Computer Aid During Taxing Times : Taxes: Softview Inc., an Oxnard maker of tax preparation software, hopes to cash in on the IRS push toward electronic tax filing.
Kathleen Lane, president of Softview Inc., an Oxnard computer software company, is wagering that her company will make a bundle on the Internal Revenue Service’s campaign to encourage taxpayers to file their tax forms electronically, instead of by mail.
Until now, Softview, with $3.8 million in sales last year, has grown nicely by becoming the only company that makes a complete tax preparation software kit that works on the popular Apple Macintosh home computer. Its tax software, called MacInTax, costs about $100.
Tax preparation software is a promising field, with more than 100 firms in the business. Instead of taking their taxes to an accountant, people with Macintoshes can use MacInTax to calculate their debt to Uncle Sam. The software puts simulated tax forms on the computer screen, calculates an individual’s taxes based on information that is punched in on the keyboard, and prints out finished tax forms, which the taxpayer then mails to the IRS.
Softview is hoping to double its sales this year by getting into the electronic tax-filing business. The IRS, in hopes of becoming more efficient, is urging taxpayers to file their forms electronically. In 1989, about 1.2 million taxpayers filed their forms electronically, but the IRS hopes to lure about 100 million people by 1994. The IRS says electronic tax filings cut down on errors: About 16% of tax returns filed through the mail have mistakes, compared to about 3% of electronic filings. Part of the reason, the IRS says, is the electronically filed reports are more likely to have their math computer-checked.
Why would taxpayers bother with electronic tax filings? Simple: It might speed up their tax refunds. A spokesman for the IRS said electronic filings could reduce the turnaround time for a refund to four weeks, from the current wait of up to three months for those who file by mail. The IRS has only begun to experiment with electronic filing for taxpayers who owe the government money because of the difficulty of taxpayers making electronic payments.
Softview has teamed up with a San Diego firm called InstaTax, which for a $30 fee, will take the information sent by Softview’s customers and have it electronically dispatched to the IRS. InstaTax has been transmitting tax forms to the IRS since last year, whether they were calculated using tax preparation software or just the old calculator method.
Softview’s deal with InstaTax calls for it to receive a percentage of that $30 transaction fee. And Lane said, “Electronic filing will be a big impetus to tax preparation software. You have to key it in somehow.”
As an extra service for electronic tax filing, for another $70 or so, InstaTax will arrange an advance tax refund of up to $3,000. The advance refund is handled by a banking subsidiary of Sears that lends taxpayers the amount they expect in a refund from the IRS--so taxpayers get the refund in about three days instead of about four weeks. When the IRS refund is sent out, it goes to the Sears subsidiary, which deducts the “refund anticipation loan” and sends the rest, if any, to the taxpayer.
InstaTax, which last year transmitted about 9,000 forms to the IRS, expects to transmit as many as 9,000 forms each day until the April 15 tax deadline.
But Softview isn’t alone among software companies looking to capitalize on the electronic filing of tax forms. Softview’s biggest competitor in tax software for home use is San Diego based ChipSoft Inc., which makes TurboTax, a program for IBM-compatible personal computers. Two years ago, ChipSoft began to sell software that allows tax accountants to reformat their tax forms for electronic filing by a Green Bay, Wis. company called Nelco.
But while ChipSoft and Nelco specialize in tax preparation professionals, InstaTax President Donald Cook said his company is the only one in the country offering people who do their own taxes the opportunity to file electronically.
In part, that is because ChipSoft is not as excited about the electronic tax market as Softview and InstaTax. “It’s an immature industry,” said Rik Barnes, ChipSoft’s marketing director. “I think it’s real hard to predict how fast it’s going to grow.” If the market grows fast though, Barnes said, ChipSoft won’t have any problem getting a bigger share of it.
ChipSoft already dominates the tax software market for IBM-compatible computers, and projected last year that it would do more than $10 million in sales in 1989.
But Softview has been thriving as well and is the leading seller of tax software for Macintosh computers. According to MacUser magazine, Softview is the only maker of software that by itself allows users to do their taxes on a Macintosh. Other companies make software that can be used to supplement “spreadsheet” programs, making them work like tax preparation software.
The InstaTax and Softview electronic tax filing works like this: Taxpayers who have completed their own tax forms will mail or send a facsimile of the return to InstaTax. Then InstaTax, using Softview software, key-punches the tax returns into a computer. InstaTax will ship the tax data to another firm, which electronically relays the information to the IRS.
Softview owes its existence, at least in part, to a $4,000 mistake by Burroughs Corp. In 1984, Burroughs paid one of its programmers, Susan Morgan, about $4,000 more than she expected in maternity benefits. Morgan decided to use the money to buy a Macintosh home computer. (She eventually repaid Burroughs).
Morgan’s husband, Michael Morgan, a programmer for Northrop Corp., came up with the idea of Macintosh software that would display and print out realistic versions of IRS forms. After he had worked on the idea for a few months, he quit his job at Northrop and worked on the software full time.
In the next few months, Susan Morgan made the rounds of computer clubs and persuaded members to invest about $80,000 in the Morgans’ idea through limited partnerships. Meanwhile, the Morgans raised $20,000 to $30,000 from relatives. That was enough to produce 500 sets of the software to sell in the spring of 1985. After several years as president, Susan Morgan brought Lane on as president of Softview in 1988 so she and her husband could concentrate on software development.
