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Review of Tax Preparation Systems — 2007

The past 12 months have been the most dynamic period for the professional tax preparation market in several years. We’ve seen new technology developments in many of the programs, as well as blockbuster business deals that have left three major companies in charge of the tax software used by more than 80 percent of tax and accounting professionals.

From the April/May 2007 Issue

The past 12 months have been the most dynamic period for the professional tax
preparation market in several years. We’ve seen new technology developments
in many of the programs, as well as blockbuster business deals that have left
three major companies in charge of the tax software used by more than 80 percent
of tax and accounting professionals.

What’s in a name?
On the business and brand side of things, two major acquisitions last year and
one early this year have really changed the dynamics of the professional tax
market. CCH, a Wolters Kluwer business, acquired TaxWise and ATX. By taking
these two brands into its fold, CCH, which produces the high-end ProSystem fx
line of tax and accounting products, essentially tripled its number of users.
CCH intends to continue to develop both of these products and has placed them
in a new business unit that will oversee its new presence in the smaller practitioner
market. In the third acquisition, H&R Block acquired TaxWorks, and also
plans to continue the product. This essentially leaves Drake Software as the
last independent professional tax software vendor with a notable market share.

Also of note, the Thomson Creative Solutions and RIA GoSystem lines have been
under the Thomson Tax and Accounting wing for several years, and their names
will soon reflect that, with the dropping of the Creative Solutions brand on
all products and the removal of RIA from the GoSystem line (RIA’s research
will continue with its current naming). Once again, Thomson has owned both companies
for several years and is just finalizing the brand transition. More information
on these acquisitions and their potential impact on the market is available

The Big Three makers of professional tax preparation software are now Intuit
(which makes Lacerte and ProSeries), Thomson Tax & Accounting (which makes
UltraTax CS and GoSystem Tax RS), and CCH, a Wolters Kluwer business (which
has the ProSystem fx, TaxWise and ATX brands). The remainder is headed by Drake,
whose extremely loyal user base makes up just under 10 percent of the professional
tax preparation market.

Technological Advances
Most tax systems can do pretty much the same things when it comes to calculations
and completing tax returns. Most have been on the market for 10 or 20 years,
or even longer, and have long since ironed out the bugs in calculations. The
difference these days between the higher-priced systems and the less-expensive
ones is generally everything else that tax packages are now capable of doing
— from data integration between various modules, like automatically transferring
K-1 data and parent/child return information, to productivity tools, system
diagnostics, research integration, support options and workflow design. Then
comes integration with third-party programs like write-up, trial balance, practice
management, Word, Excel, and other programs.

The continued quest for the “paperless office” has been one of
the driving forces for technological evolution in many of these products, with
increased tie-ins to digital document management and storage systems (which
will be reviewed in upcoming issues). Various online options, which some of
the higher-end products in this review offer, also have helped the paperless
push, while at the same time enhancing client collaboration through secure online
portals that also reduce fileroom time for firm staff members.

Zero manual data entry is the latest goal of developers, using optical character
recognition technology (OCR can read numbers and text on scanned documents)
along with form recognition capabilities (to know what form is being scanned).
Combining these two functions with a tax system will mean that forms can be
centrally scanned and data automatically pulled by the system to populate returns.
Currently, Intuit’s Lacerte and ProSeries are the only two tax programs
to offer this as an add-on option, but the products from Thomson and CCH should
be adding their own in coming years. SurePrep, a third-party developer of accounting
and tax services and solutions, offers OCR and document recognition as an outsourced
service to users of the most-used professional tax preparation products.

According to many professionals, pricing is the least important aspect of their
technology purchase, but then it is often the most discussed issue. Well, the
good news is that price levels have gone down significantly over the past few
years for tax systems geared toward small firms, and pricing for the high-end
products has remained fairly static. What this means for the professional is
that if your smaller firm or practice has a fairly non-complex client base,
then you can probably get a system “good enough” to meet most of
your needs for less than $2,000, and maybe even cheaper. For the bigger firms,
this means you may be able to justify moving up to a full-featured system.

This Review
For this review of tax preparation systems, we have recombined all of the products
that perform year-end and special compliance reporting for the major entities
into one review section. While most of the programs here are geared toward business
and individual filing and support 1040, 1041, 1120, 1120S and 1065 returns and
their state equivalents, many also support forms 706, 709, 990 and 5500. Each
product is reviewed in the following categories: Learning Curve, Use/Workflow
& Productivity Tools, Integration/Import & Export, Support/Training
& Help System, and Relative Value. Every firm is different, and different
software packages are geared toward the needs of these different firms. Therefore,
the Relative Value section provides an overall assessment of how well the product
meets the needs of its own target audience and which type of firm would see
the greatest benefit from its use. Pricing information is included for each
product, but please note the specific package for which the pricing is quoted,
as many of the products offer additional modules or networking capabilities.
Each review is capped by an overall rating.


BNA Software — 706 Preparer &
709 Preparer

overall rating
Although these products do not offer income tax preparation,
BNA’s 706 Preparer and 709 Preparer products were included in this review
because of their compliance support for estate and gift taxation. BNA
Software offers a wide range of specialty compliance tools, including
its Estate & Gift Tax line, which includes separate preparation systems
for each compliance task as well as a combined estate and gift tax planning

CCH, a Wolters Kluwer
business — ProSystem fx Tax

overall rating
The ProSystem fx suite of tax, accounting
and productivity software from CCH, a Wolters Kluwer business, is one
of the most comprehensive offerings on the market for professional accountants,
providing applications for virtually every aspect of client service and
workflow, including write-up, engagement, year-end tax compliance, …

Drake Software — Drake

overall rating
Outside of the “Big 3” makers of tax preparation software,
Drake is the largest, with almost 10 percent of tax professionals using
the system. And this user base is very loyal, which resulted in Drake
receiving The CPA Technology Advisor’s 2006 Readers’ Choice Award
for federal/state tax compliance.

Intuit, Inc. — Lacerte

overall rating
As one of the leaders in the mid- to upper-end tax
preparation market, Intuit’s Lacerte Tax system has not sat idly by, but
rather has continued to evolve into one of the most fully featured programs
on the market, offering support for every entity with year-end reporting
requirements, as well as many productivity-enhancing professional tools
and features like an integrated document management system, tax planner,
tax analyzer, research and bank products.

Intuit, Inc. — ProSeries
overall rating
ProSeries is one of the most widely used professional
tax preparation programs on the market, geared primarily for tax-focused
practices and with users in all types of firms, from small, primarily
1040 offices, to mid-sized and larger full-service accounting and tax

Orange Door, Inc. —
Orange Tax Suite Pro

overall rating
Orange Door is fairly new to the professional tax
market, having made its debut for the 2006 filing year with Orange Tax
Suite Pro, a fully web-based application that offers compliance for 1040,
1065, 1120 and 1120S, and for TY 2007 will include 706, 709 and 990, with
e-filing support for all allowable entities, making it a comprehensive
option for tax and accounting professionals.

Orrtax Software Solutions
— IntelliTax

overall rating
IntelliTax is a professional tax compliance system
that includes modules for preparing and filing 1040, 1041, 1120, 1120S
and 1065 returns, with bilingual client letters in the program and documentation
including demonstration guides, tutorials and presentation CDs, and customer
support for Spanish-speaking clients.

TaxWorks — TaxWorks
overall rating
TaxWorks offers a full tax suite for mid-sized and
smaller firms, providing comprehensive compliance for all entities for
federal, state and municipal compliance reporting. The system is available
in several bundles or as separate modules and supports multi-state processing.

Thomson Tax & Accounting
— GoSystem Tax RS

overall rating
Used by eight of the top ten U.S. accounting firms,
GoSystem Tax RS may no longer be the only online professional tax preparation
system in this annual review of tax products, but it is still at the top
of the list when it comes to offering an exhaustingly comprehensive collection
of compliance and integrated tax research functionality.

Thomson Tax & Accounting
— UltraTax CS

overall rating
The Creative Solutions name has now been phased out
and replaced by the Thomson Tax & Accounting brand, but don’t be alarmed,
this process has been in the works for several years and the uber-comprehensive
CS line of integrated professional tax, accounting and business management
programs is still going strong.

Universal Tax Systems,
a CCH company — ATX MAX

overall rating
ATX/Kleinrock was acquired last year by CCH, the developer
of the high-end ProSystem line of tax, accounting and engagement products.
The company also acquired TaxWise, and has pledged to continue to develop
these two tax systems, placing them into a new small practice-focused
business unit that essentially gives CCH offerings across the spectrum
of accounting and tax practice sizes.

Universal Tax Systems,
a CCH company — TaxWise

overall rating
TaxWise, as well as ATX/Kleinrock, was acquired late
last year by CCH Incorporated, the maker of the ProSystem fx
brand of tax and accounting applications. The company has noted that TaxWise
and ATX will continue as tax preparation software lines for the small
and mid-market, with these two “power brands” being operated from a new
business unit.