I have seen the future of electronic income tax filing and it looks like a mix of the latest technology and old-fashioned hand holding.
First, the high tech. Intuit, the company behind the market-leading TurboTax brand of tax software, recently introduced an app for iPhones that basically allows you to fill out your tax return by photographing your T4 slip.
The product is called SnapTax and, in its early days, it's only for the most ultra basic of tax returns. But in terms of harnessing technology to simpifly one of life's most tedious tasks, it's a marvel.
Okay, a pricey marvel. You can use SnapTax at no cost to get your return ready, but filing it through Canada Revenue Agency's Netfile system costs $9.99. The type of person who would find SnapTax of interest – just income to report and not even a contribution to a registered retirement savings plan – can easily find free tax software online. In fact, TurboTax and competitors UFile and H&R Block At Home may be free to use online if you're a student, if you have an income of $20,000 or less or if you have a very simple return with just income to report. Free for everyone is an online product called StudioTax (studiotax.com).
SnapTax can be a bit of a challenge to work. When it was demonstrated for me by Intuit Canada's Richard McCann, some minor and easily made adjustments were needed for the info that was taken photographically from the T4 slip. Also, getting the photo of your T4 right can be tricky. "I've been doing it for a while and I'm pretty much getting it on the first take," Mr. McCann said.
Intuit is targeting tech-savvy 18- to 35-year-olds for SnapTax. Here's a bet they'll have no problem paying almost $10 to use it, even if a free alternative exists.
By the way, Mr. McCann said RRSP contributions are at the top of the list of features to be added to SnapTax, but don't expect much more than that. "The nature of an app means it's supposed to be easy," he said. "So inserting 50 questions into it, frankly, makes it become something people probably don't want to use."
For the 2011 tax year, Intuit is also adding some hand-holding to electronic tax filing. Customers now have access to free tax advice over the phone or online chat from accountants, MBAs and experienced tax preparers who are available 24/7 until May 4.
These days, the tax software market is dominated by TurboTax, UFile and H&R Block At Home, all of which offer desktop products and an online service. If you don't mind filing online, there are about 20 other options. I haven't tested all the various choices, but my sense in hearing from users is that they all get the job done for you in more or less the same way. The main differentiator has up until now been how much online guidance they provide as you work your way through your tax return.
Now, there's also the level of support provided to users to set the competitors apart. While UFile and H&R Block mention the availability of customer support on their websites, they don't go as far as TurboTax's offer of "Free tax advice from real Canadian tax professionals."
The free advice offer also allows TurboTax to go up against the store-front tax preparers who sprout up at this time of year to serve people who don't feel they can complete their own tax return. "We have would-be customers out there who have historically been going to tax stores, and we don't think that's a great experience," said Jeff Cates, managing director of Intuit Canada. "Taking time off during the day to spend two to three hours lining up in a strip mall isn't really how most people want to do their taxes."
Free tax advice in no way replaces the services of an accountant, though. "This is really about guidance," Mr. Cates said. "Say, if you have kids and you want to take advantage of the children's fitness tax credit and you want advice on which spouse should claim it." All conversations between TurboTax experts and customers are recorded, and Intuit will reimburse customers for any penalties or interest that result from incorrect advice.
Figures from the Canada Revenue Agency show that 10.2 million tax returns were filed on paper last year. Between SnapTax and the free advice available with TurboTax, there's more reason than ever to file electronically.
TAX SOFTWARE
DESKTOP
H&R Block At Home, $29.99, 16 returns
TurboTax Standard, $37.99, 8 returns
TurboTax Premier, $59.99. 12 returns
Ufile, $19.99, 8 returns
Ufile Plus, $29.99, 16 returns
ONLINE (a sampling)
H&R Block At Home Online, $15.95 per return/$10 for spouse
TurboTax Standard Online, $17.99/return
Ufile Online, $15.95 per return/$9 for spouse
StudioTax, Free
FOR IPHONE
SnapTax, $9.99/return
See a complete list by clicking here
Which Product is Best?
Members of Rob Carrick's Facebook personal finance community offered their views on the best software for completing your tax return. Read them here. (You can join the community by clicking the Subscribe button.)
Rob Carrick