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CERCA Practitioner Survey Report

CERCA Practitioner Survey Report. FTA FedState E-File Symposium May 3, 2000. Agenda. Survey Methodology Executive Summary Profiles Factors Influencing E-filing Future Trends Recommendations. September 1999, CERCA commissioned Mellman Group to survey 579 tax practitioners by telephone

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CERCA Practitioner Survey Report

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  1. CERCA Practitioner Survey Report FTA FedState E-File Symposium May 3, 2000

  2. Agenda • Survey Methodology • Executive Summary • Profiles • Factors Influencing E-filing • Future Trends • Recommendations

  3. September 1999, CERCA commissioned Mellman Group to survey 579 tax practitioners by telephone Sample was obtained using an IRS listing of tax preparers Selection criteria of tax practitioners Prepared and filed tax returns in TY98 Used tax software to prepare the majority of tax returns Must be aware of the e-filing program Survey Methodology

  4. Objectives • Examine current and future e-file market & ways to increase tax practitioner e-file • Profile e-filers to assess current and future market • Understand how and why practitioners’ use e-file • Explore incentives, barriers, and other factors that could impact future of e-file

  5. Executive Summary • E-file market significant and can be expected to grow significantly next tax year • 33% e-filed in TY98 • 28% expect to join in TY99 • E-filers believe in the program • 97% of 1998 filers plan to e- file again in 1999 • Also plan to file more returns than last year

  6. Executive Summary • Great potential to expand the market • 33% currently e- file less than 50% their returns • Customer demand and cost-benefit analysis driving practitioners’ decisions on e-filing • Don’t e-file because clients are not interested and benefit not worth the additional effort

  7. Executive Summary • Some current e-filers put off by transmission fees, time investment, and cumbersome application process • But 37% would e-file business returns • Key benefits as incentives to e-file • Tax credits for clients • Ability to electronically access client account status at IRS

  8. Almost all practitioners aware of e-filing (1% unaware) Nearly 60% of e-filers are “heavy” filers --using e-filing for over half of their returns About 25% e-filers file over 80% of eligible federal returns electronically Average e-filer filed 45% of their eligible federal returns electronically Market Definition

  9. Market Definition • Fewer state returns e-filed • Typical e-filer files 29% of eligible state returns • Compared to the 45% of federal returns • 15% e-file over 80% of their state returns • 72% e-file less than half of eligible state returns

  10. E-file Profiles • More likely to be tax preparers than CPAs • Over 40% of e-filers were tax preparers • 30% of e-filers were CPAs vs. 50% non-e-filers • Segments who e-file more than 50% eligible returns: • 56% practitioners <10 years experience • 38% with 10-20 years experience • 27% with over 20 years experience

  11. E-filer Profiles • More likely to work for large firms and file 2-3 more returns than non-filers • Average e-filer firm has 9 tax preparers • Average 3 preparers at non-e-file firms • Over 60% of non-e-filers are the only tax preparer in their firm • Both E-filers and non-filers offer a broad range of services such as bookkeeping, payroll and business consulting

  12. Heavy e-filers tend to focus more on individual tax returns 26% filed more than 500 1040’s in TY98 50% filed more than 190 1040’s Only 5% non-e-filers filed >500 1040’s Heavy e-filers tend to Not charge a separate fee (20%) and include the fee in their tax prep charge (44%) Offer RALS (66%) and, Offer other bank refund products Heavy E-filers

  13. Market Definition

  14. E-file Services

  15. To E-File or Not -- Key Factors

  16. Education is Key • Reasons given for not e-filing point to the need for a campaign to educate taxpayers and practitioners about electronic filing process • Highlight possible improvements in the program

  17. Value Proposition? • Non-e-filers cite insufficient value for clients compared to the increased cost in time and effort to the practitioner and clients’ lack of interest as their top two reasons for not filing • Cited by over 50% non-filers

  18. Information Crucial • Lack of information and discomfort with security issues are significant barriers • ~40% non-e-filers unsure of participation criteria • ~40% uncomfortable sending taxpayer data electronically

  19. Costs & Cumbersome Procedures • E-file transmission fees were the second most frequently cited reason not to e-file by e-filers • Similar numbers of both e-filers and non-e-filers agree that the ERO application process and procedures are too cumbersome

  20. Key Factors

  21. Key Factors

  22. Key Factors

  23. Not e-filing state returns focused more on an understanding of the program and costs #1: Practitioners not sure how the program works (39%) #2: Practitioners not wanting to pay software fee (27%). Additional reasons: Requires too much staff time (23%) Can’t e-file part-year or non-resident state returns (23%) Can’t file multiple state returns (19%) Concerns about e-filing state and federal returns at the same time (15%) State e-file

  24. E-file Increase is Coming

  25. Significant e-file increase for TY99 • Over 60% likely to e-file for TY99 • >40% “almost certain” to do so • Significant increase over 30% currently filing • 42% who did not e-file in TY98 likely to e-file in TY99

  26. Current e-filers will file more • 97% will e-file again in 1999 • 90% responded “almost certain” • 61% plan file more returns • 38% will file the same number • None plan to file fewer returns

  27. Why e-file more? • Customer demand is the leading reason current e-filers plan to e-file more • >50% indicated e-file increase cited increased customer demand as reason • 25% cited increase in their own base of clients • >10% cited increased comfort with the process • 2% expect to file more refund due returns.

  28. Influencers • E-filers are more influenced than non e-filers in incentives • Tested 8 incentives • 3 out of 8 incentives would influence >50% of current e-filers to file more returns • 4 out of 8 incentives would be the best motivator for >30% of non-e-filers

  29. Incentives to e-file

  30. Incentives to e-file

  31. Frequent e-file Program of Interest • 33% overall practitioners interested • 11% of those “very” interested • Marginally rises to 38% if criteria is % eligible returns e-filed • 45% overall practitioners very disinterested • 53% e-filers interested in such a program • 26% of those are “very” interested • 33% of e-filers “very” disinterested

  32. Business e-file Important • Overall, 37% who currently prepare business returns would e-file them • 60% would not, including 49% not at all likely • 55% current e-filers would e-file • 58% heavy e-filers say they would e-file, including • 49% of those with < 10 years experience • 43% of tax preparers

  33. Recommendations • Continue and increase information to practitioners of e-file ease and benefits • Continue and increase taxpayer education of e-file ease and benefits • Reduce procedural barriers • Provide incentive structure

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