Are people increasingly going online to pay their taxes?

What signals the arrival of spring to you? For some, it is when flowers bloom, golf courses open, or the Red Sox season begins. For others, spring officially kicks off with the annual chore of calculating and paying one’s taxes. We here at Compete wondered: are consumers increasingly going online to pay their taxes? To answer this question, we fielded a survey (n=660) of our two million member panel. When asked what method they used to fill out and submit their tax form in 2005, 21% of people indicated they utilized the web.

When asked what method they plan to use for their 2006 return, 22% cited the web.

Clearly a 1% growth rate is not exactly a signal of a vast shift to the internet for tax preparation. However, a clickstream analysis of key online tax providers illustrates that shopping activity is increasing year over year. What tax related sites are gaining the most consumer interest you might ask?

IRS.gov generated significantly more site traffic than any private online tax provider, yet its traffic is growing at a slower rate. Unique visitors in January to Turbotax.com and HRblock.com* increased significantly year over year (18% and 11% respectively) while unique visitors to TaxAct.com declined substantially.

What does this all mean? It appears that people are increasingly going to the sites of established tax preparation brands as part of the filing process, but a significant percentage of the population still prefer the council of a professional. Adoption of online tax preparation resources will undoubtedly expand over time as sites continue to enhance functionality and usability.

*Includes TaxCut.com

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