Technology promises to be a major factor in the 1999 tax season, as more companies move their tax preparation services to the web. Taxpayers will find an increasing number of options for online filing, but it remains to be seen how many will abandon traditional filing methods altogether.
With the IRS strongly encouraging e-filing, electronic preparation of returns will only increase. Tax preparation software has long been available, but attention is quickly shifting to providing calculation, filing, and even refund services, all through the web.
The first shot was fired by H.D. Vest, Inc., a financial services company that has announced a website that will allow taxpayers to file their returns electronically for free, regardless of complexity or income level. The company claims it is unique in offering free preparation and e-filing regardless of income. Presumably, the cost of preparing the return will be offset by H.D. Vest's ability to acquire new clients and introduce them to the company's wide array of financial services.
The major players in tax preparation services are not sitting pat. H&R Block has announced a web-based system using its TaxCut Online Service, although a charge will be assessed for complex returns. Intuit plans to offer its TurboTax service through the web via its Quicken financial portal. The company will offer the service free for simple or low-income returns but will charge a fee for more complex returns. Both the H&R Block and Quicken websites currently offer free tax information and services, such as organizational tips and estimation calculators, that might be helpful to taxpayers going the traditional route.
There are many other companies offering e-filing services; a sampling would include 2nd Story, whose TaxACT software can be downloaded free and used to prepare a traditional return or can be filed electronically for a fee; UDS Electrotax, a start-up site that promises a similar arrangement; and Taxloop, which charges for e-filing but offers the service through the web without requiring the download of a separate program. At press time many of the sites were unavailable but scheduled for launch around mid-January.
E-filing promises easy and speedy tax return preparation, but the question is whether taxpayers will embrace web-based preparation solutions with their storage of financial information on a remote server. Individuals worried about privacy may be wary of companies using their financial information to cross-sell them other financial products. An alternative is the free downloadable software, which promises some convenience while still allowing the traditional route.
Nonetheless, practitioners should accept the likelihood that taxpayers will continue to use technology for their filings. What also remains to be seen is how sophisticated online services become and whether they can offer do-it-yourselfers greater benefits than traditional preparation. The IRS is very interested in streamlining and simplifying the return process, yet it has shown a commitment to keeping professional advice in the loop.
It should be noted that online tax filing services lack the personal contact and assurance of knowing that a professional has examined the return. The online services generally offer a way to get in touch with an affiliated representative, but it remains to be seen whether users that encounter problems might return to an advisor they already know and trust. The new services might even lead more taxpayers to use professional advice, albeit to a more limited extent.
This year's tax season will go a long way toward determining which models prove successful. More innovative, value-directed websites may well be adequate for many taxpayers; yet traditional providers may also be able to expand their base through reduced costs and increased speed. Whatever the result, CPAs will remain an important source of advice and guidance to their clients--if they
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