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Taxpayers, Trends, and the World Wide Web

Larry WolfeSenior Vice PresidentIntuit Inc.

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Agenda

Waves of Technology Will Taxpayers Adopt? Roles Taming the Paper Tigers Public/Private Partnership Looking Forward

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The Creation of Empires

Internal Combustion Engine

Semiconductor

Internet

Auto industry Oil industry Fast food industry

Consumer electronics Enterprise software industry PC industry

Electronic Finance Many more to come . . .

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Internet Impact: There are waves…and then there is a tsunami

0

30

60

90

120

‘22 ‘30 ‘38 ‘46 ‘54 ‘62 ‘70 ‘78 ‘86 ‘94 ‘02

Use

rs (M

illio

ns)

Radio TVCable Internet

Source: Morgan Stanley.

Years to reach 50 million users

38 13 10 5

5Source: Morgan Stanley Equity Research

Insurance & Fin Srvcs

Computer Soft/Hardware

Collectibles

Music/Video

Books

Flowers/Gifts

Consumer Electronics/Appliances

Office Products

General Sporting Goods

Tools/Home Repair

Home Furnishings

Cigars (it’s a 90s thing…)

Internet Opportunities for Various Product and Service Categories

Co

nsu

mer

Co

mfo

rt w

ith

Bu

yin

g O

nlin

eC

on

sum

er C

om

fort

wit

h B

uyi

ng

On

line

Internet Business OpportunityInternet Business Opportunity

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Waves of Technology

InstitutionInstitution Enterprise Computing

Automate the Back Office

CitizenCitizen Personal Computing

Automate the Customer

Connected Computing

Automate the Communication

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InstitutionsBusinesses

The Paper Chase

Consumers

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Phase One: the Computer

Businesses Institutions

Consumers

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Phase Two: the Internet

Businesses Institutions

Consumers

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Electronic Finance of the Future Will Be:

Connected

Interconnected

Delivered via the Net

Interconnecting key partsof the financial picture

Meaning

Meaning

Goal…save time, save money

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Internet Trends

Consolidating Force Search / News / Sports / Books

High Fixed / Low Variable Costs Volume Players Win

Requirements Size (Relative Scale) Speed (Time to Market)

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Will Taxpayers Adopt?

Wave 1: Desktop Software Personal finance Tax preparation Small Business

Wave 2: Web-based Software Credit Card Usage on the Net Financial Data on the Net Financial Activity on the Net

Access and Means

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Roles

Taxpayer Voluntary compliance

Return self prepared Return professionally prepared

Files tax returnElectronic, mail, telephone

Pays any tax dueVia paper or electronically

Technology Shifts:

Paper to PC to Internet

Recent growth of e-file

Paper to e-pay

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Roles

Professional Preparers Gathers data from

taxpayer Prepare tax return

for taxpayer File tax return Provide tax advice Provide support

Software Industry Technology investment &

innovation Tax preparation tools

Gathers data from taxpayer

Calculate, review return Access to tax help and

publications Tools for filing return Provide tax advice Provide support

Technology Shifts: Service Bureaus to desktop to Internet

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Roles

Government Collect revenues for public treasury Develop and oversee tax regulations Audit and enforcement Provide information and services to citizens

Technology Shifts: Paper and Telephone to Electronic Information Services over the Internet

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How Will This Succeed? Partnering.

Citizen

Citizen

BusinessesGovernment

FinancialInstitutions

Technology

The Old Days

The New Days

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Public/Private Partnerships

Government and Industry working together in Public/Private Partnership Cooperation, not competition

Common goals Mutual Commitment

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The Consumer Finance World

Banking Taxes

Mortgages

Investments

Bills

FinancialInformation/News

K

Insurance

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Banking

Mortgages

Investments

Bills

FinancialInformation/News

The Electronic Consumer Finance World

Taxes

Insurance

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The Income Tax Process

Checkbook

Taxpayer

IRS

States

Banks

Tax Preparer

Mutual FundsBrokerage House

Employers

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The Electronic Income Tax Process

TaxpayerIRS

States

Banks

Employers

Mutual FundsBrokerage House

ServerWebTurboTax

Tax Preparer

E-file Server

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Electronic Returns Filed

0

500

1,000

1,500

2,000

TY94 TY95 TY96 TY97 TY98

Retu

rns

(00

0)

23

Electronic Returns Filed

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The Small Business World

Small Business States

Customers

Suppliers

Bank

DistributionChannel

U.S. Gov’t

Employees

Accountants

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States

Customers

Suppliers

Bank

DistributionChannel

U.S. Gov’t

Employees

Accountants

The Electronic Small Business World

Small Business

Small Business

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Lower costTaxpayer and government

Real-time information Instant record updates Zero data entry, improved accuracy

Taxpayer and government Taxpayer controls finances easily

Individual or business

Why Interconnected Finance?

Benefit

BenefitBenefitBenefit

Benefit

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Getting to E-File Goals

Eliminate ALL barriers Allow all returns to be e-filed Eliminate all paper requirements Enable electronic payments (debit & credit) Squash the perception of higher audit risk Implement electronic postmarks Simplify ERO signup process

Simplify application process Treat all preparers equally

Be careful about digital signatures

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Getting to E-File Goals

Provide incentives for taxpayers and tax preparers Warehouse electronic payments

Preferably until after April 15 Provide online customer service Reduce audit period for e-filed returns Enable electronic correspondence Allow direct account access and enhanced

status information Don’t speed up paper processing

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Where Is Industry Today?

As a result of innovation and competition, private industry has: 12 million individuals using tax software 200,000+ professionals using tax software Made tax preparation easier and faster Reduced the costs of tax preparation Simplified e-filing Started to make automated tax returns real

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Where Is Government Today?

Technology is enabling development of On-line information services for citizens On-line customer service capabilities

Web-knowledgebaseAccount information

On-line forms and publications Open model for electronic filing A host of internal services

(e.g., audit and compliance)

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Where Should We Be Going?

Public/Private partnerships Industry can and will innovate Government can and should facilitate

End result…..everybody wins Taxpayers, Government, and Industry

Competition results in better productsCompetition results in lower pricesMore returns are e-prepared and e-filed

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Example: Quicken Tax Freedom Project Donated Web-based tax preparation and e-file

services No charge to taxpayer or government

Partnership Recommendations: Public Awareness and Education Campaigns Agencies educating taxpayers about no-charge

preparation and e-file services Reference all providers of services

Public/Private Partnership