Report: E-Tax Prep Needs Business Networks

Computerworld - Financial firms should join with companies like financial services firm H&R Block Inc. and Intuit Inc., maker of TurboTax software, to automate the tax preparation process, suggests a recent report.
As more people file their taxes electronically, some brokerages and banks are starting to offer downloadable information directly from financial accounts to tax forms, said Jaime Punishill, an analyst at Forrester Research Inc. in Cambridge, Mass., and author of "2001: The Online Tax Preparation Boom."
"Prepopulated forms will attract active traders and convenience seekers," he said.
The industry leader when it comes to forging alliances with financial services institutions is Mountain View, Calif.-based Intuit, said Punishill. Although other companies are considering moving in the same direction, Intuit is the only one so far to have enabled tax data to be downloaded, he said.
Intuit's TurboTax software can import data from 10 financial institutions, payroll companies and e-business application providers, including Ceridian Corp., Fidelity Investments and PeopleSoft Inc.
Long, Cumbersome Process
Financial institutions have to set up a dedicated Open Financial Exchange server to communicate with TurboTax, a process that takes two to six months, said Todd Stanley, senior product manager for Intuit's TurboTax service.
One criticism of the service is that it's cumbersome, especially for simple data like W-2 income statements.
"It's actually faster to take a W-2 and input the information yourself," said Roger Ochs, president of financial services firm H.D. Vest Inc. in Irving, Texas. "I don't know how feasible it is from a business standpoint. But we're investigating it to see if we want to launch it for next year." A better way to do taxes, he said, is to get the data directly from the Internal Revenue Service.
"All these third parties, whether it's the parties that generate the W-2s or [those] that generate the 1099s, have to file everything to the IRS," he said. "And we're talking to them about that, but they're a little slow to respond."
Gene Goldenberg, senior vice president for e-solutions at H&R Block in Kansas City, Mo., said he'd also like to see the IRS open up its systems.
"But I don't think we're going to get there very soon. The IRS has a fiduciary responsibility, a very strong obligation as the guardian of taxpayer information. That aside, their systems can't handle it," Goldenberg said. "In the meantime, we are working on developing plans with various payroll-processing companies and brokerage services to make this data easily importable into a tax return."

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