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."

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