1 Taxpayers, Trends, and the World Wide Web Larry Wolfe Senior Vice President Intuit Inc.

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

3 The Creation of Empires Internal Combustion Engine Semiconductor Internet u Auto industry u Oil industry u Fast food industry u Consumer electronics u Enterprise software industry u PC industry u Electronic Finance u Many more to come...

4 Internet Impact: There are waves… and then there is a tsunami Users (Millions) Radio TV Cable Internet Source: Morgan Stanley. Years to reach 50 million users

5 Source: 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 (its a 90s thing…) Internet Opportunities for Various Product and Service Categories Consumer Comfort with Buying Online Internet Business Opportunity

6 Waves of Technology Institution ¶ Enterprise Computing Automate the Back Office Citizen · Personal Computing Automate the Customer ¸ Connected Computing Automate the Communication

7 Institutions Businesses The Paper Chase Consumers

8 Phase One: the Computer Businesses Institutions Consumers

9 Phase Two: the Internet Businesses Institutions Consumers

10 Electronic Finance of the Future Will Be: Connected Interconnected Delivered via the Net Interconnecting key parts of the financial picture Meaning Goal…save time, save money

11 Internet Trends u Consolidating Force ä Search / News / Sports / Books u High Fixed / Low Variable Costs ä Volume Players Win u Requirements ä Size (Relative Scale) ä Speed (Time to Market)

12 Will Taxpayers Adopt? u Wave 1: Desktop Software ä Personal finance ä Tax preparation ä Small Business u Wave 2: Web-based Software ä Credit Card Usage on the Net ä Financial Data on the Net ä Financial Activity on the Net u Access and Means

13 Roles u Taxpayer ä Voluntary compliance l Return self prepared l Return professionally prepared ä Files tax return l Electronic, mail, telephone ä Pays any tax due l Via paper or electronically Technology Shifts: è Paper to PC to Internet è Recent growth of e-file è Paper to e-pay

14 Roles u Professional Preparers ä Gathers data from taxpayer ä Prepare tax return for taxpayer ä File tax return ä Provide tax advice ä Provide support u Software Industry ä Technology investment & innovation ä Tax preparation tools l Gathers data from taxpayer l Calculate, review return l Access to tax help and publications l Tools for filing return l Provide tax advice l Provide support Technology Shifts: è Service Bureaus to desktop to Internet

15 Roles u Government ä Collect revenues for public treasury ä Develop and oversee tax regulations ä Audit and enforcement ä Provide information and services to citizens Technology Shifts: è Paper and Telephone to Electronic Information Services over the Internet

16 How Will This Succeed? Partnering. Citizen Businesses Government Financial Institutions Technology The Old Days The New Days

17 Public/Private Partnerships u Government and Industry working together in Public/Private Partnership ä Cooperation, not competition u Common goals u Mutual Commitment

18 The Consumer Finance World Banking Taxes Mortgages Investments Bills Financial Information/News K Insurance

19 Banking Mortgages Investments Bills Financial Information/News The Electronic Consumer Finance World Taxes Insurance

20 The Income Tax Process Checkbook Taxpayer IRS States Banks Tax Preparer Mutual Funds Brokerage House Employers

21 The Electronic Income Tax Process Taxpayer IRS States Banks Employers Mutual Funds Brokerage House Server WebTurboTax Tax Preparer E-file Server

22 Electronic Returns Filed TY94TY95TY96TY97TY98 Returns (000)

23 Electronic Returns Filed

24 The Small Business World Small Business States Customers Suppliers Bank Distribution Channel U.S. Govt Employees Accountants

25 States Customers Suppliers Bank Distribution Channel U.S. Govt Employees Accountants The Electronic Small Business World Small Business

26 u Lower cost ä Taxpayer and government u Real-time information u Instant record updates u Zero data entry, improved accuracy ä Taxpayer and government u Taxpayer controls finances easily ä Individual or business Why Interconnected Finance? Benefit

27 Getting to E-File Goals u Eliminate ALL barriers ä Allow all returns to be e-filed ä Eliminate all paper requirements ä Enable electronic payments (debit & credit) ä Squash the perception of higher audit risk ä Implement electronic postmarks ä Simplify ERO signup process l Simplify application process l Treat all preparers equally ä Be careful about digital signatures

28 Getting to E-File Goals u Provide incentives for taxpayers and tax preparers ä Warehouse electronic payments l Preferably until after April 15 ä Provide online customer service ä Reduce audit period for e-filed returns ä Enable electronic correspondence ä Allow direct account access and enhanced status information ä Dont speed up paper processing

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

30 Where Is Government Today? u Technology is enabling development of ä On-line information services for citizens ä On-line customer service capabilities l Web-knowledgebase l Account information ä On-line forms and publications ä Open model for electronic filing ä A host of internal services (e.g., audit and compliance)

31 Where Should We Be Going? u Public/Private partnerships ä Industry can and will innovate ä Government can and should facilitate u End result…..everybody wins ä Taxpayers, Government, and Industry l Competition results in better products l Competition results in lower prices l More returns are e-prepared and e-filed

32 u Example: Quicken Tax Freedom Project ä Donated Web-based tax preparation and e-file services ä No charge to taxpayer or government u Partnership Recommendations: ä Public Awareness and Education Campaigns ä Agencies educating taxpayers about no-charge preparation and e-file services ä Reference all providers of services Public/Private Partnership