Computer usage and tax software in a tax practice: AICPA tax division survey results.

Trends in computer usage

in the tax practice

For several years now, the AICPA Tax Division's Tax Computer Applications Committee has surveyed Tax Division members on how they use computers in their practices. The survey results are tabulated in the Report on Computer Usage in Tax Practice: Survey Results, which can be obtained by contacting James Clark in the AICPA's Washington office. (Note: The survey presents a tabulation of AICPA Tax Division member responses and does not in any way constitute AICPA endorsement of any product mentioned.)

In 1993, the survey again asked Division members to indicate which tax return preparation package they used and their level of satisfaction with the package. For 1040 packages, CCH Computax's ProSystem fx package had the largest increase in usage. Over 21% of respondents reported using this package, although some of the growth was at the expense of Computax's other software package, 1040 Solutions. Of last year's top five vendors, ChipSoft showed the second highest increase, with 12% of the respondents indicating they used the company's Turbotax program. Of the other top five packages, La-Certe registered about the same percentage of respondents as in past years, while Arthur Andersen's A Plus Tax showed a slight increase.

Respondents' level of satisfaction with the top programs has remained high and fairly constant between years, with Arthur Andersen showing a slight increase and Chipsoft a slight decrease. (This decrease may have been due to problems encountered last year by users of ChipSoft's electronic filing program.)

In the other categories of tax packages, BNA Software continued its strong lead in the individual planning area. The responses for 1041, 1065, 1120 and 1120S software generally followed the same trends seen in 1040 software.

While the number of respondents who filed some of their 1040s electronically remained at 15%, the percentage of returns filed electronically by these respondents increased to 14%. Those practitioners currently using electronic filing estimated that in 1994 the percentage of returns they would file electronically would rise to 19%.

The survey reflected the growing trend toward streamlining the return preparation process based on the enhanced capabilities of today's software. Two-thirds of the respondents indicated that at least part of their return review process is done on the computer screen. Only 26% indicated that the majority of their returns are still entered by keypunch operators.

A significant increase was noted in the proportion of respondents who used software to aid them in their tax research. Among the on-line services offered, Lexis and CCH Access were the most frequently cited services used. More respondents, however, are using CD-ROM based research tools. Over 20% of survey respondents used CCH Access and RIA On Point, while 9% of respondents relied on Matthew Bender's CD-ROM service. Those practitioners not currently using an electronic tax research tool indicated that they planned to purchase one in the future.

Tax software products

The Tax Division's Tax Computer Applications Committee has conducted annual surveys on the use of tax software for seven years: 1985, 1986, 1987, 1990, 1991, 1992 and 1993. The surveys have focused on the specific tax software products used and the members' level of satisfaction with those products.

Tax preparation software has been the driving force behind the use and development of tax software. In the first years of the survey (1985 and 1986), the most used software was Computax. In those years, in-house processing of individual tax returns was available and used, but the service bureaus dominated. By 1990, that had changed, with substantially all processing of individual tax returns performed in-house.

The results of the surveys can be divided into two periods. in the early years (1986-1987), there was substantial volatility in tax software developers. In the later period (1990-1993), after a major shift that occurred about 1990, that volatility diminished. The top 10 software products, ranked according to usage (as reported in the 1993 survey), were traced back through the surveys to see where they ranked in the previous years. CCH's Computax, SCS Compute, Creative Solutions and Arthur Andersen's A-Plus have been listed in the survey since 1986. However, their places in the rankings have varied over the years. By 1990, the market for individual tax preparation software had become more stable. While there is still variation in the survey results, the top 10 software products of 1993 generally stayed in the top 10 from 1990 through 1993.

One may conclude that the tax software for the preparation of 1040s has been stable from 1990 through 1993. As noted, the individual tax preparation software has driven the tax software market. Accordingly, a review of the other types of tax software has been limited to the four surveys from 1990 through 1993, a more stable period than before 1990. See the chart on pages 448-449 for the results of that review.

The analysis focused on the number of years a top (ranked by members' usage) tax software developer was in the top group (top 10, if more than 10 developers; if not at least 10 developers, software that had more than one reported user) for each of the 12 tax software products surveyed. Thus, if product was listed in the top group for each of the four years 1990 through 1993 in all 12 product groups, the total years in the top group would be 48. CCH's Computax and Lacerte Software Corporation led the results. Both companies were in the top group all four years in six of the 12 products. Computax was in the top group in more of the other six areas than Lacerte and, thus, was the most consistent top tax software company. During those years, Computax was available both as a service bureau software product and as in-house tax software. Several software developers were in the top group. Those developers with total years in the top group of 24 (50% of maximum) or higher were:

* CCH Computax.

* Lacerte Software Corporation.

* ChipSoft, Inc.

* Arthur Andersen & Co.

* Prentice-Hall Professional Software.

* CLR/Fast-Tax.

* BNA Software.

BNA Software was unique among this group as it was the top product for preparation only for Form 706, the unified transfer tax return for estates and gifts. However, in the area of tax planning, whatever the type of tax entity, BNA Software was in the top group. Clearly, the market has accepted BNA Software as the top tax planning software, except for partnership tax planning.

The middle group of tax software developers (called the "Contenders" in the chart, i.e., those having a total years in the top group between nine and 17 and generally in the top group for three or more years for at least one type of software) has consistently performed in the area of 1040 preparation and planning software and has been active in other areas. The third group (all other tax software developers in the top group during the four-year period 1990-1993, called the "Niche" tax software developers) has viable products and is generally well accepted by a smaller number of users. These products may be regional or active in only some types of tax software.

The conclusion is that the "Top" group of software developers was active in all areas of tax software and probably should be the logical group to consider first in a search for the best tax software product. Note, however, that this does not mean that the best software product for a practitioner is one of these "top" tax software developers. The soon-to-be-revised study, Tax Technology in the 1990's, by the AICPA Tax Division's Tax Computer Applications Committee has an excellent discussion and checklist on how to select tax software products.

Tax Division members were also asked to indicate their level of satisfaction with their tax software. It is interesting that there was little difference in the level of satisfaction between the "top" developers, the "contenders" or the group as a whole. In other words, generally, if a tax adviser used a particular tax software product, he was happy with it. At the bottom of the chart is the average level of satisfaction for each group.

Other information from the survey confirms the trend in the increasing use of technology in tax practice - both electronic filing and CD-ROM products for tax research.

The seven surveys conducted over a nine-year period have clearly shown that tax software dominates the field in the use of personal computers by tax advisers. While the major tax software product was individual tax preparation software, the major tax software developers were active in all product lines and must continue to be so if they are to maintain their leadership position in the market.