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The Time is Right for Professional Web-Based Tax Prep

Column: Tips & Tricks

From the July 2009 Issue

For all the recent talk and hype about Web 2.0 and cloud computing, Software-as-a-Service
(SaaS) has yet to really bloom in one of the most important areas of all for
tax and accounting professionals. Where is professional-level online tax prep?

Yes, there are a few options on the market, most notably the web-only GoSystem from Thomson
Reuters and Orange Door Pro, and also a hosted version of UltraTax CS through Thomson Reuters’ Virtual Office CS. But none of these web-based systems have yet achieved a significant market share.

And there are a handful of others that try to market
their self-filer programs to professionals, but have not really designed the
system for professional use. One that comes to mind has no real client directory
list, communication templates, billing functions or research options, and even
uses the same terminology as for self-filers (Such as, “Did you receive
any wages this year?”). While these systems might be able to handle simple 1040s and even a few 1065s and 1120s, they simply aren’t capable
of managing more complex client returns and firm workflow processes.

But as willing as individual taxpayers have been to file online (the IRS lists
about 20 online tax programs geared for self-filers), professionals haven’t
made the jump to online tax programs in large numbers. This is because of several
factors, including the lack of professional-level products for small and mid-sized
practices, a previous lack of faith in online security and concerns about having
to learn a new system.

This last factor is probably the most significant. About 90 to 95 percent of
professionals stay with the same tax package year after year. Are they thrilled
with everything about their tax system? Are you 100 percent satisfied with yours?
Odds are that you’re not, but the perceived disruption of learning a new
system is enough to dissuade most firms from changing.

fear could be greatly diminished if the tax software vendors who currently control
most of the market offered online/SaaS versions of their traditional programs.
These vendors are Intuit (Lacerte and ProSeries), CCH (ProSystem fx Tax, ATX
and TaxWise), Thomson Reuters (UltraTax CS and GoSystem), and Drake Software
(Drake Tax). The GoSystem product is a hosted program, but it is geared toward
high-end firms, with extensive collaboration tools and research integration,
and a price point that’s fairly steep for most small and mid-sized practices.
I’m sure that Thomson Reuters would point out that firms can select only
the options they need and trim the cost down a bit, but even without the extra
options it is still a Rolls Royce.

Professionals are justly concerned about the security of their client data.
It is their livelihood, after all, and negligence could open them up to legal
consequences and even the loss of their practice. But I believe most professionals
have overcome at least most of their concerns about the security of data when
it is used through an online program.

Yes, there are threats, but there is a greater threat to your client’s
data when it is hosted on your own servers or on your own office PCs. Fire,
weather events, theft, system crashes, unauthorized users, etc., all are much
more likely to affect your office computers than they are secure hosting facilities.
These facilities, with high-level technological and human security measures,
also automatically back up data at multiple locations around the country, which
virtually eliminates the possibility that it will be lost due to any disaster
or computer glitch, meaning you can get back up and running even if your office
experiences problems. You can’t say that about your computer if it crashes
on April 1.

In addition to the security and aspects, there are also the very tangible, everyday
benefits of a hosted model, most notably the ability for you and your staff
to access the full programs from anywhere using the same interface, whether
in the office, at home or on the road. For some practices who wish to take advantage
of the technology, this could mean that late nights in March and April don’t
need to be spent in the office. Take the work home with you where, even though
you’re working, you can be around your family.

Another significant benefit, especially for tax compliance, is that all program
updates are automatically performed by the vendor on their end. While most tax
packages now include tools for checking and downloading updates from the web,
a few still require several CD updates. With the hosted model, the need to maintain
and update the tax program would be gone.

Although professionals have been reluctant to move to online tax prep, they
haven’t been shy about using hosted programs for other client services
and firm management functions. Research was a no-brainer, of course, since finding
Treasury Regulations, rulings and opinion is much quicker and more comprehensive
using online systems. But many professionals are also using, and recommending
to clients, online accounting programs, including NetSuite, Intacct and QuickBooks
Online, plus add-ons for QuickBooks like SmartVault’s document storage
utility. AccountantsWorld offers an online suite of accounting products, including
professional write-up, payroll, practice management and an integrated online
small business program.

Dozens of online payroll systems are available, most geared toward small businesses,
but also some designed for professionals who provide the service to many clients.
These include PayCycle (just acquired by Intuit), ADP, AccountantsWorld, Ceridian
and Paylocity, among others. Likewise, there are several professional document
management and storage systems available. Practices and small businesses can
also use online payables systems like the one from And there are many
online sales and use tax applications, some run by the states and others by
vendors, helping to simplify this potentially complex area.

But alas, there are still only two professional tax compliance systems for handling
individuals, partnerships, corporations and other entities. With TurboTax dominating
the self-filer arena and two very popular professional-level tax compliance
suites in Lacerte and ProSeries, it seems peculiar to me that Intuit has yet
to offer an online version of either of those professional systems. I posed
this question to Rich Walker from Intuit’s Corporate Communications office. His reply, “Stay tuned.”

Does that mean that something is in the works? Maybe, maybe not. CCH is also reportedly working on a SaaS solution, and the Thomson Reuters Virtual Office CS hosted version of UltraTax CS is still the only mid-market web tax system currently available (Thomson Reuters also recently announced that it is offering a SaaS-based, monthly subscription model of its full CS Suite, including UltraTax.)

The key movement in this area seems to be not a competitive stance between technology vendors, then, but rather one in which each of the vendors are going to try to move their current users over to a web-based tax compliance solution. And whichever of the mid-level professional accounting products is able to do so most effectively will then have an advantage when it comes to the ongoing battle of wooing users of other systems.

Professionals are ready for online
tax compliance. They’ve shown it through their adoption of other SaaS
products. They want more options than the few systems currently on the market,
and they will likely stay brand-loyal nearly as much as they have with their
traditional tax compliance software.


See inside July 2009 issue

New Ideas for Successful Buying

Column: Real Clients, Real Stories


A Time to Rest … Just Not Too Long

Column: My Perspective