Tax Poll: Public has doubts about privacy of electronic tax filing

By WILL LESTER, Associated Press Writer

WASHINGTON (AP) - More than a third of the American public has doubts about the security of filing tax returns electronically, despite government encouragement of this growing practice, an Associated Press poll finds.

The doubters range from people like 71-year-old Jack Hurst of Los Angeles who says he doesn't know anything about the Internet to 48-year-old Gerhardt Kasper of south Florida who says he knows too much.

The poll, conducted for The AP by ICR of Media, Pa., found 57 percent say they wouldn't worry about the privacy of their financial information when filing online, while 36 percent say they would worry.

"I like to put it down on paper," said Hurst, who is semi-retired and does not own a computer. "I don't like to have it floating around in the air."

Kasper, manager of a service company who lives in Delray Beach, Fla., said he isn't convinced that the Internet "is a secure platform." While he feels the technology isn't fully developed for secure transmission, he's more worried about human error.

"There are usually two idiots, one at either end of the line - the sender and the receiver," Kasper said.

Nevertheless, the number of people filing taxes electronically is increasing. The Internal Revenue Service says about 30 million, or one-fourth of tax returns, were filed online last year, and they expect that to grow by close to 4 million this year, said Steve Holden, an IRS official who handles electronic tax administration. In the AP poll, almost one-third of respondents said they expected to file their tax returns electronically this year, slightly higher than IRS projections.

"There are still some lingering concerns that are deeply seated," Holden said. "Not just about e-filing taxes. The concerns will go down as taxpayers and consumers get more comfortable with e-commerce."

A 1998 IRS reform law set a goal of 80 percent filing electronically by 2007, but IRS projections earlier this year said that only about half of all returns will be filed electronically by that year.

With the tax deadline approaching Monday, the IRS emphasized that people who file online have the advantage of getting their refund in half the time of paper filers and that tax software catches many errors, making the error rate in online returns far lower.

A third of the people in the AP poll said they would be more likely to file returns electronically if it meant they could get tax refunds quickly, while six of 10 said it would make no difference. The telephone survey of 1,002 from March 30 to April 5, had an error margin of plus or minus 3 percentage points.

Young adults seemed less concerned about the security issue. With 65 percent of those ages 18 to 34 said they would not worry about their tax information online, compared with 46 percent of those 65 and older. One in six of the older Americans said they simply did not know whether to be worried or not.

A small but growing number of people are not only filing their taxes online, but are preparing them through the Internet rather than on software installed in their desktop computers.

It's extremely safe to prepare taxes on desktop software and then file them electronically, said Robert Sterling, an online analyst who specializes in financial services.

By contrast, it's more of a risk to prepare those tax returns online, he said, because "your file is on an Internet-exposed server, 24 hours a day, seven days a week for weeks or months."

Bob Meighan, vice president of the consumer tax team at Intuit, a major provider of tax preparation software, said the 1.1 million tax filers who have already prepared and filed online using the company's "Turbotax for the Web" this year are a testament to the public's growing comfort with the Internet.

The online tax industry experienced problems earlier this year when a programming glitch allowed about two dozen H&R Block customers to read other people's financial data. The company said its system is running fine after repairs.

Problems with online security are more an exception than the rule, Sterling said.

"They shouldn't be that concerned about it," Sterling said. "It's probably more secure than sending it through the Postal Service."