Many Canadians are opting to submit their tax returns online, a trend that’s been increasing since the Canadian Revenue Agency began accepting online tax returns a decade ago.
By the end of 2008, approximately 14 million tax returns, or 62 per cent of all tax returns, were filed electronically, an increase of 800,000 from returns filed in 2007, according to figures from the Canadian Revenue Agency.
Around 11 million Canadians submitted paper versions, a reduction of around 300,000 returns from the previous year.
Tele-filing also continues to decrease each year, with around half-a- million Canadians choosing to enter tax information over the phone.
Similar trends are witnessed in the U.S. as well – and
easy-to-use software is cited as a key reason why a growing number of North Americans are filing taxes online.
“Once consumers get over the psychological hurdle of their first online transaction, [there’s] a big spike in repeat usage,” noted Lynn Franco, director of >The Conference Board Consumer Research Center, a New-York based non-profit consumer research group.
E-filing offers several advantages, such as the ability to get expert assistance either online (via IM chat or e-mail) or over the phone.
Now vendors are seeking to enhance the online filing process even further through capabilities that take advantage of current popular online practices.
One is social networking.
For instance, last year Mississauga, Ont.-based Intuit Canada introduced “Live Community” – a social networking feature in its online QuickTax software application.
Here’s how it works:
When you ask a question online, a panel automatically appears at the right hand side of your computer screen, featuring content-specific questions posed by the live user community – that keep changing to match your questions.
Intuit executives said during last year’s tax season 140,000 QuickTax users connected to the live community and 16,000 questions were posted. Most queries were about tax requirements and best practices – such as how to maximize pension-splitting.
This year, the same live community will be accessible to desktop users who are connected to the Internet. The community will be going live in a couple of weeks, said Cameron Moore, product manager lead, tax, at Intuit’s global business division.
Several reasons are prompting Canadians to file their taxes over the Web, he said.
For instance, Canadians who file personal taxes online using CRA’s Net file usually receive their tax refunds very quickly, typically in less than 10 days.
Further, if they use the online – rather than destktop – version – of a tax preparation application (such as QuickTax), they aren’t tied to a single computer, Moore added.
So, if they choose to, they could do part of their return at the office and the rest at home with their spouse’s information.
They also don’t need to go to the store and buy software, but can simply access the online version from any location with an Internet browser, the Intuit executive said.
He noted that online tax applications can be updated automatically as tax rules change.
Small and home-based businesses are a growing segment of the Quick Tax’s user base, Moore noted.
He said the first online version of Quick Tax targeting small businesses was released last year.
We note a very different trend in the case of another well-known consumer tax software product, UFile, created by Montreal-based Dr. Tax Software Inc.
Dr. Tax began as an online–only tax software company, noted Joanne Birtch, the firm’s vice-president of marketing and new business development.
But today sales of Dr. Tax’s desktop application are growing faster than the online version. “Our online software [sales] grow roughly 30 per cent each year, but our installed version has grown way beyond that,” Birtch said.
She said the desktop and online apps are exactly the same.
There’s still a minority who aren’t comfortable with filing tax returns online.
Cleo Hamel, senior tax analyst at tax service company H&R Block Canada, says while they file 95 per cent of their customers’ tax returns online, there are a few who prefer the old-fashioned paper route.
In special circumstances, such as with new immigrants, the paper work must be sent in to a different office.
Hamel urges users not to be worried about security anymore.
Over the years, security has significantly improved, Hamel said. “Files sent are encrypted pre-flight, the Web pages are secure, and Canada Revenue Agency issues a security code [that you need to use] prior to filing.”
But individual users should ensure their service provider can handle the volume of data being transmitted.
She said the only drawback with electronic filing is the risk of a technical glitch, but these are rare. There have been periodic outages but this usually occurs when the volume of applications sent is very high, such as on the last day to file.
Even then, if the technical issue originates at Canada Revenue Agency, they rectify the problem quickly and provide extensions.
But it’s an important reason for not waiting until the last minute, she said.