Julia Chirkova
For tax professionals nationwide, the familiar dance with software vendors often begins with a seemingly straightforward question: "Which states does your software support for electronic filing?" The typical response, a number like "forty states" or "every state with an income tax," is, in its own way, factually accurate. However, it rarely provides the crucial detail practitioners truly need: confirmation that their clients’ tax returns will be transmitted electronically in the upcoming filing season, particularly in the critical early months like February. This common disconnect stems from the deeply fragmented nature of state-level tax software approval processes, a complexity that a simple coverage map or a broad numerical claim can obscure.
Tyler Briskin, an enrolled agent with a solo practice in Pennsylvania and the founder of Crosstie Tax, has spent the past several months navigating this intricate landscape from the other side of the sales pitch. In the process of building his own tax preparation software, Briskin has applied to state and territory developer programs individually, a process involving over a hundred distinct regulatory bodies. His experience reveals not a landscape of vendor dishonesty, but rather a reality where state approval is far more granular and localized than most sales conversations convey. He emphasizes that a few targeted questions, focused on specific approval timelines and tax types, can yield far more actionable intelligence for a firm than a generalized coverage statement.
The Balkanized Reality of State Tax Software Approval
A fundamental misunderstanding often arises from the perception of a unified national system for tax software. In reality, the approval process for electronic filing is a state-by-state, tax-type-by-tax-type, and year-by-year endeavor. There is no central clearinghouse that grants a blanket endorsement. Each state independently manages its vendor registration, issues its own unique software identifier, and defines its own testing scenarios, all on its own distinct calendar.
For instance, Briskin notes that Indiana approved his registration and issued a software identification number on October 8th. However, other states may not even begin their review processes until well into the spring. This means a software vendor can be fully accredited and operational in one state while being completely absent from the approval list in an adjacent state, yet both facts might be represented by the same generalized claim of "state support" on a vendor’s marketing materials. This disparity can have significant implications for firms with clients spread across multiple jurisdictions.
Tax Type: A Crucial Differentiator Beyond Geography
The complexity extends beyond geographical boundaries; the specific type of tax being filed is equally critical. Briskin recounts an experience with Ohio, where the developer window for the state’s income tax for the 2026 tax year had already closed by the time he inquired. Yet, in the same week, Ohio’s Centralized Municipal Net Profit Tax program sent him a schema package, dated October 7th. This single state, with two distinct tax programs, presented opposite outcomes. For a firm whose clients file Ohio municipal net profit returns, a vendor’s assertion of "we support Ohio" offers no practical guidance for their specific needs. This highlights the necessity for practitioners to inquire about specific tax types supported, not just the state itself.
Outdated Guidance and the Perils of Assumption
Compounding the challenge is the reality that published guidance from state tax authorities is not always current or comprehensive. Briskin found Utah’s developer materials to be misleading, suggesting that no registration was required. Upon direct inquiry, Utah confirmed in writing that both registration and testing were indeed mandatory. Similarly, Oklahoma, on the same day he inquired, responded to the same question by issuing a mandatory letter of intent, Form D-106, a requirement not indicated by its published web pages. A firm relying solely on these publicly available materials could easily reach an incorrect conclusion, leading to missed deadlines and filing impediments. This underscores the importance of direct verification and persistent follow-up.
The Invisible Deadlines Shaping the Filing Season
Perhaps the most significant hurdle for tax firms is the often-invisible nature of state approval deadlines. Many of these critical dates, which ultimately determine whether a software can participate in the upcoming filing season, have already passed by the time firms are actively comparing products in the late fall.
Minnesota, for example, mandates a letter of intent by October 30th, explicitly stating that late submissions are not accepted. This submission cannot be made via email; it must go through the state’s e-Services portal, requiring a new account to be created for first-time providers. Missing this deadline effectively closes Minnesota for the season for that software, regardless of any other approvals it might hold.
South Carolina’s letter of intent deadline has historically fallen in early to mid-August in recent years. The state will not review forms until this initial letter is approved. By November, when many firms are evaluating their software options, these critical windows may have already shut, leaving certain states inaccessible for electronic filing through that particular software.
The Sequencing of Requirements: A Gatekeeper for New Entrants
The order in which states sequence their requirements can also act as a significant gatekeeper, particularly for new software developers. Minnesota’s own assurance testing, for instance, opens on November 2nd, after its October 30th letter of intent deadline. This means the letter of intent is not contingent on evidence from federal testing.
Iowa, conversely, adopts a different approach: both the letter of intent and documentation for IRS assurance testing are due on the same date, November 2nd. For established vendors with existing infrastructure and processes, this is often routine paperwork. However, for a new entrant, it can represent the difference between a state being genuinely accessible or appearing open only on paper. Some states, like Arkansas, have even been known to outright decline new software applications, a reality that firms must be prepared to encounter.
Strategic Questions for Smarter Vendor Conversations
Given this complex reality, Briskin advocates for a shift in how tax firms approach their conversations with software vendors. Instead of a broad "which states do you support?" question, practitioners should ask for specifics:
- "Which states and which specific tax types does your package support for the coming filing season, and what are the approval dates for each?" This moves beyond general claims to concrete, time-sensitive information.
- "What is the contingency plan for returns that your software does not cover? Will they be filed on paper, through a secondary product, or will the client be left to file independently?" This addresses the practical implications of any coverage gaps.
- "How far in advance is the vendor willing to commit to state coverage? Does this commitment refer to actual state deadlines or merely the vendor’s internal development roadmap?" This helps gauge the reliability of vendor promises.
- "What actions did the vendor take in the previous season when a state program closed early or a schema arrived late? How did they manage those disruptions?" This past performance is a strong indicator of future responsiveness and problem-solving capabilities when unforeseen issues arise.
These questions require no specialized technical knowledge. They demand a strategic framing of state coverage as a series of dated approvals rather than a static product feature, and a direct request for those critical dates. Vendors who have diligently navigated these processes are typically eager to share this detailed information. Those who deflect or change the subject may be signaling their own lack of preparedness or the existence of unaddressed coverage limitations, which is valuable intelligence in itself.
Implications for Firm Operations and Client Service
The implications of this fragmented approval process extend directly to firm operations and client service. Firms that are caught unaware by these complexities risk significant disruptions. This can manifest as:
- Delayed Filing: If a firm’s chosen software is not approved for a particular state or tax type, returns for clients in those jurisdictions may be delayed, impacting cash flow for both the client and the firm.
- Increased Administrative Burden: Firms may need to manage multiple software solutions or resort to paper filing, which is more time-consuming, prone to errors, and less efficient than electronic submission.
- Reputational Damage: Clients rely on their tax professionals to ensure timely and accurate filings. If a firm cannot meet these expectations due to software limitations, it can erode client trust and lead to a loss of business.
- Missed Opportunities: For firms looking to expand their client base into new states, a lack of understanding about the approval process can be a significant barrier to entry.
The firms Briskin has observed who have been negatively impacted were not necessarily careless. They asked what they believed to be a reasonable question and received a reasonable-sounding answer. However, the question, while seemingly logical, was subtly misaligned with the intricate reality of state-by-state electronic filing approvals. By adopting a more granular and date-focused approach to vendor inquiries, tax professionals can better equip themselves to navigate this complex landscape, ensure seamless client service, and maintain operational efficiency throughout the tax season.
The author, Tyler Briskin, EA, is an enrolled agent in private practice in Pennsylvania and the founder of Crosstie Tax, where he is developing tax preparation software for small practices, with a beta planned for Q1 2027. His firsthand experience underscores the critical need for practitioners to move beyond broad assurances and delve into the specific, dated realities of state tax software approvals.
