Tax prep software vendors are counting on an upswing in the professional tax preparation market to fuel their own growth during the upcoming tax filing season.
"Everyone was impressed with the huge growth in do-it-yourself returns last year," said Gene Goldenberg, senior vice president of marketing for CCH Small Firm Services, makers of ATX and TaxWise. "Do-it-yourself returns increased by 20 percent, with virtually no increase in professionally prepared returns. Does this represent a sea change in the way Americans prepare returns? We don't think so. Last year, there were a number of factors that contributed to the growth in self-prepared returns, including the economy, and the fact that Free File and other free programs became better known. But we're watching it closely." He did note that a number of new refundable credits will help drive people back to the professional preparer for assistance.
This will be the first filing season that Modernized e-File, or MeF, will be available for individual returns, according to Timur Taluy, vice president of ProTaxPro, a service of FileYourTaxes.com. "Software companies had to put in letters of intent on whether they plan on participating, with a test by November 15," he explained.
MeF is a Web-based system that allows e-filing through the Internet. It uses the XML format in place of the proprietary data transmission formats used in older e-file programs. Its benefits include more explicit error conditions, which pinpoint the location of errors in a return and provide complete information in an acknowledgement file. Transmissions are processed upon receipt and acknowledgements are returned in near-real-time.
Although it is the wave of the future, the Internal Revenue Service only wants 10 percent of returns filed this way at the beginning, according to Angela Askew and Jo Ann Cummings, product managers for CCH ProSystem fx Tax. They expect the filing season ahead to see an increase in the number of states that are mandating the electronic filing of returns. "They are determined to eliminate paper filing," said Cummings.
LEVERAGING THE WEB
Askew, meanwhile, predicted that the trend toward the paperless office would continue.
"We see this in the increased demand for our ProSystem fx Scan AutoFlow feature, which allows for the importing of tax data directly into the return from scanned source documents," she said. "For tax year 2009, we'll also add the ability to import from K-1s and consolidated 1099 statements."
A third trend identified by Askew and Cummings is increased integration between a firm's tax, document, practice and engagement software.
The goal of Thomson Reuters' UltraTax CS and GoSystem RS is to provide enhanced workflow solutions, as well as leveraging the Web throughout the entire tax preparation process, said Scott Fleszar, senior director of strategic marketing.
UltraTax is the centerpiece of its Software-as-a-Service offering, explained Fleszar. "With SaaS, firms can have access to all of the CS professional suites. Firms choosing SaaS are making the choice primarily as a tax prep system decision, but everything they get with it is value-added. We still license the software the traditional way via CD or download from the Internet, but SaaS is the future."
Intuit has introduced a SaaS-based preparation package with the launch of its ProLine Tax Online Edition. Its desktop products, ProLine Lacerte, ProLine ProSeries Professional and ProLine ProSeries Basic, have been moved to a new Java-based platform, allowing them to build on and expand applications for the future.
"Our customers tell us it's hard to grow their practices during tax season when they have so much work to do," said Jorge Olavarrieta, product manager for Lacerte. "So everything for us anchors on productivity and growth."
Intuit users now have a choice of three tax research options, noted Julie Kosloski, product manager for ProSeries. "Live Community, embedded within Lacerte and Intuit products, allows preparers to ask questions of their peers. Last tax season, there were over 7 million page views to Live Community, with 80 percent of questions answered within 48 hours," she said. In addition, links to Intuit's Tax Almanac are built in, and Intuit ProLine Tax Research, which was developed in partnership with BNA and is available on a per-use or subscription basis, allows the preparer to research tax questions.
The biggest issue for preparers is the issue of registration and licensing, noted John Sapp, vice president of sales and marketing for Drake Software: "It will have a direct impact on the preparer community over the next two or three years. We'll see preparers become more competent as they are required to have more CPE and accountability for returns. "
He observed that the number of credits available to taxpayers should be reason enough to drive taxpayers to the professional preparer. "There are more refundable credits than ever before, and none of them are easy to figure out," he noted.
Drake is issuing its own prepaid debit card, the E1 Card, for clients to access refunds. "It will have no activation fee or signature or transaction fees," Sapp explained. "Most preparers don't do [refund anticipation loans]. It gives them the ability to offer customers the convenience of not having to pay upfront for tax preparation." Drake has also added a password-protected feature for e-mailing returns and communicating with clients.
The goal of TaxWise is to simplify and streamline the user experience, said product manager Eriana Rivera-Rozo "Users will now have the ability to download software via the Web for past seasons and, in certain cases, the current season," she said.
The TaxWise Security Manager allows the manager to allocate specific responsibilities based on daily tasks and knowledge. "We added an additional user - the Return Manager User - who can view all of the returns and change them and delegate responsibilities as necessary," she said.
Both ATX and TaxWise have transitioned their research content from Kleinrock to CCH's IntelliConnect platform, noted ATX product manager Bowden Brown. "The research is part of the tax bundle, with à la carte upgrades available," he explained, adding that ATX also has a direct Schedule D import capability from most brokerage houses, and an automated update feature so long as there is an active Internet connection.
Meanwhile, Petz Enterprises has introduced an e-signature for its CrossLink software, which comes in both desktop and online versions, revealed senior marketing manager John Amaya. It has also added a TextLink feature that allows the preparer to text-message the firm's entire client base, or one client at a time.
RedGear Technologies' TaxWorks, owned by H&R Block, has developed a new Speed of Refund wizard format for preparers that specialize in RALs, according to Lynn Tenney, director of marketing communications. "Based on the preparer's answers, it intuitively moves through the program. It improves accuracy and prep time for firms with seasonal employees," she said. TaxWorks provides the business software for H&R Block, and also packages scaled-down private-label versions for a number of resellers.
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