Forthcoming 2010 CPA Journal 1 What’s Important to Tax Software Users? Sonja Pippin University of Nevada, Reno sonjap@unr.edu Alexander McLeod University of Nevada, Reno amcleod@unr.edu Vittoria Catania University of Nevada, Reno Introduction Tax software has become an annual part of many taxpayers’ lives. While professional preparers are required to file some of their clients’ tax returns electronically, the non- professional filers increasingly rely on tax software as well. The latest data from the Internal Revenue Service (IRS) states that in 2009 over 30 million individual tax returns were filed from home computers (IRS, 2009). Despite the popularity of tax programs, perceptions of the software’s usefulness and reliability vary (Pegoraro, 2009). Just recently, Treasury Secretary Timothy Geithner blamed Turbo-Tax software for his failure to pay self-employment taxes for the years he worked at the International Monetary Fund (IMF) (FoxNews, 2009). According to the Wall Street Journal (Olson, 2009), filing taxes is so overwhelming and complex that over 80% of individual taxpayers seek help. Many choose to use professional preparers; others turn to individual tax software to prepare their returns. Thus, for the average taxpayer, professional preparation or tax software serves as a means to meet tax responsibilities without having to understand the nuances of the tax law. This shift of responsibility to professional preparers or tax software would appear to provide the assurance that the tax return will be correct, that there are no potential missed deductions and that using software may provide protection from an IRS audit. Moreover. tax software is automatically updated for tax law changes– even throughout the filing season. It is therefore easy to see how for individuals unfamiliar with tax law tax software is a very convenient tool. Bolstering the perception of convenience, most tax software packages now offer “audit support” or advertise “100% accuracy guarantees” which may encourage taxpayers to believe that tax software reduces their liability in the case of an IRS audit. Since accounting and tax professionals are trained in tax law, their reasons for using software differ from those stated above. As professionals, they understand the current tax law and keep abreast of changes. In other words, professionals understand the built-in logic and heuristics of tax software. They know that using tax software does not protect the taxpayer from IRS audits and that returns prepared using software may contain errors.