Stateline Story

Online Tax Filing An Option In Many States

  • April 15, 2002
  • By Jason White

For millions of Americans, the April 15 deadline for filing tax returns used to mean a last minute rush to the post office. Now, for many taxpayers, it increasingly means logging on to a PC, surfing to a tax preparation Web site and hitting the send button.

Six states Connecticut, Hawaii, Idaho, Kansas, Nebraska and Wisconsin started Internet tax operations this year, joining nineteen states and the federal government already offering online filing of income taxes, according to the Federation of Tax Administrators .

"More states are doing it," says Harley Duncan, director of the FTA. "There's a growing, but not a huge number, of returns coming through these systems."

Last year, roughly a half-million taxpayers filed through state Internet systems. Duncan expects that number to grow significantly this year.

A few advantages of e-filing are ease of use, accuracy and speedy refunds, says Sarah Kaufman, spokesperson for the Connecticut Department of Revenue Services.

In its first year of operation, Connecticut's e-file system is able to process refunds in four days, says Kaufman, far quicker than the 6 to 8 weeks it takes to process paper returns filed on April 15.

The setting up of state income tax portals is not without controversy. Tax preparation businesses argue that state portals crowd out private enterprise.

"Intuit's position has been that the private sector has already been providing online tax filing services and there's no need for states to duplicate these services," says Julie Miller, spokesperson for Intuit, a provider of do-it-yourself tax programs for individuals and accountants.

"That is certainly an issue that has been raised in a number of states," says Duncan.

Unlike the states that offer online filing directly through their web sites, the IRS routes e-filers through private companies, most significantly, Intuit.

Miller says 15 million returns will be filed this year using Intuit's TurboTax program, accounting for 75 percent of the personally prepared e-returns the IRS receives.

California, deferring to the concerns of tax preparation companies, takes an IRS-style approach. The state's Franchise Tax Board web site links to a variety of companies offering free software to assist with online tax filing.

But many other states consider online filing assistance to be their responsibility, and not the private sector's.

"The other states have said, No, this is taxpayer service and customer service,'" says Duncan.