An Introduction to G2’s New Professional Tax Software Category

April 18, 2024

As the software market continues to evolve, G2's taxonomy grows along.
Amongst the various categories G2 has added recently is the new Professional Tax Software category. The tools under this category are intended to help and support tax professionals who assist in the return filing of taxes for their clients.

A simple and easy tax process is much needed for everyone who does taxes. However, for most people, filing a tax return in the US isn’t fun as it involves navigating through a complicated, time-consuming, and costly tax filing system. 

The fear of delays, backlogs, and errors prevails in everyone’s mind as they complete tax forms. Hence, the complexities add up to many individuals looking for highly-trained experts to prepare taxes on their behalf.

The challenge of filing tax returns isn’t just limited to taxpayers. With the ever-changing tax laws and regulations, the tax landscape is also shifting constantly. It’s an equally daunting challenge for tax professionals to stay updated with the changes and manage a high volume of work during peak tax season and filing complex returns.

Another prominent challenge that tax professionals usually encounter daily includes manual tax processing, which involves a lot of paperwork. Not having an automated workflow in place leads to several errors in return filing. 

Tax professionals have to constantly juggle between clients to collect documents, track down missing ones, and double-check everything before making the final submission. It becomes a relentless task and results in several inefficiencies in the long run, which puts the business at stake.

Solving the complexities of taxes with the right tool

To achieve maximum efficiency during tax season and retain client satisfaction, switching from manual workflow to automated workflow using tools and software is essential. An automated workflow means the tax professional has to deal with less paperwork, resulting in fewer errors, which would otherwise have happened in the manual process.

Software vendors understand the complexities of taxation, and thus, professional tax solutions are built with an interface that helps all types of users navigate easily. The tool starts with importing client data (old returns) from Excel spreadsheets or accounting software to simplify the data entry to the software. 

Then, with the help of various built-in tax forms and schedules (federal, state, and local), tax professionals submit returns to tax authorities electronically. Tax professionals also ensure that all documents are correct, duly signed by clients, and the e-filing complies with regulations. To help with this, professional tax software usually has a comprehensive library and resources available to tax professionals to learn and stay updated with changing regulations. 

Additionally, professional tax software has tax calculation and planning features to help professionals estimate tax liabilities and refunds, assisting them in guiding clients on how to reduce tax burdens and make financial decisions. 

Even though there are several benefits of switching over to these advanced tools, there are also risks attached to it. The software handles sensitive data about a client's financials, accounts, and bank credentials for refunds. These are often subjected to malicious activities like cyber attacks and theft. 

Keeping up with the client's data privacy is often a challenge for tax professionals. However, with AI, professional tax software can go the extra mile to protect clients' data and protect them from bad actors. It's also essential for users to select solutions for their business that comply with data privacy regulations like GDPR and HIPAA.

The evolving tax management software market

Tax management software (with e-filing capabilities) in G2 is broadly divided into two categories: corporate tax software and professional tax software.

Corporate tax software is meant for corporations and enterprises' internal tax departments to do tax filing and carry out other tax work. However, professional tax software is specifically designed for tax professionals and CPAs. Even though these two categories share similar features, software vendors see a business opportunity and tap into both markets. 

As per a report by Global Market Insights Inc., the market for tax management software is valued at USD 17.5 billion in 2022 and is expected to grow at a rate of 11% between 2023 and 2032. This opportunity compels software vendors to dive into these software markets and build solutions that can serve the purpose of companies as well as tax professionals.

The professional tax software category is new and only has 18 products, much lower than the corporate tax software category, which houses 116 products as of April 2024. However, 10 products are common to both the categories. This means that the software vendors of these products have offerings applicable to both markets. 

The corporate tax software market is already mature, with some prominent products like ProConnect Tax, TurboTax Business, Avalara, Sovos,  Oracle Tax Reporting Cloud, and Drake Tax, all of which are placed in the leader quadrant of the G2 Grid®.

Even though the professional tax category is relatively new in the market, it holds tremendous potential. The growing demand for tax professionals elevates the need for professional tax software and penetration of software vendors in this space.

Price impacts the demand for tax software

As per G2 data on the price distribution of corporate tax software, over 30% of users have said the prices of this software are high. The prices are scored between 1 and 7, 1 being cheap and 7 being expensive.

Unlike corporations and enterprises, tax professionals are independent practitioners who look for solutions that are affordable. Vendors of professional tax software must get the price right for their tools as it may cause several issues if set too high.

Prices can elevate the demand and decide the future of this market. Hence, it is essential to consider setting a price that fits the wallets of its most frequent users.

Learn about the importance of tax APIs in simplifying tax compliance.

Edited by Jigmee Bhutia

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An Introduction to G2’s New Professional Tax Software Category Professional tax software is an integral part of any CPA and accounting firm to manage their own business and help clients.
Subhransu Sahu Subhransu is a Market Research Analyst at G2 concentrating on applications technology. Prior to joining G2, Subhransu has spent 2 years working in various domains of marketing like sales and market research. Having worked as a market research analyst at a renowned data analytics and consulting company based in the UK, he holds expertise in deriving market insights from consumer data, preparing insight reports, and client servicing in the consumer and technology domain. He has a deep inclination towards tech innovation and spends most of his time browsing through tech blogs and articles, wiki pages, and popular tech channels on youtube.