2015 Tax Software Survey

Late passage of extended temporary items, new individual provisions stemming from the Patient Protection and Affordable Care Act of 2010 (PPACA), P.L. 111-148, and continuing depredation of taxpayers’ identities by filers of fraudulent returns all contributed to making the 2015 tax filing season a trying one for many taxpayers and their CPA return preparers. The latter’s reliance on tax preparation software can be a source of either welcome assistance or yet another tribulation, depending on its performance; thus The Tax Adviser asks them each year how their software performed.

Products Covered and Profile of Respondents

Although the survey asked about 15 software products by name, as in past years, only the eight products shown in the exhibits garnered sufficient results for meaningful analysis, i.e., each product was the software predominantly used by at least 1% of the nearly 5,000 CPA paid tax preparers who responded to the survey.

As in previous years, a majority of respondents were in small firms, with 36% sole practitioners (up from 21% last year) and 36% in firms of between two and five preparers. Respondents in firms of six to 20 preparers formed another 19% of respondents, 7% worked in firms with 21 to 100 preparers, and a small fraction worked in firms larger than that. A majority of respondents predominantly prepared individual returns; for 79% of respondents, these returns made up more than half their workload. Most respondents prepared some business returns as well, however, with 46% saying business returns were up to one-quarter of their returns and another 41% saying they were between one-quarter and one-half. Sixty-eight percent of respondents said they were solely responsible for choosing their software, with another 22% saying they had some role in deciding.

Major Findings

This year, the core metrics of adequacy of updates, technical support, and—always a concern—perception of pricing versus value showed little change from previous years, despite the additional challenges. For additional insight, however, this year’s survey asked specifically how users’ software performed tasks relating to PPACA, such as calculating the Sec. 5000A individual shared-responsibility payment, popularly known as the individual mandate, and the health insurance premium credit under Sec. 36 and its reconciliation with any advance credit. Regardless of how well CPAs and their clients themselves were able to apply these new provisions for tax year 2014, they reported their software was largely up to the task (see Exhibit 1 below).

In another new question this year, given the growing prevalence of tax identity-theft fraud and its impact on taxpayers, the survey asked respondents whether one or more of their clients had been victimized this year. Sixty-three percent of respondents answered “yes,” and most reported some difficulty in resolving the problems it caused (see “Majority Coped With Tax ID Theft“). The survey also asked about whether respondents had to file or anticipated filing Form 3115, Application for Change in Accounting Method, because of the new tangible property “repair” regulations, to which 39% answered they did. Also, asked if the IRS had asked for accounting software data while examining their clients, 13% of respondents said it had, slightly less than the 15% who answered that question affirmatively last year.

With respect to income tax preparation software, 4,672 respondents identified one of the eight most-used products as the one they used predominantly to prepare 2014 tax returns and are the subset of respondents represented in the exhibits and comparisons of those products that follow. Drake and UltraTax CS tied (as they did last year) for the highest overall satisfaction rating of 4.5 out of 5. As in previous years, UltraTax CS was the most-used product, used by 21% of all respondents, but with ProSystem fx and Lacerte not far behind, with 20% and 19% of respondents, respectively. However, the percentages for all three were slightly lower than last year, with corresponding increases (for a second year) in users of ATX (to 6%), Drake (to 12%), and ProSeries (to 13%). ATX appeared for a second year to have largely recovered from its technically troubled 2013 season. It continued to regain market share, and users gave it an overall satisfaction rating near the average for all major products. Notably, nearly 90% of its users would recommend it for a new tax practice, second only to Drake in that regard.

The highest marks for handling the new PPACA provisions were given by Drake users (4.5), followed by Lacerte and ProSeries (both 4.3).

Likes and Dislikes

This year, for the first time, respondents were allowed three choices, rather than one, for what they liked best or least about their software (see Exhibits 2 and 3 below). While this change may make the single best or least liked attribute less pronounced for each product, it gives greater relative weight to the other attributes. When offered price as a single choice to dislike, for example, respondents tend to choose it to the exclusion of all other peeves. Last year, Lacerte users did so 67% of the time. This year, that figure is 40%, still its most-disliked attribute but also allowing other perceived shortcomings to register. Price was also disliked by 42% of ProSystem fx users and 41% of UltraTax CS users.

However, to put it positively, for example, where GoSystem Tax RS most excels in its users’ eyes, number of forms/comprehensiveness (29%), the 2014 survey, by allowing only a single “like,” masked the fact, as this year’s survey reveals, that its accuracy is nearly equally prized (25%) as one of its top three features, rather than, as last year, chosen by 11% of users as its single best feature, far behind forms/comprehensiveness (35%). ProSystem fx ranked a close second this year for forms/comprehensiveness at 27%

As in previous years, Lacerte and ProSeries users ranked the products’ ease of use among their best features (28% and 27%, respectively). Although relatively few UltraTax CS users considered ease of importing data among its best three aspects (3.8%), they gave it a rating of 3.9 out of 5 in that category, higher than users of other products (Exhibit 1, above).

Product Switching

A relatively small number of respondents said they switched from one of the major products (347, or nearly 7% of respondents), and that percentage was only slightly higher than in 2014 (6.4%). This year, as previously, price was an important driver, cited by 66% of those switching from Lacerte, 65% from ProSeries, 55% from UltraTax CS, and 48% from ProSystem fx (see Exhibit 4 below). Half of those switching from ATX cited support as a reason. Number of forms/comprehensiveness and ease of use were both cited by 45% of former Drake users as reasons for switching. The survey also asked if respondents plan to use the same software again next year. Confidence in continuing with the same product was high for all products but somewhat soft for GoSystem Tax RS, for which 77% said “yes” (although only 4.1% said “no”). Users of Drake, UltraTax CS, and ATX were highest in “yes” responses at 94%, 93%, and 91%, respectively. Users of Lacerte were considerably more certain this year they would continue using it (81%) than last year (69%).

Best for a New Practice

Asked if they would recommend their software to a practitioner starting a new tax practice, Drake users, as in previous years, were most likely to say they would (94%), followed by ATX (90%), and UltraTax CS (79%). Among users of ATX, Drake, and ProSeries, sole practitioners made up the largest contingent, more than for other products (70%, 57%, and 57%, respectively). Nearly all respondents using ATX (97%) made the decision to choose it, followed by Drake (92%) and ProSeries (89%). GoSystem Tax RS and CCH Axcess Tax were the only products with significant percentages of respondents in firms of more than 20 preparers (46% and 31%, respectively). Respondents were also more likely than for other products to have had no involvement in choosing those two products (39% and 23% of users, respectively).

Training, Technology, and Support

Only 27% of respondents reported receiving training from their software provider; of those using a major product, users of Drake ranked their training highest at 4.4 out of 5, and GoSystem Tax RS and CCH Axcess Tax lowest at 3.4 and 3.5, respectively.

Most respondents operated their software on their own hard drive or network (88%) rather than on the vendor’s server, about the same percentage as last year.

A slightly lower percentage of users of major products reported needing technical support (81%) than last year (85%) (see Exhibit 5 below). Only 65% of ATX users needed tech support, less than last year and, again, a major improvement over two years ago, when it was 92%. CPAs are still more likely to reach for the phone when they need technical help, but electronic communications for tech support continued a slow growth, with email used by 29% of users of major products, up from 25% last year, and live chat or instant messaging by 21%, a slight increase from 19% last year.

Majority Coped With Tax ID Theft

Sixty-three percent of CPAs who answered the tax software survey said at least one of their clients was a victim of tax identity theft in the 2015 filing season. Ninety-seven percent of those respondents said the problem affected fewer than 5% of their clients, although 76 respondents (2%) said between 6% and 10% of their clients were victims. Ten respondents reported between 11% and 15% of their clients were victims, and two respondents put the percentage at more than 15%.

Most respondents with clients victimized by identity theft had some difficulty dealing with the IRS in resolving the issues, with only 27% saying it was easy or very easy to resolve, and 39% saying it was difficult or very difficult (see Exhibit 6 below). A significant percentage of respondents, 44%, reported that the victims were unaware of the theft before attempting to file their 2014 returns, and another 42% said some victims were aware of it and others were not.

In interviews and emails, several respondents said that even more difficult than going through the steps with the IRS to resolve the theft and file a valid return on their clients’ behalf was communicating with and counseling victimized clients, many of whom were confused and upset (see “Resolving the Theft of Tax Clients’ Identity“). Clients trying to deal with the IRS themselves about the theft were often frustrated, they said.

“They relayed stories to me of long telephone delays in getting any information,” said Mike Kimmell, a director at Mauldin & Jenkins LLC in Atlanta. Clients in some cases did not receive identity protection personal identification numbers (IP PINs) promised by IRS personnel or experienced a lack of responsiveness in other ways. “All this sounds normal to practitioners, but it is unnerving to the taxpayers,” Kimmell said.

Lori Marrs, with Marrs Bergquist, CPAs, in Las Vegas, had a similar experience with clients. “The issue was not created by them, and yet they felt that the IRS treated them as though they had done something wrong,” Marrs said.

Explaining the problem to clients and resubmitting returns took extra time just when little was available, CPAs said. “This is generally not a two-minute phone call, nor is it appropriate to correspond via email,” said Jim McEvoy, a CPA in Mount Kisco, N.Y. “This occurs at the busiest time of year for CPAs who prepare individual tax returns, and the time devoted to the issue with each client leaves less time to get work out the door, thus creating more extensions.”

Identity thieves appear to be growing more sophisticated each year, possessing more information about their victims, said Anne C. Jetter, a CPA in Kansas City, Mo. “In the first year or two, it was pretty random, but in the last two and a half years, it’s been only on high-income clients,” Jetter said. “Whoever is doing this is finding out more information than the Social Security number and name.”

That observation resonates with the IRS’s revelation in May that criminals had used taxpayers’ “out of wallet” security information along with personal information such as addresses and birthdates to hack into the Service’s Get Transcript online application, where they gained access to about 100,000 taxpayers’ records.

In June, the IRS, state tax administrators, and representatives of tax preparation and software firms outlined planned new measures in a “security summit” (see www.irs.gov). These include transmitting more “data elements” to the IRS and states to authenticate returns and, starting by the next filing season, requiring e-file providers to perform “post-filing analytics” and provide the IRS and states aggregated data to help identify theft refund fraud “patterns and indices.” Survey respondents interviewed said they hope the measures can help without unduly slowing down filing and refunds.

“All those things make sense from a global standpoint,” Jetter said. But some simple, practical measures seem untried, she said. Perhaps the IRS could double-check with taxpayers who file early in the season but give a different address or bank account number for direct deposit than the year before, to make sure they in fact filed the return, she suggested.

Results and Methodology

The survey was conducted from May 4 through May 25, 2015, and received 4,991 responses from CPAs who indicated that they prepared tax year 2014 returns for a fee. The exhibits show detailed answers for eight of the 15 products included in the survey. Click here more information and ratings of all the products asked about in the survey.