The tax prep software industry is both expanding and contracting, as Wolters Kluwer and Thomson continue their acquisitions, while new entrants surface with online and application service provider offerings.Thomson's Creative Solutions purchased Dunphy Systems in May, with the intention of converting existing Dunphy customers to Creative Solutions. CCH, on the other hand, announced its acquisition of Rockville, Md.-based ATX/Kleinrock in August, but will keep it as a distinct product line. CCH followed this move with an announcement in September that it would acquire Rome, Ga.-based TaxWise. It likewise will keep TaxWise as a separate product line, according to CCH president and chief executive Kevin Robert.
"These are absolutely two distinct segments in the market," he said. "We looked at the option of bringing the ProSystem fx product line to the small practitioner, but their needs are very different. Our feeling was that the line would be overkill for most small firms to be a viable solution, yet we recognized that the small practitioner market was a growing one."
Contrary to the beliefs of some of his competitors, Robert said that there are no plans to roll the ATX and TaxWise brands into ProSystem fx. "We'll keep both those products in the marketplace forever," he said.
Meanwhile, Creative Solutions took a different tack in its acquisition of Dunphy Systems. "We historically have done a tremendous number of fold-in acquisitions, and that's what we've done with Dunphy this year," said vice president of marketing Teresa Mackintosh. "It's primarily an acquisition where we believe Ultra Tax CS can best meet the needs of those users. We're always looking at ways to grow Ultra Tax CS, and we continue to invest in the technology that keeps it an industry leader."
The next release of Ultra Tax CS will see significant changes, according to Mackintosh. "We'll begin the shift to a .Net platform," she said. "This will improve performance in large offices by providing a more efficient database structure. Moving to that platform will also allow us to offer our customers other enhancements, such as changes to the user interface, expanded integration with PPC Deskbooks and RIA Checkpoint, and extended state e-filing support."
"We continue to lead in electronic filing, especially for business returns," Mackintosh said. "About one-third of all corporate returns e-filed with the Internal Revenue Service last year came through Ultra Tax CS."
Sasan Goodarzi, vice president of the Intuit Professional Tax Group and Intuit Branded Businesses, sees the purchase of ATX and TaxWise as validation of Intuit's strategy. "It reconfirms that our 'Right for Me' model for our customers is working. We chose not to purchase them, but it gives us an opportunity in the marketplace. We're very focused on winning customers of both companies."
"ProSeries is positioned for the tax-driven market, and within that we offer Basic, Express and Professional for every size, from very small firms and ones that specialize in bank products, to the high-end of the tax-driven market," he said. "Lacerte is focused on full-service firms. We're tightening up its integration with QuickBooks AE so that data entry is simplified and doesn't have to be double-entered. We focus on the same thing with ProSeries, taking the most commonly used workflows and making them significantly easier to use."
Goodarzi emphasized customer support for both products as an area of focus. "We know that the customer is buying not only the software but the whole experience," he said. "The best thing is not needing to call us to begin with, so we think of every call as a defect."
Drake Software is also concentrating on customer service, according to vice president of sales and marketing John Sapp, CPA. "Our average wait time during the peak season was less than 10 seconds, and 92 percent got their problem resolved in the first phone call," he said.
Sapp predicted continued market consolidation. "You have people who decided to grow a software business, and now they've gotten to that point in life where they want to do something else," he said. "Plus there are outside forces, where stock prices drive the business. If they couldn't grow organically they had to do it some other way, by raising the price, charging for e-filing or having less support staff."
"We haven't raised our prices for 16 years," he added. "We used to be expensive, but now everyone else has caught up to us and passed us."
A stream of improvements
Despite the maturing of tax preparation software, manufacturers have updated their products beyond the requirements of the tax code.
CCH's ProSystem fx has a new Electronic Filing Status System, according to product manager Jo Ann Cummings, CPA. "This is our first release for our conversion to the .Net platform," she said. "We want it to be good enough so everyone knows how good the rest will be. The practitioner can check the status of the filing from anywhere. It will produce separate histories for federal and multiple states. You'll even be able to stop the submission of a return as long as it hasn't been drained."
ProSystem also features increased integration with the BasisPro Cost Basis Analyzer, allowing it to import directly into Schedule Ds, said Cummings.
"Our investment in .Net technology is what will separate us from the pack," she said.
ATX has added the ability to import data from business accounting program such as QuickBooks and Peachtree, and now supports instant refund anticipation loans, according to Mavash Atoufi, vice president of tax solutions and enterprise services.
In addition, a downloadable version is now available for customers who don't want to wait for CD delivery, and the company is releasing its products earlier - it will be in customers' hands by early December.
Orrtax Software Solutions has focused on automation and integration. "IntelliTax for Windows has added built-in automatic updates, taxpayer prior-year debt notification and integrated receipt tracking," said group product manager Scott MacKenzie. "IntelliManager now automates program updates. It also automatically imports all prior-year office information, including contact information and configuration information. This eliminates the need to rekey critical information year after year."
RIA's GoSystem has continued its focus on e-filing and on integration with other Thomson products, according to Mackintosh. "These include Practice CS, Fixed Assets CS, Planner CS, GoFileRoom, PPC Deskbooks and Checkpoint's LineFinder," she said.
RS to Go, now with a new interface, allows the user to enter information when there is no Web access and upload it seamlessly the next time he or she logs on to GoSystem.
TaxWise continues to develop its offering as if nothing has changed, according to vice president of marketing Gene Goldenberg. "We had a very good season last year, and we're keeping on track to deliver another quality tax program for next season," he said.
"The program will now offer a new document managing system that will allow practitioners to file and retrieve PDF versions of all of their client tax returns and supporting information documents," he said.
"The Fixed Asset Manager program will have an improved user interface with total integration with TaxWise tax prep," he added. "We also will offer a proprietary stored-value debit card, which allows the professional to distribute a refund to the taxpayer using the debit card, rather than a check, at no additional cost."
Petz Enterprises is currently developing .Net technology for its Internet-based product, V-Tax. "We have added e-filing for extension forms, along with credit-card processing so the taxpayer can make any balance-due payments," said vice president of product development Charles Petz. V-Tax is designed for multiple-office firms and service bureaus, while CrossLink, a desktop product, is designed for smaller firms.
"Normally we release new features in CrossLink and then move them into V-Tax the following year," said Petz.
TaxSimple is converting its software to the .Net platform for better integration, according to chief executive John Vora. It supports e-filing for individuals and all states, and has added numerous new business forms. The program also automatically generates needed forms as the user leaves a related form.
TaxSimple also allows the completion of forms over the Internet. "Every form we have is available on the Web on a per-return basis," he said.
TaxWorks has added a more detailed worksheet for married filing jointly comparisons, according to vice president and product manager Kelly Peterson, CPA. "A tool lets you choose to split returns once you realize it's beneficial, without going back and starting over. We've also added a number of new federal credit forms and additional business states."
Orange Door and Online Taxes are two new Internet-based professional return programs that have jumped into the market for the 2007 filing season. Orange Door has been researching and beta-testing its program for two years, while Online Taxes, which began as a consumer program, is now offering a professional version.
"It's not clear why they would enter the market when it's in a clear merger mode," said Mackintosh. "But there's always room in the lower-priced segment, where practitioners tend to change software more frequently than they do at the medium range."
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