IRS E-File Sparks Use of Other Web-Services

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After all the hype and promises of IRS e-filing, this year with millions of returns expected to be entered online (for free) and electronically sent, e-file is a reality. While this is good for the IRS, vendors of other online business services are starting to benefit.

After all the hype and promises of IRS e-filing, this year with millions of returns expected to be entered online (for free) and electronically sent, e-file is a reality. While this is good for the IRS, vendors of other online business services are starting to benefit.

The IRS has made a deal with many of the large online tax services (TurboTax, TaxAct, etc.) where the government will pick up the tab if the taxpayer does their tax online and e-files. The program has been popular with individuals and businesses. While traditional desktop tax software costs from $30 to $50, doing taxes on the web is free or lower in cost.

The IRS e-file project has given a boost to services that promote an online subscriber software approach as opposed to the traditional buy, install, and update desktop software model.

Online web-services, which are often called webware, were first made popular by the Internet stock brokers like Ameritrade. The concept spread to banking, then to payroll services like PayCycle (http://www.paycycle.com) and now to the back-office environment. Back-office functions like order-entry, billing, reporting, and accounting can be done online with services like Jaya123 (http://www.jaya123.com) and Oracle's OnDemand system.

Webware has been slow to gain traction due to concerns of security and the lack of inexpensive high-speed connections. But in the past year, the security issues have been dealt with and a majority of internet users now have broadband cable or DSL.

With the huge number of people using the free tax prep web-services, the confidence factor has increased. This is especially true for owners of small businesses who have long understood the advantages of using online services but have been reluctant to do so.

The advantages of webware are several. First, there is no capital outlay. Second, there are no install issues. Third, access can be made anywhere in the world. Fourth, since all data is on the vendor's server, backup is done by the system. Finally, any computer or software platform can be used, as long as it has a browser.

"The acceptance of online tax filing is just the break we've been looking for," says Alan Canton, president of Adams-Blake Company, the provider of the Jaya123 service. "We've seen a huge increase in interest in Jaya123 since the start of the year."

The 'security and trust' issues have been paramount, says Canton. But things are looking up in the web-service sector. While desktop programs like Great Plains Accounting won't disappear, after experiencing the ease of online tax filing, many small and medium size business are looking at switching to webware for other business tasks.

When asked about security, webware providers answer that a well maintained, locked-down server running a well-engineered web-service is more secure than the small-business office network. Webware vendors also point out that most servers have a better record of continuous service (called 'uptime') than office desktop computers.

While some webware services are expensive, many are less than $20 a month: an advantage for the start-up or home-based business.

"The IRS is helping to 'educate' small and medium sized businesses to the value of using the web for accomplishing the mundane back-office tasks. I never thought I'd ever say 'thank you' to the IRS," says Canton.

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Jennifer Church