It's hard to believe that there was a time not very long ago when most accountants filled out W-2 and 1099 forms by hand. Today, you would be hard pressed to find a tax preparer who has not considered using stand-alone W-2 and 1099 software or one of the well-known accounting packages and vendors that now offer payroll capabilities-in some cases, full payroll services. There's always the question of how to buy these packages-whether to opt for software from companies that specialize in applications for generating W-2 and 1099 forms or an accounting software package with full payroll capabilities. And with the number of product choices it's not about to get easier, particularly for firms with small business clients.
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As always, price is an issue for many firms when they buy anything, and firms looking to save money may turn to the stand-alone products, rather than investing in an application with a wider range of features.
Accountants Associated began using CFS Tax Software four years ago, and product pricing played a major role in the decision to buy this stand-alone software, according to Bob Copeland, president of the Niles, Ill.-based firm.
"Cost was one of the biggest factors for us and the CFS program was very understandable and easy to install. It's hard to keep business clients, they check fees," says Copeland. "The cost of suites is not cheap. If I had a lot of clients, we would likely buy [W-2/1099 processing features] as a part of an accounting package. Our clients don't want to get involved in [payroll], so if they do have something like QuickBooks, we can import what we need into our system and print everything out."
Copeland notes that AccountantsWorld hosts his Web site and that the vendor has tempted him to use its payroll processing features, but he has turned down the offer as he claims it would "cost four to five times" as much as he is paying to use CFS. He pays $160 to CFS for two programs, one that generates quarterly reports and another that produces 1099s and W-2s. He says AccountantsWorld is pitching Payroll Relief, which would cost $5,460 if used for all of his 35 clients. (But that's for a full-fledged payroll service. Its After-The-Fact Payroll is priced at $195.)
Even if his firm did find something cheaper, he would not be so quick to make the switch from what they use. "At this point, I wouldn't change from CFS just for something cheaper," says Copeland. "It's working for us and helped us increase revenue 25 percent per year at first, and now it's closer to 30 to 40 percent."
However, Hauppauge, N.Y.-based AccountantsWorld is in a unique position to offer a After-The-Fact Payroll, as well as PayrollRelief. President Chandra Bhansali says that a majority of his payroll product users (approximately 80 percent), which range from sole practitioners to midsized firms, utilize AccountantsWorld's After-The-Fact Payroll.
"We would like to have a better understanding of why they choose one over the other, but I can say that it's not easy to get accountants to offer a full payroll service, as many of them aren't really aware of what's out there," says Bhansali. "Until recently all the major payroll services wanted was client referrals. We have been offering a full service for about two years and I believe that pretty soon payroll will become a more important service [for accountants]."
Bhansali also noted that his payroll products can import accounting data from QuickBooks and he plans to have this ability with other accounting products in the future.
Outside of the cost factor, many tax preparers that use a specialized W-2/1099 solution typically do so because they need more forms than most bundled software offers or they really only do after-the-fact payroll tax work.
Chicago-based MasterType Accounting and Business Services is like many firms that mainly do after-the-fact payroll, in that it uses specialized 1099 software like Winfiler from Greatland Corp. The firm has used Winfiler for the past four years.
"Winfiler is good because of our clients that send me payroll at the end of the year can create W-2s and we can import what we need from Peachtree, or everyone who is in QuickBooks will print the preprinted forms for me," said Ken Reid, a MasterType partner. "The one thing I notice in accounting packages, when it comes to tax preparation work, they don't allow for when you have more than 250 employees and you have to electronically file. Many of the accounting packages don't have that."
Reid says his firm has been enjoying additional revenue for his payroll processing services, and even though it was "initially a significant investment, it's all finally paying for itself." The firm currently has 25 payroll clients and that is expected to jump to around 35 by the end of January.
Greatland, the creator of Winfiler and Winfiler Plus, boasts approximately 10,000 users for both products, 80 percent of whom are practicing accountants. The company believes that it has an edge over some of the bundled or "suite" accounting products with payroll abilities, due to its products' comparatively feature-rich capabilities.
"Our clients have a variety of needs, and I believe specialized software serves many tax preparers better. A lot of accounting software vendors have some standard W-2s, but they may not serve an accountant well because of the need to also do 1099s, 941s, and state forms," says Julianna Guyette, senior product manager at Greatland. "Specialized software in general hasn't kept up to the 'ambiance' of the suites, which are often pretty and quite user-friendly. Pretty, however, doesn't mean that they will be very useful. Specialized software often has more depth in functionality beyond form offering, making it a better choice for accountants who serve a variety of client needs."
Those tax preparers really looking to keep costs down for their clients are able to get by with what QuickBooks offers and will get the forms they need from outside sources.
W-2, 1099 Vendors |
Advanced Micro Solutions
CFS Tax Software
Peachtree/ Best Software
"It's probably better to use W-2 or 1099 preparation software, but I found QuickBooks to be good. It's easy to enter simple information, it will calculate for you and put everything onto the forms," Fox said. "Sometimes people give me amounts and I can set them up on QuickBooks, enter the amounts and run the 1099s pretty efficiently."
Fox also has about 50 clients, mostly small businesses and nonprofits. He is seeing a need to look into specialized W-2 and 1099 software, as a growing number of his clients are requesting after-the-fact payroll processing.
"I really just started looking to 1099 software as my client base has doubled. Even last year I got a lot of calls at the end of the year from clients needing payroll taxes done and it's already piling up so it's got to be done," Fox says. "The real challenge is the data compiling."
Bundled packages have a place in accountants' lives, but for those that need to process multi-state returns, stand-alone products may be a better way to go, says Kyle McCorkle, product manager at Edmonds, Okla.-based Advanced Micro Solutions.
AMS, which boasts more than 12,000 users, has been in the 1099 and W-2 market since 1985. The company sells the 1099-Etc software line, which can prepare 941, 940, 940EZ, W-2, W-2c, W-3, W-3c, and all state quarterly forms, along with other features.
"Most of the suites will allow you to have pre-printed federal forms, but many don't produce state forms or, if they do, you have to buy each state," McCorkle said. "Granted, we only have a few customers in places like Alaska and Puerto Rico, but we need to have the compliance for all states. We put a lot of emphasis on the compliance end and make sure they are all complaint and can be filed."
McCorkle stressed that his customers mainly use 1099-Etc. for compliance, printing and producing forms and sending them in. The product also supports all states as well as Washington, D.C. and Puerto Rico.
A bundled approach is suitable for preparers that provide a broad range of tax and accounting services, says Jack LaRue, vice president of marketing for Dexter, Mich.-based Creative Solutions.