Most tax software can now run in a hosted environment rather than on machines in your office. The decision gets sold on convenience and priced per user, and neither of those is the thing that matters most.

What actually changes

Where the data sits. Client returns move from your server to somebody else infrastructure. That is not automatically better or worse, but it changes who you depend on and what you need in writing.

What breaks when the internet does. Hosted means no internet, no work. In an office with one connection and a monsoon season, that is a real consideration and it is worth pricing a backup connection alongside the hosting.

Who patches what. Usually a benefit. Server maintenance stops being your problem. Confirm it explicitly rather than assuming.

How performance behaves in March. The relevant question is not how it feels in October with three people on it.

Questions worth asking any host

Will you sign an agreement covering how you protect client financial information, and what does it say about breach notification.

Where are the data centres, and does any support access come from outside the United States.

What is your backup arrangement, how often, retained how long, and have you tested a restore.

What multi factor authentication is available and is it enforced by default or optional.

What happens at the end of the relationship. How do I get my data, in what format, and how quickly.

Who at your company can access my environment, and how is that controlled.

The compliance angle

Moving to a host does not move your obligations. Under the FTC Safeguards Rule you remain responsible for selecting providers capable of appropriate safeguards, requiring it contractually, and overseeing them. A hosting contract that says nothing about security is not oversight.

The firms that do this well ask the questions above before signing and keep the answers on file. It takes an afternoon and it is the difference between a decision and a hope.