Filing online has become a growing trend, allowing taxpayers to complete their taxes and get their refunds way before deadline.
April is not only known for its showers, but it is also the time of year when Americans report their incomes to the Internal Revenue Service (IRS), and many are opting to file online this year. Reports from the IRS indicate that there has been a 12 percent leap in the number of returns filed online between April 4, 2003 and April 2, 2004, resulting in more than 48.55 million e-filing receipts.
The biggest increase comes not from the tax professionals, but from those individuals who prepare their own returns. According to IRS.gov, 21 percent more self-prepared returns were filed in 2004, compared to 2003, while tax professionals measured an 11 percent increase. There was a notable 7 percent year-over-year decrease in the number of individuals using the Telefile phone service, dropping from 3.42 million in 2003 to 3.18 million in 2004.
|Source: Internal Revenue Service|
E-filing is particularly popular with 18 to 30 year-old broadband connectors, as a March 2004 survey conducted for SBC Communications by I/H/R Research Group found that 73 percent of this group file their own taxes electronically. This high percentage is likely to due to the fact that younger adults have less complicated returns, and are more comfortable conducting financial transactions online.
Traffic to tax-related Web sites will continue to build until April 15, but Nielsen//NetRatings revealed that spikes also occurred during the first week of February, coinciding with when Americans receive their W-2 forms. IRS.gov experienced 3.7 million unique visits from home during the week ending Feb. 8, 2004, while HRBlock.com drew 1.5 million.
Overall, the leading tax Web sites performed admirably under the traffic strain, Keynote Systems, Inc. found during April 12 to 15. TurboTax and Quicken boasted perfect reliability rates, while the IRS site proved to be the fastest. The Ernst & Young site landed at the bottom of the speed charts and 1040.com was found to be least reliable.
Analysis from Hitwise revealed traffic and demographic trends to sites within the Business & Finance - Accountancy category. The amount of time customers spend on the sites that belong to accountants or accountancy firms and services has increased by 14 percent from April 2003 to April 2004, with the average session time increasing from 7 minutes 13 seconds to 8 minutes 13 seconds year-over-year.
Hitwise further revealed that visitors to the sites within the category are predominantly female (58.3 percent), 35 to 44 years of age (25.65 percent) with annual household incomes between $30,000 and $100,000 (62.01 percent). Turbo Tax leads other tax preparation sites in capturing households with a higher income while HR Block leads competitors in attracting a younger demographic.
Research indicates that the early bird surge is becoming an annual trend. Findings from Jupiter Research (a unit of this site's corporate parent) indicate that Web-based tax preparation peaks in January at 19 percent of online households reporting use to just 4 percent in April. And according to a survey conducted by Claria Corporation in conjunction with its Feedback Research division, 77 percent of taxpayers filed online or offline by March 25, and only 6 percent were waiting until deadline day or after.
The SBC survey revealed that 57 percent of online taxpayers file as soon as they can, compared to just 6 percent who wait until the last minute to file. More than half (52 percent) say a fast refund is the main reason why they file quickly, and another 41 percent say they file early simply to get the process over with.
Two-thirds of all American taxpayers are expecting to receive tax refunds this year, the Cambridge Consumer Credit Index found, and the IRS reports that direct deposit refunds rose 10 percent over 2003, with the average refund equaling $2,463, compared to $2,381 the year prior.
Of those expecting tax refunds, the Cambridge Consumer Credit Index found that 59 percent plan to spend the money on everyday purchases or to pay bills. More than one-quarter (27 percent) plan to save their refunds in a bank account, while only 4 percent will invest the money in stocks, bonds or mutual funds. Claria's survey revealed that 36 percent were going to use their refund to pay bills, and 26 percent planned to save the money.
Not everyone can expect a refund, however, and Ipsos-Insight found that 15 percent of Americans are expecting to pay an average of $3,000 in taxes. While 63 percent of American adults are aware that the IRS accepts credit cards, only 1 percent plans to pay taxes with plastic.
The late March 2004 phone survey of 1,000 adults found that 76 percent would definitely not use a credit card the next time they owe incremental Federal income taxes. Instead, 70 percent opt for payment by personal check; 12 percent by money order; and 9 percent from debit or bank account cards.
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