2015 tax software survey.

• Author: Bonner, Paul

PREVIEW

* See how CPA tax practitioners rated the strengths and weakness of major tax preparation software products they used in 2015.

* Learn how CPAs assessed their software's handling of tax law changes including those of the Patient Protection and Affordable Care Act.

* Review the steps preparers should take when a client's tax identity has been stolen.

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).

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 311 'S, 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). 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...