the annual survey of New York State CPAs preparing tax
returns continue to embrace technology, generally indicating
satisfaction with available products and demonstrating some
increases in their use of these resources over the last
few years. Survey participants reflect national shifts toward
the use of integrated software packages, as well as an increased
use of e-filing. On the other hand, they still express a
lack of interest in online client organizers and in processing
returns via application service providers.
tax software industry continued to consolidate over the
past year. CCH purchased the CPA Software tax products.
Creative Solutions recently acquired Accountware; its parent,
Thomson, also owns RIA and PPC. Intuit claims ProSeries
and Lacerte Software. Kleinrock merged with ATX, and TaxWise
joined forces with CCH and BNA, as well as with the Volunteer
Income Tax Assistance (VITA) program. Respondents to this
survey have consistently selected these “Big Four”
vendors, which have come to dominate the field.
2005 survey asked the same questions as in previous years,
as well as whether respondents currently use a tax preparation
software product that is integrated (packaged) with other
applications, such as accounting, payroll, financial planning,
or document management software, or plan to do so within
the next five years. This question provides some insight
into the extent to which the tax software decision is independent
of other accounting and business software decisions. Satisfaction
with a particular tax software program may also provide
an incentive to use the vendor’s other products.
survey was mailed to approximately 500 New York State CPAs,
selected from online yellow pages and CPA directories. A
total of 136 usable surveys (27% response rate) were returned
and analyzed. Although this response rate represents a decrease
relative to the previous year, it is consistent with the
2003 survey. The participants represent a relatively diverse
group and provided ratings of many different tax software
packages, similar to prior years’ responses. A profile
of respondents (Exhibit
1) indicates that the 2005 survey respondents resemble
the 2004 survey respondents. In fact, 109 participants (80%)
in the 2005 survey have responded to the survey in at least
one of the three previous years.
Tax Preparation Software
with past years, survey respondents rated favorably the
individual tax preparation software used in their practices.
Users ranked the vendors on a scale from 1 (very dissatisfied)
to 5 (very satisfied). Important considerations in choosing
a tax software package or an online service included cost,
ease of use, customer support, available features, timely
updates, availability of state tax software, company reliability,
and user familiarity. The survey instrument listed 21 of
the most commonly used commercial tax return software vendors,
based on a review of print and electronic media. Participants
were asked to write in the name of any package that was
not listed on the survey. Most respondents indicated having
used at least one individual tax preparation software package;
some had used more than one. Respondents reported using
10 of the 21 tax return software companies; Exhibit
2 summarizes the ratings for these 10 vendors.
average, respondents had been using their software package
for more than nine years; while there is considerable variation
among the packages rated, the number of years used is longer
than average for the two packages rated by the largest number
of respondents. The mean overall satisfaction rating for
the 10 software packages rated by this year’s participants
was 4.24, slightly higher than the 4.21 in 2004. The average
respondents were highly satisfied with the tax preparation
software that they have been using. Accounting Technology’s
October 2004 “Tax Software Special” reported
very little change in prices across the market, although
our survey shows that cost continues to be the least satisfactory
category, and its mean rating declined from the prior year.
than 60% of the ratings received were for two software packages:
CCH ProSystem fx (44 ratings) and Lacerte Software (47).
Similar to last year, three other vendors received more
than 10 ratings: Creative Solutions (17), Intuit ProSeries
(17), and RIA GoSystem (12). Together, these five packages
represent 92.5% of the ratings received. Discussion of specific
ratings and features will focus on these five packages.
ATX Forms, CPA Software, Drake Software, TaxWise, and TaxWorks
were each evaluated by six or fewer users; thus, the ratings
for these vendors are presented for completeness, but should
be interpreted with caution.
most highly rated packages overall were also those with
the most users among respondents. CCH ProSystem fx and Lacerte
earned overall ratings of 4.40 and 4.35, respectively. RIA
GoSystem’s overall rating (4.33) was close behind,
followed by Creative Solutions (4.00) and Intuit ProSeries
(3.82). The software packages with the top three overall
ratings are also the packages with the longest reported
number of years used by respondents, undoubtedly reflecting
both higher satisfaction with a software package over time
and a tendency to stay with a product that is satisfactory.
high overall ratings are reflected in the ratings of individual
features, also provided in Exhibit 2, which suggests that
respondents were generally satisfied with all aspects of
their tax preparation software. Users were on the whole
very satisfied with features such as ease of use and customer
support, although some users were dissatisfied with cost.
Importantly, for the five packages rated by more than 10
respondents, the ratings of individual dimensions and overall
satisfaction are very similar to the ratings for these packages
in previous years, suggesting a relatively high and stable
level of satisfaction with these packages. The customer
support rating for Lacerte Software improved, while timely
updates declined for Intuit ProSeries and Lacerte Software,
both of which are owned by Intuit. RIA GoSystem’s
ratings improved for ease of use and customer support.
3 provides descriptive information about the tax preparation
software users for the packages rated by more than 10 participants.
Similar to prior years, CCH ProSystem fx, Lacerte Software,
and RIA GoSystem were used by firms in all size categories,
although some of the largest firms in the sample used them.
Intuit ProSeries continued to be used by firms preparing
fewer returns, with fewer full-time tax preparers, and with
25% or more of their practice in tax. Creative Solutions
was used by relatively more mid-sized firms than in prior
Tax Preparation Software
respondents also rated the entity tax preparation software
used by their firms. The survey instrument listed 22 of
the most commonly used tax return software vendors, and
participants were asked to write in the name of any package
not listed. Most respondents indicated having used at least
one entity tax preparation software package, and, similar
to last year, approximately 87% used the same vendor for
both individual and entity software. The respondents reported
using 11 different packages, some more than one; Exhibit
4 summarizes the ratings for these vendors. The following
discussion focuses on the five packages rated by 10 or more
respondents. Ratings for packages with fewer than 10 users
are reported for completeness, but should be interpreted
for entity tax preparation software are very similar to
those for the individual tax return software, suggesting
equivalent levels of user satisfaction. The overall satisfaction
rating of 4.22 is virtually identical to that reported for
the individual tax preparation software. Similar to the
individual tax preparation software, respondents had used
the package for an average of 9.3 years and generally rated
themselves as being quite familiar with the entity software.
than 10 ratings were received for five different packages:
CCH ProSystem fx (46 ratings), Lacerte Software (41), Creative
Solutions (15), RIA GoSystem (14), and Intuit ProSeries
(13). The top-rated vendors were Lacerte Software, with
an overall rating of 4.39, closely followed by CCH ProSystem
fx, with a rating of 4.30. Only one of the top five had
an overall rating below 4.0, Intuit ProSeries (3.85). Respondents
continue to express the least satisfaction with the software’s
cost, while other dimensions are generally quite favorable.
Similar to the individual tax preparation software ratings,
Lacerte Software improved on customer support, but declined
on ease of use. Ratings for its sister software, Intuit
ProSeries, reflect just the opposite. RIA GoSystem’s
ratings again improved for ease of use and for customer
Solutions, Lacerte Software, and Intuit ProSeries entity
software were almost exclusively used by firms preparing
fewer than 500 entity returns and with few full-time tax
preparers. CCH ProSystem and RIA GoSystem are more frequently
used by larger firms with more entity returns to prepare
and more full-time tax preparers.
study asked about the use of tax research software. The
survey instrument listed nine of the most commonly used
tax research software vendors, based on a review of print
and electronic media, and participants could write in the
name of any package not listed. Most respondents have used
at least one tax research software package; about 38% have
used more than one.
5 summarizes the ratings for the six vendors mentioned.
CCH had the most users, at 53, followed by RIA (51), BNA
(40), Kleinrock (39), and PPC (21). Only six users provided
ratings for Tax Analysts; thus, readers should interpret
these ratings with caution. Respondents ranked the vendors
on a scale from 1 (very dissatisfied) to 5 (very satisfied).
The average overall rating for all nine vendors was 3.82,
very similar to the overall ratings in past years.
overall ratings for the vendors used by more than 10 respondents
were very close, ranging from 3.94 for Kleinrock to 3.62
for BNA. Unlike ratings for the individual and entity software,
the order of the overall ratings for the tax research software
has fluctuated from year to year, suggesting that tax professionals
are not as settled in their use of tax research software.
Using multiple tax research software packages gives practitioners
a better opportunity to make direct comparisons of the different
features. Use of multiple products may also reflect users’
dissatisfaction with any single tax research software package.
of the tax research software packages are used by firms
in all size categories; however, BNA and CCH were used relatively
more often by larger firms, while Kleinrock, PPC, and RIA
were more predominant among smaller firms.
2005 survey results point to some important trends in technology
use compared to previous years. Vendor websites (Exhibit
6) promote tax preparation packages integrated with
tax research software, as well as with accounting, payroll,
financial planning, and document management resources. In
a new question for 2005, Exhibit
7 shows that 46% of survey participants use tax preparation
software bundled with other applications; 30% plan to do
so within the next five years.
demonstrated a substantial increase in e-filing after two
stagnant years, with 72% indicating use of this technology.
The IRS has increased incentives for the use of e-filing,
such as the availability of power of attorney, transcript
delivery system, and electronic resolution (see www.irs.gov/taxpros/providers/index.html;
also see “E-Filing Update for New York, New Jersey,
and Connecticut” by Mark Levin on page 44.) Tax professionals
are now automatically accepted for New York State’s
e-filing program if they are authorized to e-file federal
returns. Preliminary data for the 2005 filing season indicate
that 63% of all returns were e-filed, up from 58% for 2004.
Tax professionals were responsible for 70% of the e-filed
tax returns in both 2004 and 2005. All of the surviving
software vendors listed in Exhibits 2 and 4 have been accepted
to participate in the IRS’s federal/state e-file program
a significant percentage of respondents indicate that they
plan to use an online client organizer within the next five
years (40% in 2004; 39% in 2005), actual use of an online
organizer has decreased to only 11%. Fewer tax practitioners
express an interest in processing returns via an application
service provider, and only 12% took advantage of this technology
in 2004 and 2005. While many vendors have expanded their
web-based products, survey respondents, of which a large
proportion have their own websites as reported in Exhibit
8, do not appear particularly interested in or may have
unresolved concerns about Internet security. The percentage
of participants who have developed their own websites, and
the purposes for which participants use their websites,
has been very stable over the four years of this survey.
web-based tax compliance products have not gained in popularity,
an increased percentage of respondents conducted tax research
via a proprietary Internet site in 2005, and the use of
CD-ROM–based tax research software declined slightly.
2005 survey found a high level of satisfaction with both
individual and entity tax preparation software. Over 90%
of respondents continue to use one of the top five tax return
packages. Ratings of tax research software have increased
slightly, with respondents generally expressing satisfaction
with these products. The respondents continued to show a
relatively high percentage of firm websites and also indicated
a reliance on the Internet in their tax practices. Online
client organizers and tax return processing via application
service providers are used by only a small minority of respondents.
survey results reflected national trends regarding the use
of tax software combined with integrated packages that provide
other applications, such as accounting, payroll, financial
planning, or document management. Survey participants also
indicated a 12.5% increase in e-filing, ahead of the national
practitioner increase of 11% reported by the IRS.
B. Anders, PhD, CPA, is an associate professor, and
Carol M. Fischer, PhD, CPA, is a professor,
both at St. Bonaventure University, N.Y.