by Roger Russell

The consolidation and contraction of the tax prep software industry over the past decade has left fewer small players in the market, while the big names continue their efforts to grow organically, through purchases, and in some cases by marketing directly to the taxpayer-consumer.

The launch of the government-private industry consortium Free File Alliance in January 2003 opened the door for a number of vendors to market directly to consumers, with some vendors providing links to their tax preparer customers for taxpayers who either didn’t qualify for free filing, or needed additional help.

The list of vendors was shortened considerably last year when Franklin, N.C.-based Drake purchased Express Software and the customer list of Alpine Data’s Tax/Pack. UCG, which owns Kleinrock Tax Research, acquired Caribou, Maine-based ATX, Houston-based TRE Financial Services acquired Orrtax, and Best Software acquired CPASoftware. This year, only one major consolidation occurred, with Dexter, Mich.-based CSI acquiring Tax Relief from Hauppauge, N.Y.-based AccountantsWorld.

The companies that continue in business have survived for a number of reasons — quality of product, customer service, marketing, and the ability to keep up with the changes in the market. The following are the survivors, with some of the innovations they’re working on for next year’s tax season.

Caribou, Maine
(800) 376-2363

For the 2004 tax season, MAX, ATX’s core tax preparation software, will be utilizing MX2, a new calculation engine. This will allow the program to perform calculations more efficiently and streamline the process of saving and backing up returns, resulting in a smaller, more hard-drive-friendly return size, according to marketing director Bill Grady. Also, MAX will have the addition of 1,600 forms, bringing its total to 9,600 forms for federal, state, city, local, and sales and use tax.

ATX has integrated the tax research capabilities of its Kleinrock parent in Total Tax Office, which combines MAX with Kleinrock’s TaxExpert. ATX now combines Total Tax Office in an integrated suite with its client engagement software, Total Engagement Office, and its accounting and management program, Total Accounting Office. It also offers a Portfolio Tax Analyzer for handling stock, bond and mutual fund transaction calculations.

CCH Inc.
Torrance, Calif.
(800) 739-9998
ProSystem fx Tax

ProSystem fx has completely redesigned its tax user interface, adding a new, optional worksheet-based user interface that takes advantage of new development tools and technologies. The new worksheet input method is more intuitive, and simplifies workflow, as well as reducing the learning curve for new staff, according to senior marketing manager Ernest Zoumot.

He stressed that the new user interface is an optional view — customers that are comfortable with the existing ProSystem fx interview forms-based input will still be able to use that data entry method.

ProSystem has also enhanced integration between tax and other ProSystem fx Office products. For example, new integration between Tax and the Practice Management application provides the ability to launch a clock in Tax to track time spent preparing returns and invoke automatic time capture in Practice.

ProSystem fx has also expanded its electronic filing options with the addition of Forms 2688, 1041, 1120 and 1120S.

Pensacola, Fla.
(800) 272-7123
Visual 1040 and Visual Business Tax

Acquired last year by Best Software, CPASoftware is marketed to Best’s existing nationwide network of accountants who use Peachtree, MAS90, MIP, Abra, ACT! and SalesLogix products.

This year, CPASoftware is introducing a tax-planning product that integrates with its 1040 package. In addition, the Visual Tax package includes an interface between the 990 product and MIP, a nonprofit Best Software product, and an interface with all of CPASoftware’s tax products and FAS, another Best Software product. Automatic software updates will be available via the Internet, and a 706 Estate Tax Return package is being offered.

Forms are prepared on-screen, which translates to the preparer doing the entry rather than writing down the information and handing it off to a batch operation. E-filing is available for all states, as well as federal, and organizers can be e-mailed to customers.

Creative Solutions
Dexter, Mich.
(800) 968-8900
Ultra Tax

CSI has improved its Web-based client organizer this year to improve ease of use for both the tax preparer and taxpayer.

CSI’s paperless office product, FileCabinet Solution, now automatically backs up UltraTax files, as well as files from other CSI programs. The integration between Ultra Tax and FileCabinet Solution has been significantly enhanced, making it possible to open FileCabinet Solution from within Ultra Tax and access actual copies of prior-year returns and support documents. Over 7,000 firms now use FileCabinet Solution.

CSI has also added electronic filing for business entities, for Forms 1041, 990 and 1120, subject to the IRS being able to accept them.

A Watch Window, with a split screen, gives users a separate section on the screen that monitors selected values. For example, adjusted gross income or tax due can be set to appear constantly on the screen. CSI has also strengthened its data mining capabilities to search on any line on any tax return. Data mining is now built into Ultra Tax rather than being a separate module.

CSI, a Thomson business, is doing very well with its purchase of Tax Relief, according to vice president of marketing Jack LaRue. “We’re ahead of schedule on the number of firms renewing with Ultra Tax, and we’re well under way in data conversions,” he said. “We’ve already converted over a thousand firms, and we’re in the process of rolling out training specifically designed for Tax Relief customers.”

Drake Software
Franklin, N.C.
(800) 890-9500

Drake has added Forms 1099 Misc, 1099A, 1099C and 1099RRB. In addition, Drake has added the ability to bill by time; the ability to e-mail a client a tax return with a view and print option; the ability to calculate, view and print multiple business returns simultaneously; and the ability for Form 4562 to work in conjunction with Form 8829.

Drake will now provide e-filing capabilities for Forms 1065, 1120 and 1120S returns, and has added Pro Series and Lacerte business conversions.

Dunphy Systems
(614) 431-0846
Dunphy Systems Tax Preparation Software

Dunphy has added a number of new forms, and this year, in addition to having updates available on its Web site and bulletin board, they can now e-mail their program to clients. Its e-filing supports the state-only option, so preparers can e-file at the state level without e-filing the federal return, while still transmitting the federal return to the IRS. This facilitates e-filing for people who live and work in two different states, who can only e-file in one state. Dunphy has also added e-filing of extensions.

San Diego
(800) 934-1040

ProSeries has improved its in-product help, making it possible to type in a question just once — the program will search all the different types of Help content to locate an answer. The process of downloading and installing ProSeries programs has also been simplified to save time.

Other enhancements include improved federal/state integration, enhanced acknowledgements and rejections to simplify the e-filing process, and speed entry that automatically fills in a field if data has been previously entered. ProSeries has added a number of new business states.

Lacerte Software
(800) 765-7777
Lacerte Tax Software

Lacerte polled its customers to find the “pain points” in the tax preparation process, and came up with a number of new products and features.

A new Document Management System is designed to transition the move to a paperless office by allowing accountants to store and retrieve electronic documents on their computer system. The 1040 Tax Analyzer allows preparers to review their clients’ returns by comparing Schedule A and Schedule C with the norms for taxpayers in similar income ranges and business types.

The Tax Analyzer also allows preparers to query their client database for clients that are impacted by changes in the tax law.

Lacerte has added 24 business states, and now produces all state software programs for Forms 1040, 1120, 1120S, 1065 and 1041.

Lacerte also added the ability to e-file federal extensions, and has enhanced its diagnostics. For 2003, all overrides used for a particular client can be viewed from within the diagnostics tab. In addition to the current critical and non-critical diagnostics, a new section for overrides is being added. Users will have the ability to click an override diagnostic and “jump” to the field where the override has been entered.

Laser Systems
Kaysville, Utah
(800) 230-2322

TaxWorks has added an Online Knowledge Base to get information, such as updates, new tax laws, and state and federal program changes. In addition, it will give e-filers immediate results. A new scheduler program for setting appointments has been added.

Two more business states have been added to include S corp, partnership and fiduciary forms, and city taxes have been added for Ohio and Michigan.

Laser Systems also produces privately labeled tax prep software for several companies, “without all the bells and whistles that TaxWorks has,” according to company spokesman Alan Haacke.

Orrtax Software
Bellevue, Wash.
(800) 377-3337

Orrtax will continue to support its DOS product, (now named IntelliTax Classic) but now runs IntelliTax natively within Windows. Its IntelliTax for Windows now uses the MSDE engine by Microsoft, providing enhanced performance for any user in a network operation. MSDE also allows for an easy upgrade path to Microsoft Sequel Server.

The Orrtax Fiduciary Federal module now integrates with the IntelliTax for Windows program. A My Returns filter includes returns that are assigned to the logged-in user. IntelliTax Snapshot allows the preparer to provide a tax estimate in less than two minutes. And all 45 states with an income tax will be covered with full calculation forms, including the credit for taxes paid to other states. Thirty-four states — those with the highest e-filing rates — will be e-fileable.

Green Bay, Wis.
(800) 266-4669

Nelco, familiar to most preparers as a supplier of tax forms and e-filing services, entered the tax preparation market last year with its own Great Tax software. The package emphasizes quick processing, integrated e-filing, a client organizer, and customized reporting. All Great Tax packages include free e-filing software.

Nelco continues to offer refund anticipation loans through Bank One, Household Bank, and Santa Barbara Bank and Trust. Preparers may be eligible to earn cash at the end of the season with the Great Rewards program.

This year’s offering includes the ability to save a return as a PDF file, so the preparer can save and e-mail the return to the client. They have also added the ability to invoice returns, enhancing the invoicing function to adjust the invoice pricing per return.

Petz Enterprises
Tracey, Calif.
(800) 345-4337

Petz has developed a new report generator that allows tax professionals to select the data out of the tax return inclusive of the e-file status information and create their own reports. Support for 2D Bar Coding has been added for a number of states, and a Farm Home Office deduction worksheet has been added.

Petz has also enhanced coverage of IRA, Roth IRA, Coverdale ESA and MSA maximum contribution calculations and distribution rules, and modified Instant Refund Anticipation Loan processing to make it easier for tax preparers and taxpayers to apply.

RIA Group
Carrollton, Texas
(800) 950-1216
GoSystem Tax (CD) and GoSystem Tax RS (Web)

GoSystem Tax RS, the first ASP-hosted tax software, moves into its sixth season showing a growth of 20 percent in returns processed this past season; RIA estimates that over 1.2 million returns will have been filed by the end of 2003 using GoSystem’s RS, or remote server, technology.

For next year’s tax season, GoSystem has links to other Thomson RIA products, such as Checkpoint, from within a return, continued integration with CSI’s Depreciation Solution, and MYTax — a 1040 Web-based data collection tool, with an interface both for the taxpayer and the CPA.

GoSystem has also added a PDF print capability. “GoSystem users can now print to a PDF file to preview and e-mail the return to their clients rather than use paper, which is a great feature for those clients that are moving to a paperless office,” said product marketing manager Boyd Gackle.

For clients wishing to outsource tax preparation, GoSystem has initiated three strategic relationships with tax prep outsourcers SurePrep, OPI and GKM, with offshore processing centers in India.

TaxSimple Inc.
Randolph, N.J.
(800) 989-8955

TaxSimple has made it possible for professional preparers who wish to prepare unlimited tax returns to do so via the Internet. The programs are hosted on TaxSimple servers, but all client data is stored in the preparer’s computer. The communication between the TaxSimple server and the client computer is 128-bit encrypted. If a client has cable, satellite disk modem or broadband communication, then the program provides instantaneous calculations, transfers and display of the results.

A new Form Level and Field Level diagnostic analysis is expected to increase the first time e-file approval to over 97 percent. Preparers will be able to create their own dropdown menus for any field. A client management system allows the preparers to sort clients using a number of criteria.

For users who need to prepare only a few returns, a pay-per-return feature will be available over the Internet on the company’s Web site.

Universal Tax Systems
Rome, Ga.
(800) 755-9473

Universal has added more state returns, integration with PC software client write-up, and an appointment scheduler with its My Web site feature, and TaxWise University.

TaxWise can now prepare and calculate up to nine state returns with each federal 1040. Data can be imported from any existing client write-up and general ledger programs into TaxWise business tax returns. Companies using the TaxWise My Web Site for their company Web site can have clients access the schedule through the Web site. Clients can set their own appointments with a specific preparer or with the first preparer who is available at a specific day and time.

TaxWise University, an Internet-based system of lessons and tests that cover basic tax preparation and use of TaxWise software, allows office managers to track all student activity, and students can view their own progress as they move through the lessons.

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