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To Renew or Not to Renew? Tax is the Question.

From the Aug. 2006 Issue

August is here, and for thousands of tax and accounting professionals that
means time is running out on discounts for early renewal of their tax preparation
software for next year. This is a no-brainer, right? Well, for the nearly 95
percent of professionals who remain with the same software vendor year after
year, it would appear so. But is selecting your tax software something for which
you want to turn off your brain?

Just because you’ve grown accustomed to the software doesn’t mean
it best suits the needs of your practice. Firms change with time, client bases
grow and often change characteristics, 1040 practices become more business focused,
and new technologies come into the market that can increase productivity for
some firms. In short, do you really know what would best suit your practice’s

For those firms who have yet to make their purchasing decision for next year,
consider the importance of tax services to your practice, both in terms of revenues
and client service. There is still time to make an informed decision, whether
it means staying with your current vendor or moving on. Surely this valuable
component of your business is worth some of your valuable time, so develop a
needs analysis and then explore the various systems on the market. For those
who have already sent a check, consider the following for next year:

First, what do you need?

What do your clients want? Dozens of programs are on the market, and most have
been around for many years. They have grown adept at the basics of calculations
and basic 1040 preparation and generally include e-filing. For business clients,
most packages include 1120/1120S and 1065 preparation modules. Often, the difference
is not in the ability of the programs to create and file accurate returns, but
in their ability to manage more complex returns and manage client relationships.

Many programs now offer integration between return modules, enabling professionals
to easily pass K-1 data from business and individual returns or to better facilitate
kiddie tax returns. The ability to offer clients access to their returns through
the use of 24/7 secure online portals can also contribute to customer satisfaction
and reduce the time spent by staff on unproductive fileroom work. Online portals
in conjunction with electronic tax organizers also contribute as part of a firm’s
paperless (or at least less-paper) strategy, whereby the tax system maintains
electronic copies (usually *.PDFs) of client returns and documents instead of
requiring file cabinets for storage.

The need for integrated tax research is generally dependent on the complexity
of a practice’s client base, as is, conversely, the need for banking products
such as refund loans. Online systems also provide an alternative to traditional
tax software, freeing tax professionals from the chore of installing and maintaining
files, while also offering anytime, anywhere access to client records. The manner
in which data is entered and forms are viewed can also be a productivity-enhancing
feature, with some systems providing direct entry of data to form replicas,
entry onto system-guided interview sheets, or a combination of both.

What do you really need?

  • Online client return access
  • Online staff access to the program
  • Pass-through K-1 data
  • Paperless output of returns
  • Large, medium or small client base
  • Complex or fairly simple returns
  • Integrated tax research
  • Banking products


Most tax software vendors have perfected the science of tax preparation and
now have set their sights on advancing the art of their software. Improved usability,
enhanced client collaboration, integration with tax research and write-up programs,
and the continuing procession toward the paperless office all provide benefit,
but the cost-benefit analysis has to be performed by the firm.

Once you have assessed the needs of your practice, then you are ready to start
filtering through the available tax systems on the market. Two recent issues
of this magazine provided reviews of tax preparation systems. In the April/May
2006 issue, we covered full tax preparation suites — systems that handle
compliance for forms 1040, 1041, 1065, 1120C, 1120S, 990, 706, 709, 5500 and
corresponding state support. Our June/July issue covered programs that support
these same categories, but not in a universal suite. Both reviews are available
online at Find the package that provides the compliance
support you need, along with the added productivity features, and contact the
company or visit their website to get a free demo version of the system. Then,
run through a couple of returns, from start to finish, to see how the program

Choosing your firm’s tax compliance package should never be a no-brainer.
Now is the time to find the solution that best meets all of your needs, not
just your pocketbook.