| Not the Sam old, Sam old Tax e-filing marches away from CD-ROMs to online sites 03/08/2001 By Doug Bedell / The Dallas Morning News
The Internal Revenue Service, spurred by a 1998 congressional mandate to make e-filing more attractive, is nodding with approval at all sorts of new online tax services. Gradually, boxed CD-ROMs of home computer-based programs such as TurboTax and TaxCut are giving way to the latest online filing craze: Web-based forms that require only an Internet browser and a keyboard to complete. "We're absolutely convinced this is where it's all going," says Matthew Leder, president of ezTaxReturn.com ($24.95), one of the latest strictly online services to open its Web doors. "It's our contention this is something perfectly suited to an online program." Among dot.com start-ups, no sector has been encouraged more by the changing policies of a governmental agency. "The IRS wants this like crazy," says syndicated columnist Gary Klott, founder of TaxPlanet.com, a tax information site. "The real impetus is that the IRS rate for making errors typing in the data from paper returns is like 20 percent." Electronic filing drops that number to 3 percent or less, according to government figures. "It's protecting against IRS errors more than anything else because one of five IRS data entries was wrong" in the 1990s, Mr. Klott says. This year, the IRS has loosened the grip on personal identification numbers, the five-digit identifiers that had been doled out exclusively by the government. About 35 million returns were e-filed in 2000, many with PINs that had been provided to filers on mass-mailed signature cards. Taxpayers who want to zap their returns to the IRS can now select their own five-digit personal identification number instead of mailing in those signature forms.
"People made fun of us: 'You've got electronic filing, but then you've got to file a piece of paper.' It didn't make a lot of sense," IRS Commissioner Charles Rossotti told the Associated Press. "This really makes electronic filing paperless." Both online and home computer-based software packages can now generate PINs. In addition, the IRS is adding 23 forms to the list that can be filed electronically, meaning that almost every taxpayer can use the e-file system. As a result, the tax agency projects that a record 42 million taxpayers will choose electronic filing this year. According to Forrester Research, 6 million of those will choose strictly online forms entered through Web sites, tripling last year's total. The majority of e-filers this year will continue to use CD-ROM programs, which can be purchased for as little as $4.99 everywhere. But some tax preparation services, such as H.D. Vest (www.myhdvest.com), now offer free e-filing for everyone who chooses their online forms. Others, such as Intuit's Quicken TurboTax for the Web (www.quicken.com/taxes) provide online filing free for those meeting specific criteria. This year, Intuit raised its ceiling for free online filing to $25,000. That means if you have an adjusted gross income of $25,000 or less, you and 60 million other taxpayers don't have to pay for e-filing. To entice taxpayers even more, many online filing services are waiving the usual $10 filing fee tacked on by their home computer software rivals. The experience
There are signs that Web-based tax filing programs still have glitches to work out. Online tax message boards and several prominent Web site reviews have noted sluggish performance by some of the biggest players in this new game. Dan Deets, a retired Maryland resident, says he has used Web-based TurboTax for three years. "Each year, bomb-outs continue to be a nuisance; there are a few areas that are unclear in their instructions," he says. "The first year, the state tax program would not work, and the second year it worked but only allowed one state filing when I needed two." PC Magazine's review of online tax preparation services (cgi. zdnet.com/slink?80113:4507772) rated TaxACT (www.taxact.com) as the least glitchy of four top Web-based filing services. Intuit's Quicken TurboTax for the Web, H&R Block Professional Tax Service and H.D. Vest all suffered the same malady, the magazine reported. When accessed through dial-up modems rather than faster broadband connections, screens were slow to load and sometimes difficult to navigate. Not all consumers have had similar experiences. Systems programmer Dadydd Wynne-Evans of Minneapolis told members of the newsgroup misc.taxes that her Web experience with TurboTax was flawless. "I love the interface," Ms. Wynne-Evans said. "I used to do my taxes by hand – fill out a form, use a calculator, etc. – and frankly TurboTax has helped me recover more of my dollars than I ever would have done by myself. I guess that I was lucky because I've had nothing but speedy access and load times from the TurboTax Web site."
Webcriteria.com, a company specializing in ease-of-use Internet issues, found the IRS itself has an average accessibility time of over three minutes. It ranked online tax preparation services by the same method – the time and effort it takes the average user to navigate to target pages.
New online sites such as ezTaxReturn.com hope to capitalize on the slow loads and frustration wrought at large purveyors. Mr. Leder, ezTaxReturn president, contends that all-encompassing advice, preparation and planning services don't meet the public's needs. "Their one product, like TurboTax, is really robust and can handle every single tax return in the entire country, including that of [Microsoft's] Bill Gates," says Mr. Leder. "Those programs and online products are simply too robust and too complicated for the average American." EzTaxReturn.com and a host of emerging Web sites believe that 85 percent of U.S. taxpayers will flock to a stripped-down interview format gets basic returns completed in less than 30 minutes. "We get e-mail from people who say they're able to finish their returns with us in less time than it took to figure out how to even get started with a software program," Mr. Leder says. "People want to go in and do their taxes. All the extra stuff sitting there confuses them." Ask an expert More established sites are trying to increase their allure with services that can't be offered by their younger brethren. For example, H&R Block (www.hrblock. com/taxes) this year will sell expert advice on a per-solution basis if consumers run into problems during online filing. For $19.95, Web filers and users of the company's CD-ROM-based software can access the "Ask a Tax Advisor" service using e-mail, live chat or the telephone. "If you had, say, a series of questions about the sale of a house, that would be one solution," says H&R Block spokesman Neil Getzlow. "But if you get your answer on the house situation and then wanted to ask about your IRA, that's when you're talking about another solution. We'll let you know when you're getting into another area, and we're going to charge their credit cards for that." Mr. Getzlow's company made headlines in February last year when an unexpected surge of customers overwhelmed its servers, forcing an emergency shutdown. No data was lost. Once servers were rebooted, users were able to pick up where they left off, the company said. In the meantime, the company allowed a free download of TurboTax to permit customers to keep working. The event verified predictions that strictly online filing fits most taxpayers' needs. H&R Block's system was set up at the time to anticipate 650,000 online filers, but more than 300,000 had already accessed the site by February to begin work. The company said it processed more than 1 million returns via its Web site last tax season. "They've redoubled their efforts since last year," says Mr. Klott of TaxPlanet.com. "I don't think that [crash] can happen again." Not for everyone According to the IRS, the average taxpayer spends about 30 hours completing Form 1040. That includes the time it takes to pull together records, learn about the form, decipher tax laws, copy the return and send it in. Even without those chores, the agency figures it takes more than six hours to complete its most commonly used income tax form. With additional schedules or tax credits to file, consumers might measure their tax time by the calendar instead of the clock. Online and software-based tax preparation can save time, but it is primarily designed for those with few itemized deductions, Mr. Klott says. "A lot of people just don't need to go to a tax preparer," Mr. Klott says. "Their situations aren't that complicated. But if you have real estate, business deductions and other transactions, the traditional way may be better." Peculiar problems presented by complicated returns can't be boiled down well by software, experts say. "I tried TaxCut last year, and it really missed the boat for me because I had self-employment income, a California nonresident tax return to file and California expenses for which I wasn't reimbursed, so it all got pretty hairy," says Lynne Seymour of San Francisco. "The software that the accountants use costs a couple thousand dollars. Compare that to what you pay for over-the-counter tax software packages, and it is easy to see that the cheaper one might be way oversimplified." Mr. Klott says online e-filing holds advantages because it is easily kept up to date. With software and a home computer, users must remember to update the software before even starting. National tax preparation firms such as H&R Block are working to put all their services together for Web access because the IRS wants to push more than 60 million taxpayers to e-file by 2007. "We're ultimately hoping to integrate the entire e-file experience with our other services," says Mr. Getzlow of H&R Block. "Some day if you get started online and have trouble, you'll be able to bring the return into an H&R Block office. We're working toward a seamless experience, whether it's going from online to a tax office or vice versa." Today's glitches aside, online filing will continue growth rates of about 150 percent a year until everyone is doing it, many experts predict. "It's the wave of the future," says Mr. Klott. "There's no doubt about that."
|
