On the plus side Gwendolyn Lynch of The Billups Company CPA's in Clackamas, OR reports that her clients seem to be taking tax planning much more seriously and that throughout 2008 her clients called her before doing anything they thought might have tax consequences. She’s also seen an uptick in the number of new clients coming in needing help because their returns are being audited by the IRS. Lynch thinks that may be due to the IRS ramping up their auditing division in her area. Her office prepares returns using Lacerte.
This year the IRS Service Centers had some early problems handling the Recovery Rebate Credit [RRC]. These problems seemed eerily reminiscent of last year’s Alternative Minimum Tax [AMT] calculation problems. “It seems that every year brings some new and arcane calculation to the forefront. The bumps are usually discovered early and to the IRS’ credit they work very closely with the major software vendors to solve the problems quickly”, says John Sapp, vice president of Sales and Marketing with Drake Software. Sapp also notes that even though e-filing started almost a full week later this year than last Drake customers had filed nearly 15% more returns by mid-February than last year at the same time.
Mark McKinley owns what he calls a traditional CPA firm with 4 staff serving mostly small businesses and professionals. His typical clients are small business with $2 million in sales and 20 employees. The firm will process over 500 returns this year, many for law firms and physicians. He says his current deployment of technology is “finally making it easier, with dual monitors, data exchange, and digital documents I’m really efficient.” McKinley is a bit of an anomaly in this day of “suites” in that he’s decidedly a “best-of-breed” guy. He’s used Lacerte tax software for over 20 years and pairs that with Thomson Reuters’ FileCabinet CS which he’s used for nearly 10 years. When I asked about McKinley about that incongruity he laughingly told me it was too late to change either program and that he’d “have a mutiny on my hands” if he tried! McKinley has been an active web-citizen via the Thomson Reuters ARNE community since 1986, but while he was an early adopter of the bulletin board concept he’s not moved quickly in other areas. He’s not used Intuit’s much touted SmartMap technology for importing QuickBooks date into Lacerte, nor has he tried their new eSort service for sorting and bookmarking client tax data.
Many practitioners, like Carlton Johnson of Charlotte, NC, say that business is slow as a result of the economy. “It's slow. I primarily prepare personal income tax returns. Companies offering rapid refund are getting the lion's share of clients … new clients do not seem to want my higher level of service but instead choose a rapid refund.” Practitioners across the country echoed Johnson’s conclusion. From very large firms who are losing huge chunks of billable time as clients disappear in bankruptcy to mid-sized firms whose clients are looking for ways to reduce or eliminate professional services, to smaller firms where individuals are beginning to opt for lower levels of expertise and / or service in exchange for reduced fees. I’m fortunate to have access to a large number of practitioners using a full array of tax compliance products. From very small to very large, simple walk-in W2 returns to combined consolidated multi-state.
ULTRATAX CS
Thomson Reuters’ UltraTax CS is the choice of John Anderson’s firm, Weidmayer, Schneider, Raham & Bennett, P.C of Ann Arbor, MI. Anderson reports that recent improvement to the FileCabinet CS product has significantly improved its speed. “The developers tweaked the way in which FileCabinet CS stores and calls pages in the Sequel version and the result has been a wonderful speed improvement. We didn’t think it was bad before, but that doesn’t mean this change isn’t noticed and appreciated” says Anderson, who is both a CPA and a CITP. Anderson continues saying “our clients tend to be larger and more sophisticated so we don’t process a lot of returns early, but from what we’ve seen we’re going to have a good year in that UltraTax appears to be solid.” He also had high praise for Thomson Reuter’s timely release of the new Michigan Business Tax which replaced the recently scrapped SBT [Single Business Tax].
Another UltraTax CS devotee, Ryan McCowan, also a CPA.CITP, of Greene, McCowan & Co., PLLC in London, KY says simply “it does what it’s supposed to do … its solid and doesn’t surprise me, and during 80 hour tax season weeks, that’s definitely a good thing”. McCowan says his nearly 100 McDonald’s franchisee clients have kept him from most 1040s so far this year, but the 25 or 30 he’s completed have been uneventful from a technology perspective. About half of the 750 returns he’ll do this year have some pass-through relationship to his entity business clients so UltraTax’s data-sharing is a very important feature. Last year he tried the pilot version of the Source Document module, which offers form recognition and extraction of data for integration with the tax package, and was unimpressed. This year he says he’ll not bother with that feature.
Thomson Tax & Accounting Sr. Vice President Teresa Mackintosh reports that their UltraTax users are off to a very solid start. She says the software installed particularly easily with users reporting almost no difficulty. Pro-forma and organizers were early and users seemed happy with the almost seamless process. Virtually all states and all entities were shipped timely, including the new Michigan Business Tax which proved problematic for some other vendors.
DRAKE SOFTWARE
Drake Software of Franklin, NC now counts over 30,000 firms as users of its seemingly ever-expanding suite. In the not-too-distant past Drake was simply good, low-cost tax compliance software. Not so anymore says John Sapp, vice president of Sales and Marketing. Today the Drake “all inclusive package” includes all states and all entities, full e-filing, bank products, tax planning, write-up with payroll, client status manager, document manager, website creator, and online tax research. Sapp says the 2008 season started with some bumps --- as usual mostly due to late tax legislation.
While perhaps not yet rich or full featured enough to be a considered a “full-suite player” Drake has a very solid set of products for what one can only call one of the best price points in the business.
LACERTE
Jorge Olavarrieta, Group Product Manager of Intuit’s Lacerte reports the season is going smoothly. He says Lacerte delivered updated forms early in the tax season and will that they will update the system regularly based on recent legislative changes. Lacerte has seen an increase in early e-filing but Olavarrieta is unsure if the change represents a shift in the timing of returns being filed or an overall increase in the number of returns. He says the program is performing well, and customers have been happy with the product and forms delivery, the install and update process is running very smoothly, and overall customers have been satisfied with the product. Lacerte launched their embedded Live Community to provide context sensitive questions and answers at the users’ point of need. He says that after an initial adjustment period, most customers have embraced the idea of using online communities to leverage the expertise of their colleagues. Almost two-thirds of Lacerte customers have posted questions to the Live Community, and most were answered in less than 12 hours, and many questions within minutes.
This year’s Lacerte (and ProSeries) products include a new feature called Intuit eSort. eSort starts by scanning a (usually) disorganized collection of client source documents, then automatically identifies and organizes the scanned tax forms into a single, bookmarked PDF file for data entry and/or review. The process is web-based but Intuit has done a masterful job of simplifying the operation. Readers may recall that Intuit stubbed its toe with a similar product a couple of years ago. Source Doc Auto Entry was introduced and rapidly adopted in the winter of 2007 and unceremoniously pulled from the product line up the following year. Reportedly over 4,000 firms tried the product and most asked for and received refunds after discovering its shortcomings. Intuit, not wanting to repeat a mistake, partnered this time with Copanion, Inc. whose Gruntworx product offers similar functionality, albeit not deeply integrated like Intuit eSort. Long-time Lacerte user Steve Janowicz of Brea, CA was very upbeat about the new offering. “The organization is very, very accurate, much better than we expected. And the turn-around time has been under 30 minutes in almost all cases. The first three words I heard from my staff after they’d tried it were --- slick, cool, and neat. Just exactly what a partner wants to hear!” New York CPA Scott Guber also approved of the new module, but with a bit less enthusiasm. “I found the forms recognition to be fairly accurate and the turnaround time is very fast.” The module sells for $199 but is currently being discounted to $49. Additionally there is a $3 per return fee. Intuit declined to report user numbers but their public relations contact did say “we are pleased with the early adoption rates for Intuit Document eSort and are on track to meet our FY09 goals. We are seeing active customers submitting nearly 50 transmissions to eSort per firm.” They further reported “the customer base of Document eSort consists of a majority of Lacerte users so the volume we see is represented by more Lacerte activity.”
PROSERIES
The season is off to a smooth start says Kathy Kirkendall, Group Product Manager of ProSeries, at Intuit. “Our customers tell us that things are going well for them. There were a lot of late form releases from the IRS because of the number of changes in the October legislation and the federal disaster legislation earlier in the year. This IRS delay pushed many forms back in the delivery, but we were able to get the forms out by working directly with the IRS.” Like sister product Lacerte, ProSeries E-filing is up year-over-year from Tax Year 2008. Kirkendall says ProSeries customers are also excited by the Live Community offering. She touted the fact that before accepting a posting, the system will automatically search the database to see if there is already an answer to the particular question that the practitioner is posing. She reports that most of the questions posted are tax-oriented and prevent many calls to the IRS and save considerable time spent otherwise spent researching regulations. Many ProSeries customers I spoke with commented positively about an add-on bundle called “ProSeries Plus” which includes Client Checklist, Client Advisor, and Client Presentation --- all designed to help busy practitioners be more effective with their clients.
GOSYSTEM TAX ES
On the other end of the tax compliance product spectrum, Jim Bourke, Technology Partner at the New Jersey-based regional firm WithumSmith+Brown reports “GoSystem Tax ES is so far, so good” and then quickly points out that with their more complicated clientele tax season has barely begun. Bourke says his measurement for the tax system is whether staff complain (there have been none) or if the vendor, Thomson Reuters, issues any “system degradation alerts” – also none. Bourke is also excited about the early successes his firm has had with Companion GruntWorx Pro integration into GoSystem Tax ES. He says “they nailed it 100% for the basic stuff” and now sees his challenge being managing staff expectations of the system. Tom Walsh, Senior Vice President at Thomson Reuters agrees with Bourke regarding timing of work and goes on to say the approximately 1,200 firms using his product are very interested in the redaction enhancements provided to help firms meet IRS Reg 7216. The enhanced capabilities are completely integrated throughout both GoSystem Tax ES and GoFile Room ES and provide extensive granularity of Social Security number redaction. Returns can be redacted by staff, class, region, office, staff level, or any combination. The system provides firms with the capability to move any return to any staff ant any office and still guarantee adherence to the Regs. The technology utilizes a replacement blackened box in place of the removed SSN, an important feature in that some have claimed that simply overwriting the number did not provide complete security.
CCH PROSYSTEM FX TAX
Los Angeles firm Sobul, Primes & Schenkel partner David Primes, a long-time CCH ProSystem Fx Tax user, says his firm will extend a full 50% of their nearly 450 individual returns. The extensions help manage workload and resultant stress for Primes’ staff --- they simply explain to clients that work done during the very busiest season carries a premium, and if they’d like to save on fees they should agree to have their return due date extended. Primes reminisced about “the olden days” when many experienced practitioners avoided installing each year’s first version of software and it was necessary to check the arithmetic and trace amounts from form to form to ensure accuracy. “Thank goodness those days are behind us and today’s software is much, much better. This year CCH added e-Mail management to the document module of their suite and it’s been a big hit here. It integrates perfectly and solves what was becoming a very big problem for us. Tim Shortsleeve, of New York-based Bonn, Shortsleeve & Ray, reports a similar experience with ProSystem Fx. Shortsleeve pointed out that his firm uses many different products, he’s not necessarily a “suite” guy, and would “most certainly” change tax platforms if there were strong reasons to do so. But CCH can rest easy because Shortsleeve has almost no complaints and has encountered no program problems at all so far this tax season. Although he wishes for some small enhancements in the review capabilities such as 1) tick marking on schedules, 2) state withholding being displayed on a drilled-down W2, and 3) searching for a number or text string throughout the input forms.
CCH SMALL FIRM SERVICES – ATX AMX
The ATX MAX tax preparation system is specifically designed for the small, tax-focused firms, and provides a solid interface and a bundled package including individual, corporate, partnership, fiduciary, non-profit, estate and gift tax compliance, employee benefit plans and a W-2/1099 program. The system is particularly well suited for small tax and accounting practices and seasonal outlets, and includes unlimited e-filing. A particular ATX strength is its inclusion of virtually every tax form for every entity from every taxing authority. That’s a high bar but ATX regularly challenges practitioners to “name a form that we don’t have” --- and is seldom, if ever, stumped. Although it has a built-in banking module for refund loans CCH SFS touts its Taxwise product as the answer for high-volume bank product shops. ATX’s CCH parentage provides integration with Kleinrock tax research and access to CCH reference materials.
CCH SMALL FIRM SERVICES — TAXWISE
The TaxWise product is specifically designed for smaller tax offices with higher volumes and reliance on bank products. It’s also particularly well-suited for as remote and multi-location shops. Taxwise includes individual, (1040) C and S-Corps (1120, 1120S), partnerships (1065), exempt organizations (990), fiduciary returns (1041), estate and gift taxes (706, 709), and reporting for employee benefit plans (5500).
TaxWise has been steadily expanding its product line and now includes many accounting and practice management programs, including W2-1099, depreciation, document management, write-up/payroll, a website builder and banking products. Like its sister product ATX MAX. Taxwise also provides integration with Kleinrock tax research and access to CCH reference materials.
During a personal interview CCH Small Firm Services President Jeff Gramlich (also a CPA) I was informed of the current scale of efiling volume done by ATX and Taxwise customers. Gramlich claims over 20% of all returns efiled by paid preparers will originate through CCH Small Firm Services. That’s a LOT of tax returns! Gramlich further noted that volume is up significantly this year even though the IRS opened the efiling season almost a week later this year than in 2008. The Taxwise group is also making a big investment in the Hispanic market by expanding its previously impressive Spanish capabilities. Gramlich pointed to a significant bilingual staff, full Spanish language help, menus, and forms, and marketing materials.
REDGEAR TECHNOLOGIES - TAXWORKS
The TaxWorks system, now owned by H&R Block’s RedGear Technologies serves over 4,000 firms with 1040, 1041, 1065, 1120, 1120S, 706, 709, 990 and 5500, including all states, D.C. and Puerto Rico. These firms are surprisingly devoted to TaxWorks --- so much so that last year’s three training sessions (Orlando, Salt Lake City, and Las Vegas) drew nearly 25% of the entire user base. Other vendors draw more like 5% of their bases to national or regional events. The system also has asset management (depreciation), and optional modules for tax planning, practice management and client organizers. According to RedGear Vice President Lyle Peterson, eGLWorks, the early-to-market online client bookkeeping system launched in 2007, has been “temporarily shelved” and is no longer running. However, the ArkWorks document management system is still being actively developed and sold. Peterson says over half of the ArkWorks DMS users are from outside the TaxWorks user base and that only about 20% of TaxWorks firms have “gone paperless” to date. Like his competitors Peterson also reports a solid increase in year-over-year efiling volume.
ORANGEDOOR TAX SUITE
San Francisco based OrangeDoor Inc. President Sharra Chan reports that her fledgling company “continues to grow steadily, attracting more and more firms who see a significant value in adopting the professions only true Web 2.0 tax compliance system.” Although OrangeDoor does not share specific user counts Chan assured me that her software (actually it’s a “service” since it’s completely web-based) is being used by “hundreds of firms” and tested by many more. OrangeDoor’s forte is its ability and willingness to partner with other Web 2.0 services to offer tax and accounting professionals powerful, single sign-on, applications. This capability is evidenced by OrangeDoor’s recent addition of a fully integrated secure accountant to client portal system. The portal is spawned and controlled by the accountant and provides document retention and sharing at both the client and accountant side.
CONCLUSION
Tax season 2009 seems to be “ho-hum” on almost all fronts. While some firms are a bit concerned about client defection to lower-priced competitors or even DIY (do it yourself) solutions and many wonder about collectability of fees most remain upbeat and surprisingly confident. It seems that as a profession we believe that in good times or bad, our clients still need and value our advice and services.
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