The 2020 tax season was unlike any other, with a global pandemic requiring virtually all tax preparers to work from home, often while balancing many other responsibilities. In addition to the coronavirus (COVID-19) pandemic, tax practitioners faced many challenges, including late tax law changes, revised filing deadlines, increased reliance on technology, and delays in clients submitting their tax information. Despite the challenging circumstances, survey respondents expressed general satisfaction with the tax preparation and research software used to meet client needs for compliance and planning. Weighted average ratings decreased somewhat for tax preparation software, but increased slightly for tax research software. Value for cost continues to be a concern; however, customer service has emerged as an even bigger apprehension, with the lowest ratings for the second straight year. In addition to commercial products, most survey respondents use the IRS and New York State tax department websites, as well as a variety of other helpful free online resources to assist in tax research. New York CPAs have once again provided valuable practice information by responding to this survey.
Tax practitioners faced multiple challenges during the 2020 tax season, including revised filing deadlines, increased reliance on technology solutions, and a delay in clients submitting their tax information. New York State was hit particularly hard by COVID-19, with the largest number of cases in the country throughout the traditional busy season. The IRS began accepting and processing individual tax returns on January 27, 2020; while early self-prepared return statistics were ahead of 2019, transmittals by tax professionals lagged behind the prior year. The number of tax practitioner e-filed returns had actually just started increasing by early March. The weekly IRS filing statistics (https://www.irs.gov/newsroom/filing-season-statistics-by-year), clearly indicate that something had gone wrong by mid-March.
Thanks to the advocacy efforts of the AICPA, the NYSSCPA, and other state societies, the IRS (Notice 2020-18) granted automatic extensions to all taxpayers, expanding the tax season well beyond the usual time period. Many state deadlines were lengthened as well. Almost all survey respondents filed tax returns after the typical deadlines, with more than 40% of participants filing more than half of their returns under the additional time provided. This is also reflected nationally in the IRS filing season statistics, with the tax professional e-filing receipts finally catching up to last year in an obvious big push at the revised due date of July 15.
In addition to dealing with the COVID-19 environment, and the many personal and professional obstacles and stresses it created, tax practitioners also had to absorb both pre- and post-COVID-19 late-breaking tax law changes. The Taxpayer Certainty and Disaster Relief Act of 2019, passed in late December 2019, extended or renewed many tax credits, along with provisions affecting individuals. The Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 affects retirement plans beginning in 2020, hence necessary client communications during the 2019 tax return preparation. Not to be forgotten, the Tax Cuts and Jobs Act (TCJA) of 2017 also contained provisions that took effect in 2019.
March 2020 brought additional legislation that affected tax practice. The Families First Coronavirus Act and the Coronavirus Aid, Relief, and Economic Security (CARES) Act were not primarily tax law changes, but they did include provisions with which many CPAs assisted client implementation. More than 90% of survey participants spent at least some “tax season” time helping clients with Paycheck Protection Program loans, Economic Impact Payments, and other COVID-19 relief-related options. One survey respondent mentioned “having to stop tax preparation” to learn “four new tax law changes in March” on the list of tax season issues.
The IRS closed customer service operations around March 20, 2020. The Treasury Inspector General for Tax Administration (TIGTA) report “Interim Results of the 2020 Filing Season: Effect of COVID-19 Shutdown on Tax Processing and Customer Service Operations and Assessment of Efforts to Implement Legislative Provisions” (Ref. No. 2020-46-041, June 30, 2020) states that the IRS initially closed more than 90% of its toll-free phone lines (https://bit.ly/3eRFYnB). More than 80% of incoming phone calls were routed to the Accounts Management automated system. The National Taxpayer Advocate Publication 4054, “Objectives Report to Congress: Fiscal Year 2021” (https://bit.ly/3eROOS5), specifically identified several major immediate impacts, including no telephone service, no face-to-face service, and no processing of paper returns or other correspondence.
Participants in the 2020 survey indicated notable increases in substantial problems, including the length of time spent waiting to talk to an IRS representative and obtaining assistance from New York State or City representatives. Those reporting significant problems in reaching the IRS increased from 44% in 2019 to 57% in 2020. Although success at achieving help from New York State or New York City representatives had actually been improving in recent years, respondents reporting significant problems increased from 20% in 2019 to 33% in 2020. This situation is no doubt due to an operational design that emphasizes face-to-face contact and on-site computer hardware for tax department employees to perform their job functions. Given the highly sensitive and private nature of taxpayer data, it is probably not reasonable to assume that tax authority activities can be safely conducted from these employees’ homes.
In an effort to accommodate the shift in the tax season due to filing deadline extensions granted under the global pandemic, the 19th Annual Tax Software Survey in 2020 was delayed somewhat. Although some potential respondents may have been unable to participate because of delayed filing deadlines, many New York State tax practitioners shared their insights with readers of The CPA Journal. Survey invitations were e-mailed by the NYSSCPA to practitioners from the Society’s database of members with an indicated interest in tax. In an effort to include participants who may not have received the emailed invitation, the survey link was highlighted on several “e-zine” newsletters, including one targeted to all members, as well as an NYSSCPA Exchange discussion forum. The number of responses received was 177, compared with 187 last year; thus, despite the unusual circumstances surrounding the delayed tax season, the response rate was comparable with recent years. Although the number of ratings and profiles of respondents was generally consistent with prior years, the mean number of individual returns, entity returns, and tax practitioners were all somewhat lower than usual, suggesting fewer respondents from large firms. Survey participants represented firms with a wide range of practice sizes, reflective of national demographics, although New York State practitioners don’t necessarily report the same views as those presented on national survey results.
Similar to previous years, the 2020 survey included the tax software ratings questions and provided a write-in option to rate a package not listed. In addition to evaluating tax preparation and research resources, respondents answered questions about firm practices, such as use of client portals, pay-per-return pricing, and workflow management. A special section covered the impact of COVID-19 on tax practitioners. Finally, the list of possible tax season issues was updated to include topics that were identified through news articles and discussion forums during and after the tax season.
Exhibit 1 provides a profile of the 2020 survey respondents, which demonstrates that survey participants included representatives from small, mid-sized, and large practices, and are generally similar to prior years of this study. The mean number of individual and entity returns was lower than in 2019, but only modestly lower than the means observed over the last five years. The median value for the number of individual returns is close to those from the last several years, whereas the median value for the number of entity returns was somewhat lower. The mean number of full-time tax practitioners during tax season in the 2020 survey was in line with the 2019 survey and those reported in years before 2017. Further, the median number of tax professionals for 2020 has been identical for the last five years. Finally, the percentage of practice in tax (71%) was higher than the value reported (mid-60s) over the last several years, suggesting that respondents are even more heavily engaged in tax practice than past respondents. Overall, the demographics for 2020 indicated survey coverage of firms of all sizes, with somewhat less participation by larger firms. Similar to past years, the respondents were very experienced tax preparers, with 85% reporting that they had more than 20 years of experience as tax professionals and only 3% reporting that they had been tax professionals for five years or less.
Profile of Survey Respondents
A Few Highlights
Wolters Kluwer (CCH), Intuit, and Thomson Reuters maintain their dominance in the tax software market, with each offering multiple tax preparation and tax research products designed to serve different sizes of tax professional firms. These vendors’ tax preparation products represented 185 (78%) of the 237 tax preparation software ratings received in 2020. The ratings for CCH, Intuit, and Thomson Reuters’ tax preparation products represented 33%, 29%, and 16% of the total, respectively. With 17% of the ratings, Drake Software was the only non-“Big Three” tax preparation package rated by a significant number of users.
CCH and Thomson Reuters products represented 80 (57%) of the 141 ratings of commercial tax research software packages. With 42 and 38 ratings, respectively, CCH and Thomson Reuters received 30% and 27% of the total ratings. Three other tax research products received more than 10 user ratings, with The Tax Book, Bloomberg Tax, and Parker Tax Pro receiving 14%, 11%, and 10% of the commercial tax research package ratings, respectively.
Free websites for tax research continue to gain traction. The Internal Revenue Service website, state tax websites, Google searches, and other Internet sources received 68% of the total tax research ratings in 2020.
Value for cost is still one of the lowest rated features of tax preparation software, and survey participants continued to express concerns about cost. For the second year in a row, however, the mean rating for customer support was even lower than the value for cost rating. Customer support was also the lowest rated feature for commercial tax research software. Open-ended comments from respondents focused primarily on dissatisfaction with customer support, although a few noted appreciation for companies that provide outstanding support.
Tax Preparation Software
The survey listed 12 of the most commonly used commercial tax return software vendors and gave respondents the option of writing in the name of a package not listed; 159 of the respondents (90%) rated at least one tax preparation software package, and 27% evaluated two or more. Respondents reported using all of the listed tax return software products, with three partial write-in ratings submitted; fewer than 10 ratings, however, were received for five products. Altogether, 237 ratings were analyzed; the ratings for these vendors are summarized in Exhibit 2.
Ratings of Tax Preparation Software
Survey participants rated each tax preparation software package on six factors: value for cost, ease of use, customer support, availability of forms, accuracy (low error rate), and overall rating. These are the same factors considered in the survey since 2015. Each factor was rated on a scale of 1 (very dissatisfied) to 5 (very satisfied); respondents also provided an overall rating for the products using the same scale. The average overall rating of 3.79 in 2020 represented a modest decrease from 3.86 in 2019. The last time the overall rating of tax preparation software dipped this low was in 2011; overall ratings for the past 10 years have not varied much, ranging from 3.79 to 3.95.
Exhibit 2 provides the 2020 ratings of the tax preparation software packages and compares averages to the previous three years. Six products received more than 25 ratings and accounted for 82% of the ratings: CCH Axcess Tax (26 ratings), Intuit ProSeries (28 ratings), CCH ProSystem fx (31 ratings), Lacerte Tax (34 ratings), UltraTax CS (34 ratings), and Drake Software (42 ratings). One other package, ATX, was rated by more than 10 respondents (18 ratings). Together, these seven products represent 90% of the total ratings received. The discussion that follows is limited to these providers, as the results for those receiving fewer than 10 ratings may not be representative of a broader survey of the software users. However, the five products that received between 1 and 10 ratings are included in Exhibit 2 for completeness.
Of the seven packages with more than 10 ratings, the overall ratings were between 3.38 and 4.70 out of 5, a wider range than what was observed in 2019, but generally in line with the overall ratings reported in the past several years. Drake Software has increased its advantage in overall rating versus the other packages with an overall rating of 4.70, an increase from 4.61 in 2019, 4.37 in 2018, and 4.24 in 2017. Except for 2016, Drake has received the highest overall rating every year since 2010; this year, its overall rating is higher than any previously observed in this survey. Drake also received the highest rating on every individual feature, the first time this has happened in the history of this survey. The second-highest overall rating of 3.89 was earned by ATX, which was rated fifth overall last year with 3.75. UltraTax CS maintained its third-place rank with an overall rating of 3.71, albeit a decline from 3.93 in 2019. The top three rated programs were followed by Lacerte (3.67), CCH ProSystem fx (3.65), Intuit ProSeries (3.50), and CCH Axcess Tax (3.38). These overall ratings reflected increases for Drake, ATX, and Intuit ProSeries. The ratings for UltraTax CS, Lacerte Tax, CCH ProSystem fx, and CCH Axcess Tax decreased from 2019. One factor that may have impacted ratings for CCH Axcess Tax was a temporary issue with its e-filing system at the September 15 deadline, which resulted in error notifications to some users. The changes in overall ratings closely paralleled the changes in ratings of individual features.
A comparison of the weighted average rating for each feature in 2020 to the rating for that same feature in 2019 shows small increases in the average ratings of value for cost and customer support, and modest decreases in all other features and the overall rating. The value for cost rating increased from 3.52 to 3.66, the highest it has been since this survey began in 2002. Respondents ranked value for cost as the second most important feature for tax preparation software; consistent with past years, Drake Software had the highest average rating for value for cost (4.72). No other package received an average rating over 4.0, which may be a major contributor to Drake Software’s high overall ratings each year.
Average ratings for ease of use have been very consistent over the past several years; the rating of 3.86 in 2020 was slightly lower than the range from 3.92 to 3.97 reported since 2013. Respondents rated ease of use as the most important feature for tax preparation software, and the package with the highest ease of use rating (Drake) also received the highest overall rating. The modest decrease in average overall rating may have been driven by the decrease in average ease of use rating. Additionally, shifting the work environment from a professional office to a home office may have impacted the user-friendliness of tax preparation software.
Respondents’ open-ended comments reflected frustration with customer support for specific products, and it is evident from Exhibit 2 that there is quite a variance in the ratings across the individual providers. The average customer support rating had been more consistent over time, until decreasing quite substantially from 2018 to 2019, but showed a slight improvement from the 2019 low of 3.51 to 3.56 in 2020. For the second year in a row, customer support is the lowest rated feature. It is noteworthy that top-rated Drake Software had by far the highest customer support rating (4.71) in 2020; this continued a long-term trend for Drake. The second-rated package on customer support was Lacerte Tax (3.53).
Availability of forms was the highest ranked individual features with an average rating of 4.16, a modest decrease from 4.23 last year. Drake Software had the highest rating on this feature (4.69), followed by Ultra Tax CS (4.21) and Intuit ProSeries (4.19).
Accuracy (low error rate) was the second highest rated individual feature, but the average rating declined from 4.26 in 2019 to 3.97 in 2020. Accuracy was tied with cost for the second most important feature. Once again, the highest rated package for accuracy was Drake Software (4.69), followed by Intuit ProSeries (4.04) and Lacerte Tax (4.00). All other products received ratings below 4.00.
Consistent with previous years, the average ratings of all of the features for the tax preparation software packages were higher than 3.5 (out of 5) and have been relatively steady in recent years. This may reflect survey participants’ familiarity with tax preparation software. Respondents were asked to indicate how long they had been using the software packages that they rated. As shown in Exhibit 2, with the exception of Lacerte Tax, all packages had been used an average of five or more years by respondents; thus, most of the respondents would be characterized as experienced users of the software that they rated.
Exhibit 3 provides descriptive information about the tax preparation software users for the packages rated by 10 or more participants. The size of the firms utilizing these vendors in 2020 was generally similar to previous years. Overall, respondents rating CCH Axcess Tax and CCH ProSystem fx represented a cross-section of firm size categories, including the larger practices, as well as more mid-sized firms. ATX, Drake Software, and Intuit ProSeries were used primarily by smaller firms. The other products had users of all sizes, but were used primarily by firms preparing fewer returns, with fewer full-time tax preparers, and a majority of their practice in tax.
Tax Preparation Software Usage
Tax Research Software
Survey participants were asked to rate the eight most commonly used commercial tax research software products, based on a review of print and electronic media. They also had the option to write in a package to review, as well as to rate free resources such as the IRS and state tax websites. Approximately 52% of the respondents rated at least one commercial tax research software package or resource, while 16% rated more than one. Although just over half of the respondents used a commercial tax research package, this survey has documented a shift toward greater reliance on free tax research resources in recent years. Similar to last year, 70% of respondents rated at least one free resource, and 59% rated two or more free research resources. In total, 76% of respondents rated at least one commercial or free tax research product and 67% rated more than one commercial and/or free resource. The ratings for the commercial products are higher than the free options, but tax practitioners clearly find value in both. The ratings for the tax research products are summarized in Exhibit 4, with the free resource ratings shown after the commercial software.
Ratings of Tax Research Software
Altogether, 141 ratings were received for the commercial tax research software packages, and an additional 304 ratings were received for the free tax research resources. Seven write-in ratings were submitted, but most did not identify the product. Three products received 20 or more ratings: Checkpoint (38 ratings), CCH IntelliConnect (47 ratings), and the Tax Book (20 ratings). These three products accounted for 74% of the commercial tax research product ratings. Three other products received at least ten ratings: Bloomberg Tax (16 ratings), CCH AnswerConnect (14 ratings), and Parker Tax Pro (14 ratings). This is the third year the survey generated more than 10 ratings for the Tax Book, a relatively new product.
Of the free tax research resources, the IRS website had the most ratings at 110, followed by state tax department websites at 91, Google searches (86 ratings), and other Internet searches (17 ratings).
The average overall rating of 3.85 for commercial tax research software reflects a modest increase from 3.82 and 3.76 in 2019 and 2018, respectively. Of the six packages with more than 10 ratings, just one product, CCH IntelliConnect, experienced an increase in the overall rating. Parker Tax Pro was essentially unchanged, while Checkpoint received identical overall ratings of 3.78 in 2019 and 2020. This year’s survey separated CCH AnswerConnect, a relatively newer product, from CCH IntelliConnect; as such, no prior comparative ratings are analyzed on CCH AnswerConnect. The two remaining providers received lower ratings in 2020 than 2019—Bloomberg Tax declined from 3.79 to 3.67, while the Tax Book had the largest decrease in overall rating, from 4.33 to 4.00. Parker Tax Pro’s overall rating of 4.14 made it the top-rated commercial tax research package, followed by the Tax Book (4.00). The remaining packages were bunched closely in overall ratings as follows: CCH IntelliConnect (3.82), Checkpoint (3.78), Bloomberg Tax (3.67), and CCH AnswerConnect (3.43).
The range of overall ratings was similar to previous years, with individual software ratings ranging from 3.43 to 4.14 for 2020. The overall rating of all products (commercial plus free internet resources) was 3.52 in 2020, as compared with 3.47 in 2019 and 3.52 in 2018, respectively.
Respondents ranked the overall performance and five features of the tax research software packages on a scale of 1 (very dissatisfied) to 5 (very satisfied). The average rating for value for cost was 3.68, compared with 3.72 in 2019, a minor decrease. The average rating for ease of use increased from 3.63 to 3.75, marking the second consecutive year of a modest increase.
The average rating of customer support also increased somewhat, from 3.50 in 2019 to 3.59 in 2020. Customer support ratings have increased each of the last several years, although at a very modest pace that has kept it the lowest rated feature. The average ratings for both timely updates and company reliability increased relative to 2019, and are close to 2018.
Parker Tax Pro had the highest value for cost rating (4.60), followed by the Tax Book (4.24), Checkpoint (3.56), CCH IntelliConnect (3.45), CCH AnswerConnect (3.43), and Bloomberg Tax (2.94). Of the six commercial tax research packages with more than 10 ratings, only Parker Tax Pro saw an increase in its value for cost rating (from 4.43 to 4.60). CCH AnswerConnect and CCH IntelliConnect had ratings that were very close to that for CCH in 2019 (3.43 and 3.45, respectively, similar to 3.41 in 2019). Compared with 2019, the Tax Book had a decrease in its 2020 value for cost rating (from 4.38 to 4.24), while Checkpoint had a small decrease in its rating (from 3.63 to 3.56), and Bloomberg Tax had a much larger decrease (from 3.55 to 2.94).
Despite a decline, the Tax Book earned the highest ease of use rating for the third year in a row (4.30) in 2020. Parker Tax Pro was ranked second on ease of use, with a rating of 3.93 (the same as in 2019), followed by Bloomberg Tax (3.69), CCH IntelliConnect (3.61), Checkpoint (3.54), and CCH AnswerConnect (3.21). The rating for Bloomberg Tax was substantially higher than its 2019 rating, while the rating for Checkpoint declined. Finally, the ease-of-use ratings for CCH IntelliConnect and CCH AnswerConnect were somewhat higher and lower, respectively, than that for CCH. It is interesting to note that the packages with the highest value for cost ratings also received the highest ease-of-use ratings. Because ease of use and value for cost are ranked as the two most important features for research software, these ratings take on particular importance.
The Tax Book earned the highest rating for customer support, although its rating dropped from 4.13 in 2019 to 3.95 in 2020 (while still higher than 2018). With a customer support rating of 3.77, Parker Tax Pro was ranked second on this feature. Checkpoint earned third place with a rating of 3.68, followed by Bloomberg Tax (3.40), CCH AnswerConnect (3.31), and CCH IntelliConnect (3.30).
Checkpoint earned the highest rating for timely updates (4.37), which represented an increase from 2019 (4.18). CCH IntelliConnect was the second-rated package for timely updates (4.31), significantly higher than that earned by the single CCH product in 2019 (3.72). Parker Tax Pro’s rating for timely updates declined from 4.36 in 2019 to 4.14 in 2020, but was still high enough to earn third place. With a rating of 4.07, Bloomberg Tax’s rating was essentially the same as 2019 and ranked fourth. The Tax Book also had the same rating as the previous year (4.00), while CCH AnswerConnect received the lowest rating for timely updates in 2020 (3.69). Survey respondents consider timely updates to be the third most important feature of research software.
Finally, the company reliability ratings increased overall from an average of 4.01 in 2019 to 4.15 in 2020. CCH IntelliConnect (4.29) and Checkpoint (4.28) were the highest rated packages, followed by Bloomberg Tax (4.06), Parker Tax Pro (4.00), the Tax Book (4.00), and CCH AnswerConnect (3.93). After the top two packages in this category, the ratings are quite close to one another. With the exception of Bloomberg Tax and the Tax Book, all of these ratings represent increases from the 2019 ratings. The 2019 survey noted decreases in company reliability ratings for all packages; thus, the increases effectively bring the ratings back to previous levels.
Familiarity with tax research software packages varies somewhat, as three of the packages (CCH AnswerConnect, Checkpoint, and Parker Tax Pro) have been used on average for only three years. The Tax Book has been used on average by respondents for five years, while both Bloomberg Tax and CCH IntelliConnect have been used for six years.
Similar to the past several years, the number of ratings received for the free tax websites far exceeded those received for commercial tax research packages, suggesting that they are becoming a more popular source of tax research material for tax professionals. The overall ratings for all of the free resources increased modestly from 2019, and are at essentially comparable levels in 2020, with a rating of 3.33 for Google searches, 3.34 for state tax web-sites, 3.41 for other Internet searches, and 3.42 for the IRS website.
The IRS website once again received the most ratings (110) of all commercial and free research tools, closely followed by state tax websites (91 ratings) and Google searches (86 ratings). Other Internet searches received a comparatively small number of ratings (17). Not surprisingly, consistent with previous years, value for cost is the most highly rated feature and customer support is the lowest rated feature for all of the free tax research resources. Although ratings for individual features changed slightly from 2019 to 2020, none of the changes were significant, with the exception of a decrease in the ease-of-use rating for Google searches. Interestingly, the ease-of-use ratings for both the IRS and state tax websites improved modestly, while there was a slight decrease in the ease-of-use rating for other Internet searches. The ratings for the free resources have moved toward a relatively steady level; for some features, the ratings do not vary significantly from one free resource to another. All of the value for cost and customer service ratings are similar. Ratings for timely updates and company reliability are generally higher for the IRS and state tax websites, although not substantially so. While survey respondents find Google and other Internet searches to be a helpful tool, they appear to recognize that the official IRS and state tax websites are more reliable for obtaining and confirming technical tax guidance.
Exhibit 5 provides descriptive detail on the tax research software users. Similar to past years, Bloomberg Tax, both CCH products, and Checkpoint users came from all firm sizes. Parker Tax Pro and the Tax Book are used almost exclusively by small firms. The IRS website, state tax department websites, and other Internet resources were used across all firm sizes, but were used disproportionately by smaller firms; this pattern is similar to previous years.
Tax Research Software Usage
Other Technology Issues
The top-rated software by feature, summarized in Exhibit 6, shows that Drake Software dominated the ratings for tax preparation packages, with the top rating for every feature: value for cost, ease of use, customer support, availability of forms, accuracy, and overall rating. While Drake Software has earned top overall ratings for several years, it has typically only achieved two or three of the highest feature ratings. This is the first time that this survey has found one package at the top of every feature—perhaps influenced by the slightly larger proportion of smaller firms in this year’s survey.
Providers with Highest Ratings
There has been less consistency over time in the ratings for tax research software. For 2020, Parker Tax Pro earned the highest overall rating and the top rating for value for cost. The Tax Book, which was rated second overall (and earned the top overall rating in 2019), earned the highest ratings in ease of use and customer support. Finally, Checkpoint earned the highest rating for timely updates and tied with CCH IntelliConnect for company reliability.
Which tax software features do practitioners consider the most important? Exhibit 7 reveals the 2020 participants’ averaged preferences. For tax preparation software, accuracy and ease of use have consistently been the two most important features, although they alternate between first and second place in some years. In 2020, ease of use was rated most important, followed by cost and accuracy, which were tied for second. Similar to previous years, these features were followed by customer support, availability of forms, availability of states, familiarity, company reliability, and data security. The continued low ranking of data security is interesting, but rather than an indication that this feature doesn’t matter, it may be that data security is assumed to be at an appropriate level for all packages and is important enough to be covered by other practices within the firms.
Important Software Features Rankings as most important to least important
While Drake Software was the highest rated tax preparation package on all features, ATX and UltraTax CS, which were second and third rated overall, also received relatively high rankings on individual features, especially those considered most important by respondents.
For tax research products, ease of use, cost, and timely updates have typically been the top three features in terms of importance; in 2020, these were the top-ranked features in this order. Similar to 2019, ease of use was the most important feature in 2020. Cost and timely updates reversed rankings from 2019, with a somewhat larger difference than in previous years. The three most important features for tax research software were followed by company reliability, customer support, familiarity, and availability of states. Notably, customer support was ranked last in 2019, but rose to fifth in 2020. The rankings of the tax research software features have tended to be inconsistent after the top three, however, so it is difficult to interpret this change.
The most important tax research features show a sizable gap between the top three and the remaining features. In 2020, the Tax Book had the highest rating for the most important tax research feature, ease of use, while Parker Tax Pro had the highest rating for value for cost. Checkpoint held the highest ranking for the third most important feature, timely updates, followed closely by CCH IntelliConnect. These two products are essentially in a tie for company reliability.
Exhibit 8 summarizes responses with respect to other technology issues. Most vendors offer online versions of the software. In 2020, 45% of respondents used the online version of tax software, as compared with 38% in 2019 and 2018, 31% in 2017, and 25% in 2016. This might be due to the increase in tax professionals working from home during the pandemic (discussed further below). The use of portals for clients to upload tax data documents among survey respondents decreased modestly to 48% in 2020, from 51% in 2019, and compared to 46% and 40% in 2018 and 2017, respectively. Over the last few years, the percentage of practitioners using or considering client portals appears to have stabilized after notable increases in the previous years.
Although software companies promote the use of pay-per-return pricing as a way to reduce tax return preparation cost, only 28% of survey respondents currently use payper-return pricing.
Although software companies promote the use of pay-per-return pricing as a way to reduce tax return preparation costs, only 28% of survey respondents (compared to 35% in 2019) currently use pay-per-return pricing, with 6% considering it for the future. Several industry publications predicted an increase in outsourcing tax preparation activity due to the remote working environment; it was not common among respondents, however, with only 6% reporting that they outsourced some tax preparation activity, consistent with previous years.
Several of the tax preparation software packages rated by respondents allow adopters to integrate practice management software or other applications with tax preparation software. In 2020, 24% of participants indicated that they currently use integrated applications, with another 14% considering doing so, a nominal change from 26% and 11% in 2019. Respondents who viewed integration important to their practice increased from 32% to 39%, contrasted with 29% reporting that they did not integrate at all.
While most survey participants have not changed tax software in the last five years, 29% had changed either tax preparation software (19%), tax research software (4%), or both (6%); these percentages are somewhat higher than in 2019. Another 12% of respondents indicated that they plan to switch tax software within the next year, including 3% who plan to switch both tax preparation and tax research software, a small decrease from 2019. The most frequently cited reason for changing software was cost (60%), but most respondents also gave other reasons for switching. The most common factor given was dissatisfaction with customer support, while other reasons given for changing software included technology issues, desiring more features or functions, and desiring a product that is easier to use.
The importance ranking on customer support (see Exhibit 7) increased in 2020, possibly due to a socially distanced work environment and a lack of collegial help. However, actual contact with vendors’ customer support was broadly similar to 2019, with some modest shifts in the use of support options. Consistent with previous years, telephone assistance was the most commonly used option, with 42% of participants using telephone assistance often or frequently and 54% of participants using it occasionally. E-mail contact was accessed often or frequently by 20% of survey respondents and occasionally by 35%; similar to last year, online assistance was used often or frequently by 27% of respondents and occasionally by 47%. Live chat usage was down somewhat compared to the last few years, with 15% using it often or frequently, and 36% using it occasionally.
Tax Season Challenges
The 2020 tax season was dominated by issues related to the pandemic, with COVID-19 hitting particularly hard in the New York City area during the traditional tax season. Although the use of integrated or workflow software and customer service contacts did not appear significantly affected, the COVID-19 environment did have a notable impact on survey respondents’ physical work locations. Prior to the stay-at-home order issued in New York State in March 2020, tax practices were relatively “balanced,” with 39% of respondents reporting no staff working from home, and equally 39% indicating that over 75% of professionals worked remotely. However, between March and June 2020, only 17% had no staff working from home, and the participants with more than three quarters of their professionals working remotely increased to 59%.
By early August 2020, there was a shift back to working at the office, although not to the same extent as beforehand. Only 27% of survey participants indicated that no tax professionals were working remotely at that time, while 52% reported that more than half of their tax staff were continuing to work from home. The percentage of respondents indicating that more than 75% of their tax professionals were working from home in August decreased to 41%, as practices appeared to be returning to some semblance of prepandemic operations. When asked about the long-term impact of COVID-19 on work-from-home practices, 45% of respondents anticipated no impact, while 35% expected at least some employees to work from home indefinitely; the remaining 20% were not yet sure of the long-term impact.
Under the revised due dates granted by the IRS, the 2020 tax season continued well beyond the usual April 15. For 43% of respondents, most of their returns were filed using the extended deadlines; this included 15% who indicated that more than 75% of their returns were filed later than usual. However, for 53% of participants, less than half of their returns were filed after the usual deadlines. Only 4% indicated that none of their firms’ individual or entity returns were filed beyond the usual deadlines.
Most respondents shifted at least some “tax season” time to non-tax matters, such as helping clients file for Paycheck Protection Loans or Economic Impact Payments. A small number (3%) of participants spent over 75% of their time dealing with non-tax issues, whereas 12% spent between 50% and 75% of their time on these matters. More typically, 34% reported devoting between 25% and 50% of their tax season time on these non–tax return activities, and 42% dedicated less than 25% of their tax-season time on such issues. Only 9% indicated that they did not spend any time on these activities.
Other impacts from the COVID-19 pandemic included difficulties resolving software issues due to increased online traffic (affecting 35% of respondents), staff home technology being insufficient for firm needs (31%), staff challenges with software because of working from home (29%), loss of workforce due to illness or family responsibilities (27%), and an increase in cybersecurity attacks (8%). In addition, 19% of participants provided open-ended responses identifying other challenges associated with the pandemic, including the inability to meet clients face-to-face, adjusting to late tax law changes, and clients’ uncertainty about their businesses. One respondent also noted that the filing extensions were critical to enabling the firm to stay in business, given everything else.
In addition to the unique challenges posed by the COVID-19 pandemic, the survey asked respondents about the extent to which several other concerns created problems for them during the 2020 tax season. The issues included in the survey were identified from news articles and discussion boards. A large majority of respondents experienced problems arising from waiting to speak with an IRS representative, with 79% reporting minor or significant problems; this represents an increase as compared with 2019. Similarly, there was an increase in the percentage of respondents who had significant problems obtaining assistance from a New York State or City representative; 60% reported minor or significant issues. Perhaps related to the pandemic, client delays in submitting tax information resulted in minor or significant problems for 94% of respondents, with over half reporting significant problems with late client data. Although the majority of respondents reported no problems with rejection of e-filed returns due to either prior claim of stimulus check or identity theft, minor or significant problems were experienced by 31% and 36%, respectively; fortunately, most of those experiencing problems characterized them as minor. Finally, 40% of respondents indicated that they experienced minor or significant problems due to phishing or malware e-mails, the same as 2019.
The IRS Return Review Program continues to suspend processing tax returns for which third-party documents (such as Forms W-2 and 1099s) have not been received or do not match the tax returns. The TIGTA report “Interim Results of the 2020 Filing Season” (2020-45-024, April 7, 2020) indicated that the number of potentially fraudulent returns stopped from processing increased dramatically between 2019 and 2020 (https://bit.ly/3nygnmO). Although the IRS appears to be making progress in refining its filters, the National Taxpayer Advocate Publication 4054 “Objectives Report to Congress: Fiscal Year 2021” stated that the false-positive rates for incorrectly flagging potential identity theft was 50%; while down from 63% in 2019 (and 82% in 2018) this is still impossibly high, especially given the difficulty in contacting IRS personnel during the closure of Taxpayer Assistance Centers (https://taxpayeradvocate.irs.gov/reports).
The IRS launched the “Identity Theft Central” webpage (http://www.irs.gov/identity-theft-central) to collect information on identity theft and data security. At first glance, it looks a little minimalist, but the linked webpages for tax professionals and businesses contain a large number of resources. The Security Summit program (IR-2020-71) has focused on the additional cybersecurity risks in a work-from-home scenario. The IRS encouraged tax professionals to use a Virtual Private Network (VPN), employ multifactor identification of a security code in addition to a user name and password, avoid phishing emails from fraudsters posing as potential clients in need of help with COVID-19 stimulus, and use broad-based security software to protect all electronic devices from malware. This problem appears to have held steady for survey participants, with 40% reporting minor to significant problems from phishing or malware e-mails posing as a software provider, compared with 39% in 2019.
The IRS “Dirty Dozen” list of tax scams for 2020 (IR-2020-160) emphasized the activities of fraudsters seeking to profit from the COVID-19 environment. The pandemic is prominently featured in several of the schemes, such as phishing e-mails, texts, and letters related to stimulus payments and fake charities. Identity theft is being used to file false tax returns to claim Economic Impact Payments or divert the funds to the wrong address or bank account. Respondents continue to report identity theft issues, but at a lower level than previous years, with 36% reporting minor or significant problems in 2020, compared with 40% in 2019 and more than half in 2018 and 2017.
The Cost of Tax Software
For many of the commercial packages discussed here, the cost of tax software options is not publicly available, and is often tailored to specific customer preferences and the number of users. The pricing structures for tax preparation software varies widely across products, with some offering a flat fee for unlimited returns and others using per-return pricing. Additionally, some software prices include both individual and entity returns, while others are sold separately. Many vendors prefer to discuss this information on an individual basis with potential customers. An unofficial listing of prices, as of November 2020, for products covered in this survey will be available with the online version of the article at https://www.cpajournal.com.
Analysis and Summary
Tax practitioners faced their share of technology issues, notwithstanding the COVID-19 pandemic. January 2020 began with service disruption on Thomson Reuters Virtual Office CS and GoFileRoom; September 15 brought an e-filing shutdown on CCH Axcess. Not surprisingly, the aforementioned TIGTA “Interim Results of the 2020 Filing Season” (2020-45-024) reported tremendous increases in connections to the IRS website, as well as the use of Free File by individual taxpayers.
New York State CPAs adapted to a remote work environment, but did not necessarily fulfill the particular predictions made in accounting technology publications. Specifically, survey respondents did not increase the use of outsourcing tax preparation activities and a majority did not maintain substantial work-from-home operations, but returned to their commercial offices by August. Around 40%, however, expected to have some portion of their staff continuing to work remotely. There was a slight increase in the use of integrated practice management software, but not the major shift predicted. Interestingly, many respondents reported considering adopting these tools, and next year’s survey may show a lagged response for technology upgrades.
With the onset of the COVID-19 restrictions in mid-March 2020, as well as the time spent in assisting taxpayers with Paycheck Protection Program loans, Economic Impact Payments, and other relief-related provisions, practitioner e-filed returns did not reach last year’s submissions numbers until a last-minute push for July 15, 2020. Between quarantine restrictions, improvements in the IRS Free File program, and the availability of stimulus checks for non-filers, taxpayer e-filed returns increased by 24% over 2019, while practitioner e-filed returns were down 0.3%, as of October 16, 2020.
Identity theft continues to be a problem, but it has been declining according to IRS reports. The percentage of 2020 survey respondents who experienced rejection of e-filed tax returns due to possible identity theft issues decreased, in line with national statistics. However, tax practitioners, with their access to taxpayer information, are now serious fraud targets, and 40% of participants reported receiving phishing and malware e-mail scams from fake software vendors, similar to 2019. The Taxpayer First Act of 2019, along with more than half of state governments, requires cybersecurity measures to be in place to protect taxpayer data. Tax professionals will be required to have a written data security plan in place when they obtain or renew their Preparer Tax Identification Number (PTIN) for 2020 (see IRS Publication 5293 https://bit.ly/36FjRgg).
In the 2020 annual survey, New York State CPAs generally expressed satisfaction with commercial tax preparation and tax research software resources, as well as with free online tools. Drake Software, a lower-cost option for tax preparation software, took the top rating in all feature categories—a first for this survey—and retained its overall top rating. Parker Tax Pro, which was in second place in 2018 and 2019, became the highest overall rated of the tax research products due to lower ratings on the previous top performer, the Tax Book.
The average ratings for both tax preparation and tax research software were consistent with previous years, although ratings for some products reflected more substantial changes. In 2020, ease of use was rated as the most important feature for tax preparation software, followed by cost and accuracy (low error rate). For tax research software, ease of use was rated as the most important feature, followed by cost and timely updates. While the order has fluctuated, the same three individual features have consistently emerged as the most important over the past several years.
Practitioners have many options when it comes to tax software, including free resources for tax research applications. Some survey respondents required high functionality and quality, while others needed low-cost options. Although write-in comments highlighted concerns with customer support and cost, package ratings reflected overall satisfaction. The ratings of individual features and overall satisfaction reported from the 2020 survey should help those who wish to consider the different packages. The website information for the tax software vendors is listed in Exhibit 10.