Tax Software Survey. In this year s survey by The Tax Adviser and the Journal of Accountancy, PracticeManagement

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1 PracticeManagement Tax Software Survey By: Paul Bonner In this year s survey by The Tax Adviser and the Journal of Accountancy, more than 6,000 CPAs assessed the software they used to prepare 2011 tax returns, revealing what they liked and disliked about their software. Overall, respondents were pleased with their software: On average, the products rated 4.3 out of 5. Ease of use, comprehensiveness, and accuracy were the most-liked features. This year s respondents also identified many of the same drawbacks as in prior years: The price of some of the leading large-firm products was a deterrent for some preparers, but users of the more budget-conscious products most often faulted them for lacking all the forms they needed or not being comprehensive enough in other ways. This year, the survey also checked on newer ways of deploying and using tax software, finding that cloud computing, for example, while not yet widespread, is a growing trend among return preparers. This year s survey saw a decline in the market share for the three products named by a majority of respondents as the software they predominantly used to prepare returns. Tax (CCH) (26%), (Intuit) (19%), and (Thomson Reuters) (18%) together still accounted for nearly 63% of responses. However, last year, these three products were used by 75% of respondents. The growth in other products resulted in two of them garnering enough responses to be included in the survey analysis: (2nd Story Software) and (Intuit). Almost 4% of respondents reported using one of these programs to prepare returns for clients. While still a small number, this represents a large increase over prior years: In both 2010 and 2011, 0.7% of respondents said they used or to prepare returns for clients. Other software included in this analysis (in descending order of percentage of respondents using them) are (Intuit) (12%), ( Software) (6%), (CCH Small Firm Services) (6%), (Thomson Reuters) (4%), and (RedGear Technologies) (1%). Overall user satisfaction was little changed from previous years, with the ratings for most products hovering near the 4.3 (out of 5) average for all products (last year, all products also averaged 4.3). UltraTax claimed the overall top spot again this year at 4.5, narrowly edging out (4.4). Exhibit 1 shows products ratings for ease of use and versatility in several categories. What users like about their tax prep software also showed a similar profile to previous years. Best-liked features of each software package are shown in Exhibit 2. For ease of use, got the highest rating, with 48% picking that as the software s best-liked feature. Turbo Tax and were close behind.,, and users were particularly positive about their software s price. Overall this year, price rose as the best-liked feature, from 8% in 2011 to 12% this year. Esteem for products accuracy dropped on average, with nearly 16% of respondents picking it as their most-liked feature this year, compared with 18% last year. On the other hand, budget-conscious CPAs gave all three of the most-used products low marks for price: users found little else to dislike about the 524 the tax adviser August 2012

2 Exhibit 1: Overall ratings Overall rating How easy was the update/ installation process? How easy was the software to use? How well did it handle updates to forms? How well did it handle transfers of data within returns? How easy was paperless electronic filing (including, for example, sending PDF attachments)? How well did it handle multistate business returns? Would you recommend it to someone starting a tax practice?* Numeric ratings are the average for each product s users on a 1 5 scale, with 5 being the best. * Percentage of each product s users who answered this question answering yes % 88.6% 95.2% 45.1% 85.2% 90.7% 79.5% 90.7% 88.6% 77.3% 88.8% Exhibit 2: What did you like best about the tax preparation software you used for the 2011 tax season? Accuracy 15.9% 4.4% 3.0% 11.4% 20.2% 9.2% 24.2% 1.0% 3.3% 5.7% 19.6% Conversion process 0.1% 0.0% 0.3% 0.0% 0.1% 0.1% 0.1% 0.0% 0.0% 0.8% 0.3% Ease of importing data 1.9% 0.0% 0.0% 3.5% 0.9% 1.6% 2.7% 1.9% 0.0% 4.1% 3.2% Ease of use 29.0% 25.9% 17.0% 9.2% 44.7% 47.9% 16.9% 23.1% 26.7% 46.7% 24.8% Installation process 1.0% 0.6% 0.3% 3.1% 1.2% 2.2% 0.4% 1.9% 0.0% 2.5% 0.7% Integration with other software 5.6% 0.0% 0.3% 6.1% 0.5% 1.2% 6.1% 0.0% 0.0% 0.8% 19.6% Learning curve 2.8% 1.7% 0.5% 3.1% 3.3% 4.9% 2.7% 1.9% 1.1% 3.3% 2.4% Number of forms/comprehensiveness 19.0% 25.3% 4.3% 38.0% 15.5% 10.7% 32.7% 2.9% 8.9% 2.5% 14.5% Price 12.3% 37.7% 49.0% 3.9% 2.4% 14.9% 0.9% 65.4% 46.7% 28.7% 2.8% Support 6.6% 1.4% 23.4% 8.3% 5.2% 1.9% 6.9% 0.0% 8.9% 0.0% 7.2% Tax research included in package 1.3% 1.1% 0.8% 0.0% 1.5% 0.9% 2.0% 0.0% 0.0% 1.6% 1.1% Other 4.3% 1.9% 1.3% 13.5% 4.6% 4.3% 4.4% 1.9% 4.4% 3.3% 3.7% Percentages are of users who indicated that they predominantly used that product, except column, which shows percentage of all respondents. Some columns do not add up to 100% due to rounding. the tax adviser August

3 PracticeManagement Exhibit 3: What did you like least about the tax preparation software you used for the 2011 tax season? Accuracy 2.8% 3.0% 2.4% 10.5% 1.7% 1.7% 3.3% 1.0% 7.1% 2.8% 2.0% Conversion process 1.8% 1.5% 3.3% 0.4% 1.2% 1.4% 1.3% 2.0% 7.1% 3.7% 2.6% Ease of importing data 3.1% 4.8% 4.9% 5.7% 3.1% 3.7% 2.3% 5.0% 3.5% 3.7% 1.5% Ease of use 7.0% 4.5% 6.5% 30.3% 2.3% 3.4% 10.8% 4.0% 3.5% 4.6% 5.6% Installation process 1.4% 0.6% 0.5% 0.0% 0.7% 0.4% 2.0% 0.0% 8.2% 2.8% 2.3% Integration with other software 6.1% 10.8% 17.9% 4.4% 5.9% 4.8% 3.9% 9.0% 10.6% 2.8% 3.6% Learning curve 5.7% 5.7% 10.6% 8.8% 1.9% 2.7% 7.7% 1.0% 4.7% 1.8% 7.1% Number of forms/comprehensiveness 6.2% 3.6% 8.4% 3.9% 5.5% 14.7% 3.7% 15.0% 10.6% 12.8% 2.0% Price 37.4% 12.9% 3.0% 11.8% 57.8% 34.6% 42.5% 3.0% 4.7% 13.8% 49.8% Support 5.7% 13.5% 2.2% 5.3% 4.1% 6.5% 6.4% 6.0% 9.4% 10.1% 3.1% Tax research included in package 8.6% 14.4% 13.6% 4.4% 4.5% 13.2% 4.3% 23.0% 16.5% 22.0% 9.2% Other 14.4% 24.6% 26.8% 14.5% 11.2% 13.1% 11.7% 31.0% 14.1% 19.3% 11.3% Percentages are of users who indicated that they predominantly used that product, except column, which shows percentage of all respondents. Some columns do not add up to 100% due to rounding. software, but nearly 58% faulted its cost. Similarly, despite being generally pleased with the software, nearly a majority of UltraTax users disliked its price, as did 43% of users. Few respondents were notably displeased about other aspects of any of the products, although 30% of GoSystem users reported ease of use as its least-liked feature, up from 25% last year. Exhibit 3 shows what respondents liked least about their software. While price was the most chosen leastliked feature overall (37%), that was down from nearly 42% last year. The increase in overall satisfaction with tax prep software s price may reflect the increase in the use of lower-priced software packages among respondents. Dissatisfaction again, mostly with the software s cost also highlighted reasons that respondents switched from a software package they had used in 2011 to prepare 2010 taxes (see Exhibit 4). Eight percent of respondents said they had switched from another product. Those saying they switched because of price (26% of all switchers) included 39% of former users, followed by former users of (37%), (34%), and UltraTax (34%). The next most salient reason for switching was the number of forms or comprehensiveness (11% of all switchers), given by nearly 43% of former users and 29% of former users. Overall, 79% of respondents said their software contained all the forms they needed. rated particularly high in this regard, with 93% of users saying the software had all the forms they needed. For two products, fewer than 70% of users said they had all needed forms: (69%) and GoSystem (51%). The survey also asked if users plan to keep using the same software next year, finding an average of 86% saying they definitely would. This percentage was highest for UltraTax (92%), followed by (90%). It was lowest for (74%) and GoSystem (80%). Best for a New Practice Price and ease of installation and use may also figure in responses to a new question this year: whether users would recommend their software to someone starting a tax practice (see Exhibit 1 on p. 525). Overall, 84% of respondents who answered this question said they would. The percentage answering yes was greatest for (95%), followed by and (both nearly 91%). Among the big three of UltraTax,, and, the highest percentage of thumbs up was for UltraTax at nearly 89%. New Technology This year, the survey explored respondents adoption of new developments in technology, such as cloud computing. 526 the tax adviser August 2012

4 Exhibit 4: Why did you switch from the software you used for the 2010 tax season? Accuracy 6.6% 16.2% 9.5% 10.6% 2.9% 12.9% 0.7% 7.1% 20.0% 5.5% 2.1% Conversion process 1.8% 10.8% 0.0% 3.0% 0.7% 1.4% 2.6% 0.0% 5.0% 0.0% 0.0% Ease of importing data 3.2% 8.1% 4.8% 7.6% 2.9% 4.3% 3.3% 0.0% 0.0% 0.0% 2.1% Ease of use 9.6% 13.5% 9.5% 21.2% 2.1% 5.7% 9.3% 14.3% 15.0% 11.0% 8.5% Installation process 2.2% 2.7% 0.0% 1.5% 0.7% 1.4% 4.0% 0.0% 0.0% 1.4% 4.3% Integration with other software 7.7% 5.4% 4.8% 6.1% 13.6% 7.1% 11.9% 7.1% 5.0% 1.4% 2.1% Learning curve 3.2% 0.0% 4.8% 10.6% 1.4% 0.0% 4.0% 0.0% 5.0% 0.0% 2.1% Number of forms/comprehensiveness 10.8% 0.0% 28.6% 13.6% 10.7% 10.0% 2.0% 42.9% 10.0% 17.8% 2.1% Price 25.6% 13.5% 9.5% 7.6% 39.3% 34.3% 37.1% 7.1% 20.0% 11.0% 34.0% Support 8.5% 13.5% 9.5% 10.6% 8.6% 10.0% 4.6% 0.0% 15.0% 4.1% 6.4% Tax research included in package 1.4% 0.0% 0.0% 1.5% 0.0% 2.9% 1.3% 7.1% 0.0% 1.4% 0.0% Other 19.6% 16.2% 19.0% 6.1% 17.1% 10.0% 19.2% 14.3% 5.0% 46.6% 36.2% Shows percentage of respondents who answered that they switched from the particular software; multiple responses were permitted. Cloud computing is becoming a common phenomenon outside the field of tax prep software, both in consumer software applications and in business. Cloud computing refers to the use of software in which the application and/or the data reside on a third-party server and not on the user s computer. Common examples include web-based services, online banking, online document hosting services, and even social networking sites. This year, to gauge the acceptance of cloud computing in the return preparation industry, the survey asked two questions related to cloud computing: Whether the respondents used software that resided on the vendor s server and whether the return data resided on the vendor s server. Ten percent of respondents reported storing return data on the software vendor s website, with 90% keeping the data on their own network, server, or personal computer (see Exhibit 5 on p. 528). The same percentage (10%) said their tax prep software resided on the vendor s server. The bulk of users downloaded the program from the vendor s server (64%), with slightly more than one-quarter installing their software from compact discs (26%). That 10% of respondents have already embraced cloud computing for tax prep software shows how quickly the cloudcomputing model is becoming the norm. CCH, Intuit, and Thomson Reuters released their first web-based tax software for tax professionals in And it was not too long ago that many tax practitioners would refuse to prepare returns on computers that were hooked up to the internet, out of concerns that the data would be hacked. In another new technology question, a significant segment of respondents (41% of those answering the question) indicated they would be interested in having their tax preparation software available on a tablet device such as Apple s ipad. Asked if they have a virtual office, however, only 19% the tax adviser August

5 PracticeManagement Exhibit 5: Platform of respondents answering that question said yes, suggesting that most tax preparation work is still performed in a traditional setting of a business office rather than remotely. Client portals also showed little reported use, with only a little more than one-third of the respondents who answered that question saying they offered one in the latest tax season. Technical Support As in past years, a majority of users of all programs reported needing technical support for their software (Exhibit 6). The overall percentage of CPAs saying they needed technical support was slightly lower (79%) than last year (82%), with a similar reduction in reports of support needed for several of the products. Again this year, most of this technical support was received by telephone (93% vs. 95% in 2011), with a strong secondary means of communicating. Similar to last year, users of and were more likely than users of other software to report receiving technical support by live online chat or instant message (35% and 27%, respectively). Exhibit 6: Technical support Did you need tech support? * 78.5% 67.5% 89.6% 89.5% 81.2% 58.0% 86.4% 41.3% 97.8% 18.0% 86.4% How easy was it to get? How good was it? Received support by: ** Phone 92.7% 86.9% 95.2% 96.7% 91.4% 86.1% 95.6% 62.8% 96.6% 59.1% 96.7% 28.9% 34.3% 35.4% 19.7% 31.4% 15.8% 23.5% 60.5% 30.7% 36.4% 35.4% Live chat/im 18.5% 11.4% 4.8% 4.7% 27.1% 35.3% 22.3% 7.0% 23.9% 18.2% 5.8% Other 3.1% 4.1% 1.7% 0.5% 4.1% 1.9% 2.9% 0.0% 3.4% 18.2% 3.5% * Percentage of each product s users answering yes. ** Percentage of those users who received support; multiple answers permitted. All other answers: Average rating on a 1 5 scale, with 5 being best. 528 the tax adviser August 2012

6 Also like last year, only a little more than about one-quarter of CPA respondents reported receiving any training from their software provider, but a majority of those who did reported its quality as either good (44%) or very good (26%). Integration With Other Software Asked how well their software integrated with their accounting and other software, users overall gave it an average rating of 3.5 out of 5 (with 1 being very poorly and 5 being very well). UltraTax had the highest average at 4.1, followed by at 3.8. The lowest ratings were for (3.0), with three programs, GoSystem, and TaxAct all averaging 3.1. Importing data into the software was generally not a problem for most CPA respondents, with a slight majority saying it was either easy (30%) or very easy (22%). Again, UltraTax and were highly rated in this regard, with a 4.1 and 3.9 average rating, respectively (with 5 being very easy and 1 being very difficult). Results and Methodology The survey was conducted in May 2012 and received 6,070 responses. The exhibits show detailed answers for 10 of the 15 products included in the survey. Information and ratings for products that received fewer than 90 responses were not included in this article, but full survey results for each product are available online at tinyurl.com/2012softwaresurvey. EditorNotes TTA Paul Bonner is a senior editor, tax, for The Tax Adviser and the Journal of Accountancy. For more information about this article, contact Mr. Bonner at pbonner@aicpa.org. The Tax Adviser Best Article Award The winner of The Tax Adviser s 2011 Best Article Award is Tony Nitti, CPA, MST, a partner with WithumSmith+Brown PC in Aspen, Colo., for his article S Corporation Shareholder Compensation: How Much Is Enough? in the August 2011 issue (p. 534). The best article was chosen by The Tax Adviser s Editorial Advisory Board from among the articles published in The Tax Adviser from January through December It was selected for its usefulness, practicality, and readability. The Tax Adviser staff and the AICPA congratulate Mr. Nitti on winning the Best Article Award. The winning article can be read online at tinyurl.com/4xnab32. Tony Nitti the tax adviser August