From...

January 14, 2000
Web posted at: 11:12 a.m. EST (1612 GMT)

by Mike Hogan

(IDG) -- The two leading Web-based tax preparation programs go online this week amid projections that many more federal and state returns will be prepared in cyberspace this year.

Tax software market leader Intuit will post Quicken TurboTax for the Web for Tax Year 1999 (the successor to 1998's WebTurboTax) on Saturday, the day after the IRS begins accepting electronic filings. It will be available at the TurboTax section of Intuit's Quicken.com financial site, as well as on America Online, Excite.com, and at the sites of more than 350 Intuit financial partners.

Intuit's principal competitor, Block Financial, expects to post the Web version of Kiplinger TaxCut on Friday or Saturday on its own Web site and on the newly revamped site of its parent, H&R Block. TaxCut will have preferred links from financial partners MSN Money Central, Yahoo Finance, Go, and Snap, among others.

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Neither program requires you to download software to prepare and file taxes. Both offer the same complete array of forms and features contained in their popular packaged software counterparts. Their comprehensiveness is unmatched so far by any of the many Web-based competitors that have surfaced in the past two tax seasons.

Your taxes may rise, but fees drop

A million tax returns will be prepared online this year, according to Forrester Research. That's twice as many as last year, when you had only Intuit's two online tax preparation tools, TurboTax and SecureTax, to choose from.

And the process is getting cheaper.

The Web version of TaxCut costs $9.95 for federal and $4.95 for state return preparation. That includes electronic filing charges, which normally run about $10. You pay nothing until you actually file a return.

You can use Quicken TurboTax for the Web to prepare and file a personal federal tax return for $9.95, and a state return costs an additional $9.95 -- again, including electronic filing for all 38 states that accept it.

Block Financial didn't offer a Web version of TaxCut last year, but Intuit charged $19.95 for each federal return and $19.95 for each state filing with WebTurboTax. That means Web filing cost anywhere from $15 to $25 more last year.

Neither Intuit nor Block Financial charges for filers who use Federal Form 1040EZ. In fact, Intuit doesn't even charge those with adjusted annual gross incomes of $20,000 or less, regardless of the forms used. This free service applies to both state and federal tax returns and is available for 1999 tax returns through October 16, 2000.

Taxes: A reason to go online?

By 2003, more tax returns will be prepared online than the number readied using the traditional desktop software packages, Forrester researchers say. And more than 85 percent of those who used Web versions of Intuit's programs last year had never used tax software before, notes Bill Campbell, Intuit chair.

Spurring this trend is the falling cost of online tax preparation, and the capability to feed the digital forms with electronic data from financial institutions that sponsor such services on their sites, says Jaime Punishill, a Forrester senior analyst.

As in past years, many sites will draw customers by giving away tax preparation services free of charge. Some also will arrange for customers to prepopulate their forms with data drawn electronically from their accounts.

The average user of tax-preparation software has nine accounts at four different financial institutions, Punishill says. But one institution is likely to have most of the customer's accounts, and the others can be entered by hand. There are also about a dozen online data aggregators that are trying to bridge these gaps.

"Early versions of the infrastructure is either in place or being put in place," Punishill says. "It's not inconceivable that in three to five years we'll be able to assemble all our financial data on one site."

Easier with experience

Today, the Web version of TurboTax -- but not TaxCut -- allows taxpayers who prepared their 1998 returns on the Web to push relevant data from last year into their 1999 online worksheets. Also, users of Intuit's Quicken 2000 personal finance manager can import tax data into TurboTax for the Web.

Web-based tax preparation may not be cheaper than packaged tax software, depending on the package and the number of returns you prepare with it. You can file a federal return using Block Financial's TaxCut Basic for as little as $7.95 after a manufacturer's rebate.

But electronic filers can expect to get tax refunds directly deposited into their bank accounts in as few as seven days. Or you can opt to get the check by snail mail within ten days, according to Intuit's report of IRS statements.

Block Financial goes a step further. The service has instituted a program called Electronic Refund Advance, which lets you get a tax refund advance of up to $5000. It's deposited directly into your bank account within two business days after the IRS accepts your electronically filed returns. ERA is actually a loan, and the lending institution, Household Bank, FSB, charges a $19.95 fee for the expediency.