February 23, 1997
Tapping Into the Internet to File
By DAVID CAY JOHNSTON
The cost of software to figure your tax bill this year has gone way down, in some cases to nothing, even if your taxes have not.
One reason is the Internet. This year, for the first time, you can prepare your taxes over the network, a shift in style that lowers costs and forces software makers to cut their prices to compete.
Last year, tax software typically sold for $19.95 to $49.95. This year you can buy software for complex returns for as little as $4.95 and CD-ROM software for as little as $9.95.
And if you have access to the Internet, you can calculate your taxes free on several sites and, in one case, even file your return electronically free, all with privacy of data assured, software publishers say.
Tax softwan one state. Intuit sells state tax software for all states with income tax, but it charges for each, typically $19 at retail. H & R Block's Tax Cut has only 23 states, but they are on one disk for one price.
"Just 10 states account for more than 75 percent of personal tax software," said Gene S. Goldenberg, who was brought in as Tax Cut publisher last year with orders to sell more product. Mr. Goldenberg said that by focusing on key states he hoped to improve his company's position without diverting resources to chase every last possible sale.
But Tax Cut is in a tricky position, said Ann Stephens, president of PC Data, a software market research company. Growth in tax software sales has come mostly from mass merchants, who demand huge incentives to carry another product. So the focus for Tax Cut is on lower prices.
In December, when advance orders are taken, Tax Cut had more than tripled from last season to 17.6 percent of the market, but it was still far behind Inersal Tax Systems.
Most people will find one program as good as another. Turbo Tax, Tax Cut and Secure Tax offer thorough expert help, but you still have to be willing to commit a big chunk of time if your return is at all complex.
To attract people to its retail Internet service, Universal Tax Systems allows people to prepare their returns free. But to use the data, they must either enter it by hand on paper forms or print copies by paying Secure Tax $9.95 for a 1040 or 1040A form or $7.95 for a 1040EZ. Customers can also electronically file returns to the Internal Revenue Service and state tax agencies for $4.95.
Secure Tax has a friendly interview technique and uses appealing cartoons, and customers can log off and resume work later.
Intuit has responded to Secure Tax with its own on-line product for people with modest incomes derived almost entirely from paychecks.
Intuit's 1040EZ Online has a casual, chatty approach and is available throughuntants," he said.