A Talk With Intuit's Guru

Scott Cook on the future of online tax preparation

Intuit's TurboTax is the country's leading tax-preparation computer software program, commanding an impressive 70% share of a $128 million market. The Mountain View, Calif., company has also helped to pioneer tax preparation on the Internet with TurboTax for the Web, launched three years ago. Personal Finance Editor Susan Scherreik spoke with Intuit co-founder Scott Cook about how the Web will eventually make doing taxes a breeze.

Q: What are the advantages of preparing your tax return on the Web?

A: You get all of the benefit of preparing your return on a computer, but you don't have to go to the store to buy a box of software or install anything on your computer. All you do is go to our Web site [www.turbotax.com] and start answering plain English questions. It's like being interviewed by a tax professional. When you're done, you'll see a calculation of how much taxes you owe. It's only then, once you've seen the final total and you want to file that you give us your name, credit-card information, and Social Security number and we complete the filing for you. You can then either [print out and] mail in your return or file it electronically.

Q: Will doing your taxes on the Web be different in the future?

A: Our goal is to automate the process from end to end, although that's still a couple of years away. Here's how it will work: You'll either come to our Web site or go to your employer's or your bank's Web site and click on taxes and they'll route you to our servers in San Diego. You'll identify yourself to us, and we'll say, "We recognize you from last year" and provide you with a list of your banks, mutual funds, brokerage accounts, and employer. We'll ask you if anything has changed, and then, with your permission, electronically pick up your investment and salary information and insert them in the right places in your tax forms and beep you to let you know it's done. You inspect the information and hit a button to electronically file and then get back an electronic receipt from the IRS and your state. The whole process will take two minutes.

Q: Is TurboTax for the Web cannibalizing your software sales?

A: In the main, no. Something like 80% of the users of TurboTax for the Web last year had never before turned to a computer to prepare taxes. One new audience that we are reaching on the Web is college students. They tend to have simple returns and love the speed and ease of the Internet. Generally, we've found that people who use TurboTax for the Web are younger and have lower incomes than do those who use our desktop software. For instance, we found that nearly 50% of the Web users were under 35 years old, compared with 24% of those who used the desktop version of TurboTax.

Q: Are taxpayers reluctant to prepare returns online because they fear their data won't remain private?

A: We are not finding it a concern. Initially, we thought that people would be kind of wary of something new such as taxes on the Web, but they are eating it up. Last year, some 240,000 taxpayers used TurboTax for the Web, a tenfold increase over the prior year. This only works, however, because people know that their private information is treated as their private property and that we won't do anything with it that they won't allow us to do.

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