Six million U.S. households will prepare tax returns online in 2001, up from 2 million in 2000, according to Forrester Research, which credits better online tax and financial service offerings and the growing comfort of online users with using the Internet for financial applications.
Automated advances have made online tax preparation easier and more convenient for consumers. Prepopulated forms and automated downloads of W-2 and 1099 forms make it quicker and simpler to prepare taxes online. Over the next five years, Forrester predicts that financial firms, payroll providers, tax preparers, tax agencies and other participants will be linked in real time over the Net in what Forrester refers to as tax eBusiness networks.
“2001 will be remembered as the year that the obstacles to easy, Net-based tax preparation were eliminated,” said Jaime Punishill, senior analyst at Forrester. “And with the IRS on a paper-eradication crusade, the possibility of eliminating the need to send in paper copies of W-2s and 1099s may soon become obsolete. Financial consumers have also become quite savvy in their online usage. More than 15 million U.S. households have transferred balances, paid bills, or traded stocks online and another 5 million will do so for the first time this year, laying the groundwork for the online tax preparation boom.”
Forrester found that filers will experience faster, easy online filing because all agencies will be connected in real time. Filers will enter information just once rather than filling out various forms and sending them off to different locations. Vendors will attract more customers because of the simplicity and immediacy of filing online, coupled with tax assistance services. For the tax industry as a whole, Forrester estimates that 80 percent of tax filing will be done online by 2007.
According to the IRS, the number of Americans that filed their income tax electronically (which includes electronic filing by preparers, as well as online returns) in 2000 was 35.4 million. That number is expected to rise to more than 40 million in 2001.
The WingspanBank.com Financial Index, which surveys more than 1,000 adults in the United States found that more than 59 million Americans plan to use the Internet this year to help them with their taxes.
Among other tax-related findings from the WingspanBank Index:
- For 133 million Americans preparing taxes is as unpleasant as going to the dentist. For men, preparing taxes is even worse than a visit to the dentist.
- Americans expect to spend an average of 7.5 hours preparing their taxes.
- More than 15 million Americans will wait until the last possible day, April 16th in 2001, since the 15th falls on Sunday, to file their tax returns.
- Six in 10 Americans, or 102 million tax filers, expect an estimated average refund of $1,625 from the IRS this year. Paying bills and other debts is the most popular use for tax refunds.