Better Tax Software please

March 28, 2010

When April rolls around, millions of Americans rush to file their tax refund form. While tax preparation services are abound, there are people like me who like to do their own taxes. You would think that we will be spoiled for choice with the many tax software packages out there.

It turns out that there is a segment of the market – which I would call “Savvy but cheapskate tax payers” – that is not very well served by most of the tax preparation software in the market right now. Why so? Don’t we have the easiest, most up-to-date software that guides us step by step in understanding our different sources of income, our potential deductions and then automatically generate a tax form for us?

It is precisely the meticulous hand holding and the automatic calculation of the deductions that make these software unsuitable for the Savvy cheapskate tax payers. Why? For a savvy user, the linear step by step wizard format prevalent in these solutions is not helpful at all.

Note the vast difference with a typical clueless user and the savvy tax payers. The simple Joe does not want really understand each part his tax returns, but just wants to input the numbers on his W-2 or his 1099 forms into the computer and let it spit out the right numbers for his return.

The tax-aware user, in contrast, knows how to fill in the form themselves for the most part, and can actually complete 80% of the tax form themselves without any help. To spend hours putting in tiny bits of details into the wizard so that it does the remaining 20% of the work is really an inefficient use of time, and hence the dissatisfaction of the savvy users. What they really want is a virtual expert who lets them fill in the part they are comfortable with, and then help walk them through the difficult parts and then validate their work. A non-linear format would be welcome, too, so that an experienced user can skip through easier parts and revisit the tricky sections time and again.

Unfortunately, it seems like this market is not reinventing itself too quickly. I have not seen much venture capital funding activities in the tax software sector, except for the recent first round venture funding for Outright.com and new expansion capital for for Copanion. However, these solutions are geared towards small business owners, which have a different set of needs. Clearly, there is room for innovation and I will be rooting for any vendor who provides the savvy tax payers with the right set of software tools for their tax preparation needs.

Chief Business Officer at UserTesting

Tien Anh joined UserTesting in 2015 after extensive financial and strategic experiences at OpenView, where he was an investor and advisor to a global portfolio of fast-growing enterprise SaaS companies. Until 2021, he led the Finance, IT, and Business Intelligence team as CFO of UserTesting. He currently leads initiatives for long term growth investments as Chief Business Officer at UserTesting.