Growth of online tax filing expected to increase

As tax season approaches, an increasing number of people plan to file their federal taxes online, according to the Consumer Internet Barometer.

Forty percent plan to file online, up from 34 percent three years ago. More than two-thirds of consumers report having filed online for three years or more, up from less than 55 percent in 2005. "Given the many online tax filing alternatives and payment options, such as IRS E-file, Free File, and direct deposit options, it's not surprising that every year an increasing number of consumers are filing electronically," says Lynn Franco, Director of The Conference Board Consumer Research Center. "And, once they file online, they tend to stay online."

The Consumer Internet Barometer - produced by The Conference Board, the global business research and membership organization, and TNS, a global market insight and information group - surveys 10,000 households across the country and tracks who's doing what on the Internet.

More consumers are comfortable filing their taxes online, compared to other financial transactions. The survey finds that while half are "extremely concerned" when banking or paying bills online, only 44 percent express similar concerns when filing taxes online.

Although the gender gap has closed over the years, the survey finds that women still express greater concern than men about banking, paying bills, brokering trades, and filing taxes online.

Professional service still preferred over do-it-yourself software

The percentage of Internet users who are filing their federal taxes offline has steadily decreased over the past several years as more consumers opt for the convenience, speed, ease-of-use, and increasing options available to online filers. The most popular reasons for not filing online are that the consumer does not do his or her own taxes, and concerns about transmitting personal information over the Internet.

"Online identity theft is one of the fastest growing crimes in industrialized nations," says David Stark, vice president and North America privacy officer of TNS. "Several consumers have either been victims of cyber-crime or know people who have. Even though online tax filing is secure, the reluctance of some consumers to try it is understandable."

Among consumers intending to file their federal taxes online, over 40 percent intend to use a professional service, with women more likely than men to seek assistance. The second most popular method, preferred by one-third of online filers, is do-it-yourself tax software. Male filers are more likely than female filers to use tax software. Only about one-fifth of online filers intend to use IRS E-file.

About 72 percent of online federal tax filers chose to receive their 2006 tax refund last year by direct deposit, while less than 15 percent requested a check.

About this survey:

The Consumer Internet Barometer is based on a quarterly survey of 10,000 households. A unique sample is surveyed each quarter. Return rates average 70 percent, which ensures highly representative data. Data is weighted as well to reflect the latest U.S. household demographic information. The latest survey was conducted during the first quarter of 2008.

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