The Push to the Web


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Glenn Adams has been offering online tax preparation via CCH's CompleteTax, a private-label offering, for the past six years and not only sees it as a way of the future for him, but as an enhancement to the professional market. "I don't look at it as being a deterrent but an enhancement," says Adams, managing partner at Charlotte, N.C.-based Adams and Hook CPAs. "When people try to do complex things [online], they will call a professional because they can't do it."

Adams says that several hundred returns are processed through the site, located at, each year. This year, the firm experienced its highest volume ever due in large part to heavy advertising online and word-of-mouth.

Adams has embraced do-it-yourselfers as a way to tap into the online tax preparation into the online tax preparation market-a move that not only can lead to new clients, but also serves as an additional revenue stream.

Partner Insights

"They are seeing another channel for revenue to market self-prepared returns," says David Bergstein, business development manager for consumer markets, CCH CompleteTax. "They realize they will not lose clients, but will gain clients they didn't have to begin with."

Via CompleteTax, CCH enables tax professionals to capitalize on those consumers preparing their own tax returns online, and bolster their client base through its private label or co-branded affiliate program.

Professionals can opt for full branding on the homepage and CCH content pages or for the elimination of the CCH and CompleteTax names to the fullest extent possible. CompleteTax can link from a preparer's Web site and handle all the back-office operations, including data hosting, tax return processing, e-filing transmission, technical support and credit card processing. Bergstein says the number of CPAs taking advantage of the program has about doubled in the past two years.

CCH is also pushing into the ATX and TaxWise market, as it pushes products into the user base of those two companies, which it acquired last year.

"Advertise your business online while attracting new clients with ATX Site Builder with CompleteTax. Site Builder with CompleteTax allows you to create a polished and professional Web site, while offering your own easy-to-use consumer 1040 tax prep software that handles federal and state individual returns," the company stated on the ATX Web site.

"You either change with the times or the times will walk from you," says Adams, who notes that he is building up the online business so it can keep him involved when he retires in about three or four years, and will serve as a solid revenue stream for him. "To me, [online filing] is the nature of the way the software is evolving."

Drake on the Web

CCH is not the only professional software company trying to give its customers a chance to pick up business from the online D-I-Yers.

Through its, Franklin, N.C.-based Drake Software also enables tax professionals to set up a tax preparation site-using either Drake's template or creating their own site-and keeping a portion (typically 80 percent) of the revenue.

"The people who are filing taxes online are going to do it on their own anyway," says Brian Stork, Drake's vice president of application development. "We are trying to do this in partnership with [users]."

Stork notes that about 25 percent of its preparers are participating, most of whom are using Drake's template system instead of constructing their own Web site. By typing in their zip code, taxpayers are directed to a participating tax preparer's site-a process that is essentially transparent to the taxpayer.

"The market seems to be evolving as more people get comfortable with the Internet," says Stork, who notes the biggest challenge for tax practitioners is marketing into today's competitive marketplace.

Such a program can turn into a lead generator if, for example, the taxpayer ends up having issues completing the return and needs help, or if the preparer chooses to download customer data to see if the taxpayer could use further assistance handling finances.

While declining to disclose specifics, Stork says the company plans on giving a major overhaul by next tax season.

John Gregory, owner of Baltimore-based Action Tax Service, has been a Drake user for about the last four years and views as "a nice dovetail," as it enables preparers to capture those taxpayers who want to file their own returns online or if taxpayers find they aren't ready for that they can reach out to the Drake [preparer] for assistance or an in-person appointment.

"[Online filing] has been increasing, and it is a nice increase, but it isn't going to replace my practice," adds Gregory.

The Consumer Angle

Of course, it's well known that the consumer packages have led the charge in the move to the Internet and Intuit, which has the largest consumer market share, is benefiting from that trend.

According to Julie Miller, an Intuit spokesperson, TurboTax last year had 14 million federal returns sold. Of those, 6.7 million were through its online version and the remainder of the returns were prepared using the desktop version.

"The Web grew 57 percent year-over-year and this year expects to be the tipping point," Miller says of TurboTax online.

Intuit has broken out the sales of TurboTax by online and desktop units. The figures demonstrate how dramatically the online business has grown over the last four years.

For tax year 2000, Intuit sold 2.4 million federal online units. That was 28.4 percent of all TurboTax sales, not including1.2 million units sold through the Free File Alliance. For tax year 2005, the total online units sold had jumped to 5.2 million, or 42.4 percent of the 12.3 million sold, not counting 1.4 million through Free File.

Looking to bolster its user base, aside from those do-it-yourselfers completing their returns manually, Intuit is also targeting those taxpayers who use such national franchises as H&R Block.

"This is a person who is overpaying and getting underserved at a national chain," says Miller. "We think that is an interesting segment for us to pursue."

When asked whether Intuit has any plans to move into online preparation with its Lacerte and ProSeries products, a company spokesman says he is not aware of any near or long-term plans to do so.

While many in the industry see online tax preparation as a growing business, there are still those consumers who have their reservations for various reasons.

According to the IRS, 73 million tax returns were e-filed in 2006-with 20 million having been filed from home computers. Tax professionals e-filed 53 million individual tax returns in 2006 out of the 73 million total filed electronically. (See related story page 30.)

Years ago, the IRS set a goal of having at least 80 percent of returns filed electronically by 2007.

"I was a bit apprehensive [initially preparing my return online], but if I went to H&R Block or those other services they do it online and charge, so I took a chance and am so glad I did," says Selma Cherry, an assistant manager for a retail closeout store who lives in Mashpee, Mass.

This year, Cherry used TurboTax's Deluxe desktop version because she obtained a CD for free, but has been very happy using the online version for the last four years. She used to prepare her own taxes manually, a method she says was "very nerve racking."

Before using TurboTax online three years ago, Dwayne Felder, a financial analyst in Atlanta, admits he had concerns.

"Initially, I did have reservations about preparing my returns online. First and foremost, I was concerned about privacy and confidentiality, as I basically worried about submitting my personal information, not only over the Internet, but also to a then unknown firm," says Felder, who previously prepared his returns with pen and paper. "After years of exposure to 'secure' Web sites like TurboTax, I progressively developed confidence in the ability of such Web sites to keep my information confidential and secure, to the point where I now purchase more goods and service over the Internet than I do at brick-and-mortar establishments."

TurboTax online user Lisa Megna, who is a probation officer living in Hopewell Junction, N.Y., has been using the product since 1999, and says that years ago she was concerned about errors or transmission problems, but never had a problem.

Megna, who uses the Deluxe and Premier versions, says she likes the program's ease of use, customer support and convenience.

Echoing Megna's sentiment, CompleteTax user Adams says he believes that many taxpayers might not file online because they are concerned it will be too difficult or they will make a mistake. His firm is taking steps to help alleviate that fear.

"We are trying to make sure people don't have the apprehension [of filing online]," says Adams. "We are offering added value to the online capability."

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