2013 Tax Software Survey

CPA tax return preparers in 2013 contended with a compressed filing season and widespread reports of software performance problems. Software producers, the IRS, and tax preparers alike had to scramble to revamp their systems to reflect the retroactive enactment of many key extended tax provisions and some new ones by the American Taxpayer Relief Act of 2012, P.L. 112-240. The IRS was unable to accept any 2012 individual returns until Jan. 30 and not until March 4 for individual and business returns involving a number of items, including some common ones such as education credits, general business credits, and depreciation. In an informal poll during a May 10 AICPA Tax Section tax season debriefing webinar, 36% of participants called this tax season worse than last year’s, and 24% said it was the “worst tax season in history.” Sixty-one percent said they filed more extensions this year than last.

Major Findings

The most marked difference in software survey results this year from previously, however, was reported dissatisfaction with the performance of a new version of ATX’s software, which is geared toward small-to-midsize CPA practices (nearly all survey respondents using it were in practices of five or fewer preparers) and that in previous years had rated high in affordability, ease of use, and suitability for a new practice. In 2013, however, the average overall rating by the survey’s 555 respondents who primarily used ATX was 2.1 out of 5. (Last year, it was 4.3.) ATX users, less than one-fifth of whom said they planned to use the software again in 2014, reported persistent problems with slow performance and crashes.

CCH Small Firm Services, a subsidiary of Wolters Kluwer that produces ATX software, said the problems stemmed from a new technological platform for the software that had not been sufficiently tested for the tens of thousands of different hardware types and hundreds of system configurations its customers use. Fifteen releases of the new version later, the problems were fixed, but not until near the April 15 filing deadline. The new platform was deployed to support new features such as mobile applications that are becoming more common in the market and that ATX’s customers had said they wanted, said Jason Marx, president of CCH Small Firm Services. However, it caused problems in the software’s networking, performance, and stability, Marx said.

“ATX did not perform in a way that meets our expectations or that of our customers,” he said.

Customer support for ATX was in turn overwhelmed, said Marx, who took over in a leadership role for the company in mid-February. The company brought in more staff to handle support calls, but “frankly, we couldn’t answer all of them in the time frame customers were used to,” he said. Customers now will find ATX “greatly improved” for use on returns currently on extension and next year, he said.

A compressed filing season caused by late passage of extender legislation was a contributing factor, in that it added complexity in programming changes to the software, but “that doesn’t excuse our delivery issues,” Marx said.

Other major tax preparation software products experienced some problems as well. Although it did not clearly affect any survey respondents and was mentioned by only one, Lacerte and ProSeries, both of which are Intuit products, reportedly had temporary problems correctly filing Minnesota state income tax returns.

Aside from ATX, the survey’s overall rating of major products was the same or nearly the same as in 2012 (see Exhibit 1). For all major products, the overall rating this year averaged 4.1; excluding ATX, it was 4.3, the same as for 2012.

Filing season was not the only thing compressed; a long-term trend of consolidation in the industry continued, meaning fewer software products garnered enough responses this year to be included in this analysis and thus are included as “major” products. Only eight software products passed the cutoff of being used by at least 1% of the respondents who said they prepared tax returns for a fee in 2013, versus 10 products in 2012. One of them, TaxWorks, just met that threshold in 2013 but was excluded from the analysis because Thomson Reuters has acquired the brand from RedGear Technologies and is discontinuing it, offering users a special renewal pricing offer and transition resources for its UltraTax CS. Intuit’s TurboTax and 2nd Story Software’s TaxACT, while getting enough responses in 2012 to be included that year for the first time, did not repeat that showing for 2013.

As in previous years, a majority of respondents used three products, ProSystem fx Tax (CCH), Lacerte (Intuit), and UltraTax CS, used by, respectively, 26%, 21%, and 20% of respondents. Other software packages included in this analysis and percentage of respondents using them were ATX (11%), ProSeries (Intuit) (9%), Drake (Drake Software) (7%), and Thomson Reuters’s GoSystem Tax RS (3.5%).

Likes and Dislikes

Users of Drake software reported the highest price satisfaction; 49% of its users reported price as its best attribute, the same as in 2012 (see Exhibit 2). Despite ATX’s problems this year, many users (41%) rated its price as its best feature. Users of the “big three” products, on the other hand, again, as in 2012, ranked price as a major dislike: Lacerte, 62%; UltraTax CS, 56%; and ProSystem fx, 48% (see Exhibit 3). Those three ranked high, however, in esteem for their accuracy, ease of use, and number of forms/comprehensiveness (see Exhibit 2). The biggest dislikes for the budget-conscious Drake and ATX users were lack of tax research included in the package (Drake, 21%) and support (ATX, 34%—but see problems described above; last year, this feature was disliked by only 14% of respondents).

Asked specifically about ease of use, respondents ranking their software highest on a five-point scale (with 5 being the easiest to use) were Lacerte and Drake (both 4.4—see Exhibit 1). UltraTax CS users ranked their software higher than those of other major products in its integration with other accounting software (average 4.1 out of 5), with ATX ranking lowest at 2.36 (last year, it was 3.1). UltraTax CS also ranked highest in users reporting it contained all needed forms (92%) and in ease of importing data (4.1 out of 5). Among users who ran a conversion package (972 for all major products), Drake and Lacerte users reported the highest satisfaction with that process, an average 4.2 and 4.1 out of 5, respectively.

Product Switching

When respondents were asked whether they planned to use the same software next year, the highest percentage of “yes” responses were from users of UltraTax CS at 92% and Drake at 90% (both the same as last year). ProSystem fx users were close behind at 89%. Drake had the highest percentage of new adopters of any of the major products this year, with 22% of users saying they had switched to it this year, versus 6.7% for all major products. Price was the primary consideration for switching to Drake, with 31% of those new users saying it was a reason. The 52 respondents who said they had switched to ATX this year similarly identified price as a reason (35%). Of the 349 total “switchers” this year, the most frequent major product switched from was Lacerte (68), followed by ProSystem fx (65). A principal reason for switching from them was price (63% and 57% of former users, respectively; see Exhibit 4). Former users of UltraTax CS were just as likely to give price as a principal reason for having switched (62%).

Best for a New Practice

Drake also ranked top among users who would recommend their software to someone starting a new practice, at 95%, followed by UltraTax CS (90%) and Pro­Series (88%) (see Exhibit 1). Nearly all of the users of Drake, ProSeries, and ATX were in practices of five or fewer preparers. GoSystem Tax RS was the only major product with a sizable percentage of its users in the large-firm range of more than 500 preparers (37%), a category that was only 3% of all respondents using a major product. Correspondingly, GoSystem was also the major product least likely to have been chosen by the respondent, with 69% of its users saying they were not involved in deciding what software to use (although 23% said they had some input). Drake and ATX were the most likely to have been chosen by the respondent, at 90% and 91%, respectively. ProSeries was third in this respect, with 82% of its users having sole responsibility for choosing tax software and another 13% saying they had input into the decision.

New Technology

For a second year, the survey asked respondents how they accessed and used their software. Responses indicated a slight increase in users who downloaded their software (70%, versus 64% in 2012) and who used a program that resided on the vendor’s server (11%, versus 10% in 2012). Correspondingly, a smaller percentage of users (19%) installed the software from compact discs than last year (26%) (see Exhibit 5). Respondents again registered a strong preference for keeping return data on their own network or personal computer (90%) rather than on the vendor’s server (10%), a result unchanged from last year. Interest in having their tax preparation software available on a tablet device waned. This year, 35% of respondents said they would like a tablet version, while in 2012, 41% said they would.

The IRS has adopted new technology, too, and the survey asked whether respondents had been asked by the IRS for accounting software data in connection with an examination of clients’ returns. Fifteen percent said they had.

Technical Support

A higher percentage of users (86%) than last year (79%) reported that they sought technical support for their software (see Exhibit 6). The highest percentage was for Drake, at 94%, and the lowest was for ProSeries at 62%. Drake users, however, ranked their provider highest in both ease of obtaining support and its quality. Users of all major products still are more likely to use the phone (80%) to obtain support than email (27%) or live chat/instant messaging (16%). Lacerte users used the latter channel more often than others (28%), and used email frequently, reaching for the phone less often (75%) than users of other products, except for ProSeries, whose users received support by telephone 54% of the time and live chat/IM 25% of the time.

The same percentage of users of all major products as last year received training in use of their software (25%), and most who did ranked it a 4 out of 5 in quality (42%) or a 5 (26%). Forty-three percent of Drake users gave their training a 5 out of 5.

Results and Methodology

The survey was administered by email in May 2013 to AICPA members who had indicated they prepare tax returns. It received 5,004 responses saying the respondents prepared tax returns for a fee in 2013. The exhibits show detailed answers for seven of the 16 software products included in the survey.

Half of respondents to this year’s survey prepared 500 or fewer returns during the season, and 27% prepared 1,000 or more. For most (89%), business returns were less than half of the returns they prepared, with nearly half of all respondents (48%) saying business returns were between one-quarter and one-half of their returns. A majority of respondents, 54%, were able to decide for themselves what software to use, and another 27% said they had input into the decision.

More complete survey results, including for products not included in this analysis, are available online.