From the April/May 2008 Issue
For many firms, annual tax compliance services represent the largest single
revenue stream, often amounting to more than half of their annual gross. Individual
return preparation, primarily involving clients who visit the office one time
per year, make up the bulk of these receipts.
With such an important part of their practice’s income at stake, many
professionals have been concerned with the perceived “commoditization”
of preparation services. That is, with the continued encroachment of online
do-it-yourself filing programs now even extending into business returns, to
many the profitability of tax services looks threatened.
If preparation services existed in a vacuum, if a professional preparer offered
only the same service as one of these programs, and if return preparation processes
stayed static, then that might be a just concern. But tax professionals offer
much more, in terms of both service options and the quality of those services,
and improved workflow processes continue to make practices more productive.
Of course, the value of professional preparation starts with training and
expertise, in addition to access to resources that can help clarify complex
situations. This year’s Congressional SNAFU with the AMT reminded many
consumers of how little they know when it comes to their taxes. But the value
of the professional runs much deeper, and professional tax compliance systems
have evolved greatly over the last few years.
The Tax Prep Market
Professional Compliance Products
Program developers once strived to provide accurate calculations and forms
libraries, and they achieved this — all tax systems are reliable in this
aspect. The vendors then turned their sights on maximizing the productivity
and efficiency of the professionals who use their programs. Each practice is
different, so to meet this challenge, the vendors have taken different approaches
to meet the unique needs of the types of professionals who use their programs.
This has resulted in new and enhanced features that not only improve and streamline
workflow processes for the professional practice, but also offer client service
and communication improvements.
For clients, one of the more visible of these added-value features also serves
as a continuation of a practice’s paperless office strategy: Online client
portals and data organizers. Giving clients online on-demand access to electronic
versions of prior-year returns and other documents is a convenience factor and
reduces the filing and storage requirements in the firm.
Integrated tax planning capabilities has also enhanced client service. Having
the ability to explain why a client’s return turned out a certain way
is a cornerstone of the tax engagement, but being able to proactively help them
reduce their exposure and liability is a tangible benefit the client can readily
see. For one-visit clients, this benefit can easily lead to an additional engagement
in the middle of the year to revisit their taxation issues and develop strategies
to help them. Some programs even offer client-ready reporting functions with
graphical elements to help explain current and projected scenarios.
Technological innovations in workflow processes have similarly enhanced efficiency
and productivity within practices, enabling tax offices to handle more returns
in less time while increasing managerial supervision and ensuring quality. Among
the most recent and most dramatic workflow innovations has been automated scanning
and form population tools that allow the professional or an administrative staffer
to scan a client source document, with the data flowing directly into a client’s
electronic folders for import into returns and then awaiting review. The first
of such systems debuted for TY 2006 and, in the intervening year, several vendors
have introduced similar programs. In our September 2007 issue, we will provide
a special section covering tax document automation systems.
Advanced integration between modules has also streamlined data entry by automatically
moving data between interrelated returns. For practices with partnership and
corporate returns, having K-1 data flow through to the appropriate individual
returns saves time, as does data sharing between parent/child returns.
Client communication tools, in addition to providing client-deliverable copies
of returns and reports, have been enhanced to include automatic generation of
client letters that can include pre-populated checklists or reminders of missing
data. This is an added value to both client and firm, as it reduces the number
of visits a client may have to make to the office, and also reduces the manual
compilation of notes related to missing client information.
Additionally, review processes have also been improved, decreasing the time
spent on the administrative part of the process, such as gathering workpapers,
which frees senior staff to provide more valuable services. Likewise, improved
diagnostics and research systems have grown to automatically alert users to
potential difficulties and give quick access to expert analysis of tax code.
The services that tax and accounting professionals provide clients goes well
beyond data entry and submission of returns, and the key to finding the best
professional tax compliance system is to find one with features that not only
help provide client service but also increase the efficiency and productivity
of the practice. These factors vary with each practice and their client base,
but the general philosophy does not: Giving clients what they need (not what
they think they need), and doing so in a way that maximizes firm resources,
enables the practice to be more responsive to clients and to be more profitable.
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- BNA Software – 706 Preparer/709
- The BNA 706 Preparer and 709 Preparer systems provide
a valuable resource to practices involved in estate planning and who need
a more specialized program for handling complex gifting and generational
- CCH, a Wolters Kluwer business
– ProSystem fx Tax
- ProSystem fx Tax is one of the premier
professional compliance systems, providing support for all entities with
income or annual reporting requirements for state, federal and municipal
- CCH Small Firm Services – ATX
- Under the arm of CCH Small Firm Services for two
years now, the ATX MAX tax preparation system has long been popular with
small, tax-focused firms, providing a very user-friendly interface and
bundled packages that include virtually all aspects of tax preparation.
- CCH Small Firm Services – TaxWise
- TaxWise is now offered by CCH’s Small Firm
Services group, along with the ATX tax system, both of which have been
popular with smaller tax practices, but for different reasons.
- Drake Software – Drake Tax
- Drake Software’s all-in-one tax preparation
system has a very loyal following of professional users who have enthusiastically
voted for the system in our annual Readers’ Choice Awards, making
it the most favored tax prep system for two years running.
- Intuit – Lacerte Tax Software
- The Lacerte brand of professional tax preparation
software has been among the most respected brands for more than a decade
and, with Intuit as its parent company, has evolved technologically to
be one of the most advanced systems.
- Intuit – ProSeries
- Intuit offers two distinct lines of its ProSeries
tax compliance system — Basic Edition for entry-level practices
and ProSeries Professional (the focus of this review) for small to medium-sized
tax-focused practices with diverse client bases.
- Orange Door, Inc. – Orange Door
Tax Suite Pro
- In a not-so-distant future, professional practices
and individuals will have very few traditionally installed software programs.
We’ve been trending in this direction for years, but remotely hosted,
online applications provide so many benefits to users and the vendors,
that it will continue to progress.
- Orrtax Software – IntelliTax
- Orrtax offers several bundled versions of its IntelliTax
system for professional preparers, from a 1040-focused bundle to a complete
individual and business suite as well as an option for practices with
- RCS – TaxSlayer Pro
- The TaxSlayer Pro preparation system from Rhodes
Computer Services provides a full complement of compliance tools that
supports all entities with annual income reporting requirements, including
individual, 1120, 1120S, 1065, 1041, 990 and 5500.
- RedGear Technologies – TaxWorks
- The TaxWorks professional tax compliance system
initially started out nearly 35 years ago when the company acted as a
service bureau. With the evolution of technology since then, and with
its acquisition by RedGear Technologies in 2007, TaxWorks has grown into
a comprehensive collection of tax compliance modules.
- Thomson Tax & Accounting – GoSystem
- GoSystem Tax ES is widely viewed as the premier
tax compliance system and is used by all of the Big 4 firms and most of
the top 10. Although it originated as a CD-based product two decades ago,
it evolved as an online program, which gives the benefit of automated
updates and no maintenance.
- Thomson Tax & Accounting – UltraTax
- UltraTax CS is the comprehensive professional tax
preparation system offered by Thomson Tax & Accounting, which also
offers a full array of accounting and firm management programs under the
- Programs Add Value To Tax Services
- Not every professional tax compliance system provides every possible feature, which is probably a good thing, since this could likely result in overly cluttered programs that would be harder to navigate with a negative effect on productivity.
Sharp Software — 1040 Review
— This program is an affordable addition to any practice that
wants the peace of mind that comes with third-party checking and validation
of client returns. It includes a full-featured diagnostics program that
not only helps identify potential IRS flags that can result in audits, and
also provides client-ready reporting and review process checklists.
— With a centralized digital folder of all client documents and forms,
DreamWorkpapers gives tax professionals a fully cross-referenced and indexed
set of workpapers that speed the process of drilling down to source documents
from leadsheets when reconciling return data, thereby streamlining the review
XCM Solutions — XCM Accelerated
Workflow Automation — XCM’s Accelerated Workflow Automation
system is a remotely hosted management program designed to help reduce the
inefficiencies of manual processes within accounting and tax practices.