A Clear Look at Tax Software
2007 Annual Survey of New
York State Practitioners
By Susan B. Anders and Carol M. Fischer
MAY 2007 - The
results of the 2007 annual survey of New York State tax practitioners
indicate that respondents are generally satisfied with tax compliance
and research software, although ratings declined moderately compared
to prior years. This is probably because this year’s survey
respondents included more small firms and more respondents who are
directly involved in tax preparation and day-to-day use of software.
Survey participants generally report using the most-popular tax
software products, although smaller firms may be relying on the
year’s survey, the sixth of its kind, was sent to a broader
range of respondents and also introduced an online questionnaire.
It also includes more tax preparers employed below a firm’s
decision-making level. A software industry emphasis on improving
customer support and differentiating package features was explored
through new questions that yielded some surprising responses.
of tax software vendors represents a continuing trend. During
the past year, CCH acquired TaxWise and ATX/Kleinrock. Dunphy
Systems was purchased by Creative Solutions, and the last DOS-based
package was removed from the market. Three vendors now dominate
the tax software market: Intuit (Lacerte and ProSeries), CCH (ProSystem,
ATX, TaxWise, and CPA Software), and Thomson (Creative Solutions
and RIA). These vendors’ products represent 200 of the 205
(97.6%) tax preparation package ratings and 177 of the 232 (76.3%)
tax research software package ratings reported by this year’s
survey respondents, mirroring the marketplace.
continue to make notable efforts to expand their markets and upgrade
their products. The availability of electronic filing features
is increasingly important, as more states have moved to mandate
e-filing and taxpayers are increasingly aware of refund-anticipation
loans and the ease of e-filing. Survey respondents’ use
of e-filing appears to have peaked in last year’s survey
(2006), the year New York State required mandatory e-filing by
tax practitioners preparing 100 or more returns using computer
are also focusing on ensuring adequate technical support and training.
Interestingly, however, this year’s survey results suggest
that tax preparers prefer a product that is easy to use, making
technical support and training less of a concern.
survey was modified to facilitate electronic distribution via
the web-based “Survey Monkey” program. Thus, although
the survey asked many of the same questions as in previous years,
some questions were omitted or shortened, and new questions were
added regarding the most important software features for both
tax compliance and tax research software, regarding hours of software
training required and regarding customer support.
was e-mailed to approximately 5,000 New York State practitioners
from the New York State Society of CPAs’ database of members
with an interest in tax, as well as a database of past survey
participants. A total of 153 surveys were returned, consistent
with the number of survey respondents in most prior years. It
is noteworthy that past surveys were mailed to firms, whenever
possible addressed to the partner, manager, or supervisor in charge
of the tax practice. In contrast, this year’s survey was
e-mailed to a much larger database of practitioners, making it
possible for multiple individuals at a single firm to complete
the survey. Also, it is likely that many more of this year’s
responses were provided by individuals who use the software on
a day-to-day basis, or by individuals who were not involved in
the software selection process. This contrasts with past surveys,
which were typically completed by the senior tax associate within
of respondents (Exhibit
1) indicates that the 2007 survey respondents resemble those
who responded to the survey in previous years, but provide greater
representation of smaller practitioners and greater variation
in firm size. The 2007 respondents also report a somewhat higher
number of tax-season professionals and a higher percentage of
professional practices in tax.
considerations in choosing a tax software package or an online
service include cost, ease of use, customer support, available
features, updates, and user familiarity. Users ranked the vendors
on each factor using a scale from 1 (very dissatisfied) to 5 (very
satisfied). Overall, the ratings for the tax preparation software
were favorable, generally consistent with prior years. Although
the ratings for all factors declined slightly from prior years
(as shown in Exhibit
2), ratings of each feature still averaged well over the midpoint
for all factors except cost, which has been the lowest-rated feature
of the tax preparation software products since this survey was
first conducted in 2002.
instrument listed 21 of the most commonly used commercial tax
return software vendors, based on a review of print and electronic
media. Approximately 93% of the 153 respondents indicated that
they used at least one individual tax preparation software package,
and 24% used more than one product. In total, 205 ratings were
analyzed. The respondents reported using 11 out of the 21 tax
return software packages; Exhibit
2 summarizes the ratings for these 11 vendors.
overall satisfaction rating for the 11 software packages rated
by this year’s participants was 3.87, as compared to the
prior year’s weighted-average rating of 4.12. The average
respondents were satisfied with the tax preparation software that
they have been using, although the ratings for most vendors declined.
This may be due to the increase in the proportion of respondents
from staff levels or other positions who were not responsible
for selecting the software. Tax compliance partners may want to
examine the issue of increasing staff training on the tax preparation
software that the firm uses.
to be the least satisfactory feature. Cost ratings declined the
most for ATX, Creative Solutions, and RIA GoSystem; CCH ProSystem
fx, Intuit ProSeries, and Lacerte Software remained closer to
last year’s responses. Accounting Technology’s
“Tax Software Special” (October 2006) reported that
Intuit has been emphasizing price competition, apparently to the
satisfaction of customers. Conversely, ATX raised its prices about
5%, which may have been responsible for the large decrease in
its cost ratings.
of the ratings were for two software packages: CCH ProSystem fx
(57) and Lacerte Software (45), two of the higher-priced providers.
CCH ProSystem fx and Lacerte Software have historically alternated
between the No. 1 and 2 spots in the survey. Four other vendors
received more than 10 ratings: Creative Solutions (28 ratings),
ATX (23), Intuit ProSeries (23), and RIA GoSystem (14). Discussion
of specific ratings and features will focus on the aforementioned
six packages. CPA Software, Drake Software, Tax$imple, TaxWorks,
and TaxWise were each evaluated by fewer than 10 users; the ratings
for these vendors are presented for completeness, but should be
interpreted with caution.
packages with the most respondents were also the highest rated
overall. Lacerte Software had a strong increase in its overall
ratings from 2006, while the ratings for ATX, CCH ProSystem fx,
Creative Solutions, and Intuit ProSeries declined, apparently
influenced by the perceptions of small-firm or staff-level users.
RIA GoSystem’s category ratings suffered a major decline
in the 2006 survey compared to prior years; its 2007 overall rating
remained consistent with 2006.
in overall ratings was reflected in similar declines for the ratings
of some individual features, also provided in Exhibit
2. On the whole, users were very satisfied, although, as noted,
cost continued to be the greatest source of dissatisfaction. The
average ratings of most of the features, except cost, for all
software packages were generally higher than 3.5. Customer support,
which has been a major industry emphasis, showed a substantial
decline in ratings, below 3.5, for Intuit ProSeries and RIA GoSystem,
while ATX and Lacerte software showed an increase. Most other
features received similar ratings as prior years, although Intuit
ProSeries users reported a lower rating than in 2006 for available
3 provides demographic information about the tax preparation
software users of the packages rated by more than 10 participants.
Respondents rating CCH ProSystem fx, Creative Solutions, Lacerte
Software, and RIA GoSystem represent some of the larger firms
in the sample, although those companies’ software was used
by firms in all size categories. RIA GoSystem users represented
fewer small firms than the other vendors. ATX, Intuit ProSeries,
and TaxWise were used by firms preparing fewer returns, with fewer
full-time tax preparers, and with 50% or more of their practice
were also asked to rate any of the nine most commonly used tax
research software vendors (based on a review of print and electronic
media) with which they had experience. Almost 87% of the respondents
indicated that they used at least one tax research software package,
and 24% used more than one package. Use of multiple tax research
packages is consistent with published software reviews. The ratings
for these vendors are summarized in Exhibit
232 ratings were received for seven vendors. Only eight users
provided ratings for LexisNexis; its ratings are presented for
completeness, but should be interpreted with caution. Additionally,
some Tax Analysts users did not respond on all features, making
its ratings less interpretable. In contrast to the tax preparation
software ratings, the average ratings on the tax research software
remained similar to 2006, with the exception of declines in ratings
for cost and customer support. This may be due to the inclusion
of a larger proportion of smaller firms and staff accountants
in the participant pool. Timely updates and company reliability
reflected higher ratings than in 2006.
ranked the vendors on a scale from 1 (very dissatisfied) to 5
(very satisfied). The average overall rating for all seven vendors
was 3.77, very similar to past years. The overall ratings for
the vendors used by more than 20 respondents were very similar,
too. The rankings of the tax research software fluctuate year
to year, but CCH has taken first or second place in the past three
years. Use of multiple products may reflect users’ preferences
for features that are not available on a single product. It could
also reflect the need for a different perspective or second opinion.
4A provides descriptive detail on the tax research software
users. Although BNA, CCH, and RIA are used by firms of all sizes,
in general, they were used more often by larger firms, while Kleinrock
and PPC ratings came from the smaller firms. LexisNexis appeared
to be used by firms at the smaller and larger ends of the scale.
Kleinrock and PPC received the best cost-satisfaction ratings,
which may be related to the preference of smaller firms for these
preparation and research software industry seems to be focused
on several major issues: training and customer support, e-filing
and other technological improvements, continued integration of
vendors and packages, and outsourcing. Exhibits
report survey responses on these issues.
have been emphasizing training and customer support, and this
survey has reported declines in customer support ratings of some
vendors, it is interesting that Exhibit
5 indicates that respondents’ median software training
time is only five hours; the median number of calls to customer
service was 10; and the median time on hold was approximately
five minutes. Exhibit
6 indicates that customer support is not considered the most
important feature for either tax preparation or research software.
Respondents want software that is easy to use, and they don’t
want to spend a lot of time on training; they do not want to have
to call customer support either. “Plug-and-play” is
an attractive feature for many survey participants.
to select the most important feature for tax preparation software,
respondents chose ease of use, followed by available features.
Although individual ratings varied substantially, ease of use
was the modal choice for users of Creative Solutions, Intuit ProSeries,
and Lacerte Software. Available features was the modal choice
for ATX, CCH ProSystem fx, and RIA GoSystem. Tax research software
users, as well as participants who did not indicate use of any
particular package, overwhelmingly selected ease of use as the
most important feature.
cost ratings have historically received the lowest ratings since
the first survey, in 2002. Cost almost always receives the lowest
rating for the individual vendors as well. Only 7% of tax preparation
software respondents, and 15% of tax research software respondents,
selected cost as the most important feature.
use of e-filing maintained a peak of approximately 75% since the
prior year, as reported in Exhibit
7. New York State lowered the maximum tax return preparation
level required for e-filing in 2006, so most respondents have
adopted e-filing. Nationwide, tax professionals are responsible
for 70% of the e-filed tax returns. All software vendors listed
2 participate in the IRS’s Federal/State E-file Program.
software vendor websites, as listed in Exhibit
8, promote tax preparation packages integrated with tax research
software, as well as with accounting, payroll, financial planning,
and document-management resources. Exhibit
7 shows that 36% of survey participants indicated that they
used tax preparation software bundled with other applications,
down from 44% in 2006. Half of these respondents reported that
the tax software component was more important than the other applications,
and another 36% stated that it was of equal importance to the
other products. Several tax compliance providers are bundling
their products with other vendors’ tax research resources,
and 33% of respondents purchased their tax research software in
connection with their tax preparation software, up from 17% last
94% of respondents indicated that they have not outsourced any
of their tax return preparation, but 5% of that group were considering
it. The strong push for outsourcing options offered by software
vendors has died down, but industry literature indicates that
the concept is not going away.
survey respondents continue to report satisfaction with both tax
preparation and tax research software. The change in the survey
population, from senior tax software decision-makers to NYSSCPA
members with an interest in tax, broadened the range of responses
and generally lowered the overall and individual ratings. Tax
compliance partners and managers who select the tax software may
want to consider that the employees using the software may not
be as satisfied as the individuals making the purchasing decisions.
ratings of tax software have decreased slightly, respondents generally
express satisfaction with most of their features. Only 12% of
respondents indicated future plans to switch tax preparation software,
and 16% reported intentions to switch tax research tools. Two
areas that saw decreases in ratings (cost and customer support)
were not considered by respondents to be the most important features
of either tax preparation or research software.
hours of training to use tax software (five hours) is relatively
low, suggesting that most software packages are already user-friendly,
or possibly that users are not taking advantage of all of the
functionality that the products offer. Given the number of tax
returns that the average respondent prepares, the median of 10
calls to customer support does not seem very high. Furthermore,
wait times of five minutes are within reason. Increased training,
however, may improve satisfaction with the software and reduce
the need for calls to customer support.
survey participants’ reported purchases of integrated packages
have declined, the percentage of those who acquired tax research
software in connection with tax preparation software almost doubled.
Additionally, tax preparation software appears to be a major determinant
of package choice. Respondents continued to report a high level
of e-filing, for both New York State and federal returns. Finally,
there was a slight increase in the percentage of respondents who
outsourced tax return preparation or were considering it.
B. Anders, PhD, CPA, is an associate professor of accounting,
and Carol M. Fischer, PhD, CPA, is a professor
of accounting, both at St. Bonaventure University, St. Bonaventure,