Online Tax Filing Slow to Catch On

While online shopping and trading have become the newest hobbies of Internet users, online tax filing still has a long way to go.

Preparing and filing taxes online has faced abysmally slow consumer adoption rates, according to research done by Jupiter Communications. The research found that, much like online shopping, consumers are worried about their privacy and the security issues associated with doing their taxes online.

Although paper tax returns are quickly becoming a thing of the past, Jupiter found that submissions via the Internet will not represent a significant portion of returns in the near future. A poll by Jupiter and NFO found that less than 2 percent of Internet users plan on preparing their taxes over the Internet. That is less than 0.5 percent of all expected individual returns.

“Contrary to popular belief, Web-based tax filing is only a tiny part of what is defined as electronic filing. The increase in electronic filings is more likely due to a rise in the number of desktop software users who are using dial-up filing options, rather than the widespread migration to Web-based solutions,” said Jupiter’s Marc Johnson. “While consumers show they are becoming more comfortable with electronic filing options, they are still hesitant to rely on the Web for such an important transaction.”

According to Jupiter, the shift to Internet tax filing will also be slowed because the majority of consumers only file their taxes once a year. The only significant change in tax filing is the 3.5 percent of consumers that are moving away from pencils and paper and using software to file.