Online Tax Software Success

Online tax software is becoming more popular each year for people looking to file their federal income tax returns on their own.  Compete, a company that measures website visitors across the Internet, released a report this month that showed 11.5% more consumers visting the category of “Accountancy and Tax Service” sites than the previous year.

All three of the main online tax prep software sites saw more visitors than the year prior, with Tax ACT seeing a huge increase:

• Tax ACT – Up 42%
• Turbo Tax – Up 15%
• H&R Block – Up 15%

Of course, it’s no surprise that online tax software websites had a big increase in the number of visitors in January that’s when tax season starts nbsp;but the increase from previous years is what points to more people filing online. 

Traditional Tax Prep vs. Online Tax Filing

A recent Wall Street Journal article (trial subscription required) takes a look at how traditional tax prep companies are losing customers to online tax software.  While companies like Jackson Hewitt are suggesting that the bad economy has more people paying less to do their taxes themselves online; the tone of the article suggests that the shift to online tax filing is a long term trend that brick and mortar tax prep businesses should be concerned about.

Why Online Tax Software? 

So why are more people moving to online tax software vs desktop tax software or manually filing?  Here are a few things that come to mind.

Convenience – The first reason I can think of is that online filing is certainly more convienent than having to go to the store and buy tax software and then install it on your computer. All you have to do is open your browser and you can get started in just a minute or two.

Broadband – A few years ago this might not have been as feasible since more people had slower internet connections. Can you imagine trying to prepare your taxes using dial-up, I’d rather have my fingernails pulled out than have to sit through that frustration!

Promotion – Companies like Intuit and H&R Block are really emphasizing online tax filing.  For example, when I watched an episode of the show LOST on HULU a few weeks ago, H&R Block at Home was the exclusive advertiser for the program. I think the companie are also doing a good job of reaching out and interacting online.  For example, this interview I did with Intuit Vice President Bob Meighan about TurboTax online and also the presence of Intuit employees on social media sites.

Cost – I don’t know if this is the case but I imagine that offering the software online lowers the cost of delivering the product.  Of course, what the companies do with the cost savings is up to them but they could use it to help out and attract customers with things like the H&R Block at Home discount weekend.

If you do your own taxes, are you using online tax software? If not, what are some of the reasons?

Ben Edwards, the founder of Money Smart Life, saved up enough to buy a Nintendo back when he was 12 years old. When he used the money to buy shares of Wal-Mart stock instead, he knew he wasn't like the other kids... His addiction to personal finance has paid off for his family and now he's helping you to afford the life that you want. Check him out on the web at Google Plus, Twitter and Facebook.

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