Approximately 40 percent of online households plan to file their federal taxes via the Internet this year, up from less than 34 percent four years ago, according to a new report.

The report by researchers at the Conference Board and TNS surveyed 10,000 households across the country and found that consumers’ concerns about conducting financial transactions online have been easing over the last few years, and that has now extended to filing their taxes over the Internet.

“Convenience and speed are the primary reasons behind online filing,” said Conference Board Consumer Research Center director Lynn Franco in a statement. “Concerns over security, once a major deterrent, have declined substantially. And, once consumers convert to online filing, they don’t go back. A once cumbersome, rather stressful process is becoming easier and faster, which could very likely make paper filing obsolete in the not so distant future.”

Those who are extremely concerned with the security of filing taxes online have dropped from about 50 percent in 2005 to only 36 percent today. Conversely, those who claim they are not very concerned or not concerned at all have increased to nearly 40 percent from 27 percent five years ago. In general, women are more concerned with security when conducting financial transactions online. 

Among online filers, 40 percent have been filing their taxes electronically for five years or more, a major increase from just 22 percent in 2005. Among those not filing electronically (44 percent offline and 15 percent still undecided), the most popular reason (cited by 40 percent) is that the individual does not do his or her own taxes. Concern about submitting personal information online is the second most likely factor, cited by just 19 percent. Another notable barrier, cited by 14 percent, is the complexity of the return.

Among online filers, roughly 40 percent intend to use a professional service, with a similar percentage using do-it-yourself tax software. Only about 20 percent intend to use IRS e-file.

Convenience is the most cited reason for prompting consumers to file their taxes online. Nearly 60 percent say they’re filing online because it’s easier than filing by paper. Quicker refunds were also a major motivator, with 51 percent of consumers claiming that speed motivated them. Comfort with electronic filing came in at a distant third, with only 28 percent claiming this was a factor in their conversion. Other reasons include having access to “a secure/direct line to the IRS,” “not having to use a professional service” and “friends/family recommended it.”

More than 75 percent of online tax filers chose to receive their 2007 refund by direct deposit, with only one out of eight requesting a check.

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