Businessweek Archives

Cp As: Is There Life After Turbotax?


Finance: TAXES

CPAs: IS THERE LIFE AFTER TURBOTAX?

They're finding ways to replace revenues stolen by tax software

Until 1993, Duane Kent, a self-employed engineer from Boulder, Colo., would gather his checks and receipts like millions of other taxpayers, and march off to his friendly neighborhood certified public accountant to prepare his tax return. The following year, he started using TurboTax, a popular tax software package. Learning to use it was rough. But this year, he's confident he'll be able to punch out his 1040 in only two hours. "The tax return used to run me $300 in accounting fees," he says. "Now, it's $50 for the software, and I can do it myself."

Many CPAs these days are wondering how many of their clients are going to become do-it-yourselfers like Duane Kent. Sales of tax software are brisk. They zoomed 36%, to 2 million units, last year, according to PC Data, a Reston (Va.) company that tracks the field. The Big Six accountants aren't too worried because their clients' returns are usually too complex for popular software. But the majority of the nation's 400,000 CPAs practice in small firms, which traditionally have gotten more than half their revenues from individual taxpayers.

"FALSE SECURITY." The accounting profession, however, is rapidly becoming adept in replacing those revenues. The savvier CPAs are letting computers do the drudge work while they focus on more value-added advisory services. And they're making a big push to cater to small businesses.

Fortunately for the accountants, the new tax software is still imperfect. In mid-February, Intuit warned customers that some errors in its TurboTax program could lead to miscalculations relating to depreciation and IRA contributions. "These programs can give a false sense of security," says Pat Nielsen, a CPA in Boulder, Colo. "Last week, I was looking at a client's 1994 tax return, which he did on a computer program. The interest and taxes that were prorated on his home office were double-counted as itemized deductions."

Nielsen, who started her career at Price Waterhouse nearly 30 years ago, is typical of the CPAs who have embraced rather than fought technology. She helps small business clients to computerize their recordkeeping instead of relying on her to post debits and credits every month. Making heavy use of the Internet for E-mail communications, she does tax returns for U.S. citizens living overseas. "My niche is to provide better hand-holding than the national firms, and the companies like that because they want their executives to be treated well so they're not unhappy with their overseas assignment," she says.

Many CPAs, like James Grey of Bloomfield Hills, Mich., are spending more and more of their time providing personal financial planning to clients who are looking for objective advice. "Clients ask, `Should I buy or lease my car? How do I manage my finances for my kids' college education?"' His advice is welcome because he's not trying to sell a financial product.

Grey's tax practice also includes plenty of people who don't own a computer and don't want one. "We still have that niche of client, mostly the over-50 crowd, who aren't computer-literate," says Grey, who says technology has allowed him to downsize his staff. "I'm making more money with less volume."

But CPAs are banking mainly on the notion that technology will never be a substitute for judgment. Says Phil Bartmasser, a Beverly Hills CPA: "We've got clients who use TurboTax, but they still bring it in for consultation. I still think there's an aura of `Gee, you're a CPA, maybe I'm missing something."'By Stuart Weiss in Portland, Ore.


Best LBO Ever
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus