Financial companies are trying to make tax season a bit less taxing for people who bank online.
Filling out tax forms has long been a labor-intensive chore, but some vendors are now connecting personal financial management software to automated tax-preparation applications. Bankers say the combination simplifies the filing process and increases customer loyalty.
"If somebody is going to one Web site to manage their finances, and they go to another Web site to do their taxes, and they go to another Web site to do their banking, you don't build up that relationship, and you don't necessarily keep those customers," said Bob Powers, a first vice president with Byron Bank of Byron Center, Mich.
Byron Bank last month began offering a version of Intuit Inc.'s widely used TurboTax software that is integrated into its online banking software. Powers said the financial company is hoping the application will cut attrition rates.
"Could you do" your taxes in "other places? Of course you could," Powers said. But combining the tax software with the financial data in its PFM application "just makes it easy to use, and that's what we're striving for."
Byron Bank, a unit of OAK Financial Corp., has used Intuit's FinanceWorks personal financial management system for about two years, and has marketed its TurboTax software as a stand-alone product for nearly as long.
When Intuit rolled out a December update to FinanceWorks, it included the integrated version of TurboTax, which 1,200 of its bank clients now offer to customers.
Though Byron has only been offering the software for a few weeks, Powers said he was "really surprised" by the positive reaction from customers this early in the tax season.
Intuit said that the integrated version of TurboTax would have more financial data to work with when paired with the company's FinanceWorks PFM system, but it can also be purchased by banks that use neither FinanceWorks nor Intuit's Digital Insight online banking system.
Intuit is not the only vendor that wants to offer automated tax services to banks.
Yodlee Inc. announced last week a deal to connect its PFM software to the tax-preparation software of H&R Block Inc. of Kansas City, Mo. The combined product will be available by next year.
Jason Houseworth, the vice president of client innovation at H&R Block, said that although his company already offers online tax-preparation, it would hold more appeal if banks were involved.
"What we really want to be able to do with Yodlee is to integrate these offerings where consumers want to do their personal finances," at their banks, Houseworth said.
Last year, nearly 29% of H&R Block's retail customers used online or desktop software for part or all of their tax preparation. The company hopes to attract even more online users by making its tools accessible through banks.
Joe Polverari, Yodlee's senior vice president of strategy and development, said banks could choose to charge a fee for the service on top of what H&R Block charges, but there are also benefits from offering the service for free.
"Just the retention and the loyalty aspect alone is enough for the bank to want to help subsidize this," Polverari said.
Banks that use Yodlee software could allow customers to pull in transaction data from multiple accounts, including those at rival banks. Because all the data is collected in one spot, the software can then single out, for example, charitable donations and other transactions that need to be documented before filing one's taxes, he said.
The H&R Block software would then use this data to begin filling out a user's taxes automatically. The system can also tap into H&R Block's Best of Both service, which allows customers to begin their taxes online and finish with a person.
Houseworth said the H&R Block/Yodlee system would also include features that enable people to predict their tax liability well ahead of tax time.
Albert Ko, the senior vice president for consumer solutions at Intuit's Digital Insight online banking unit, said: "What we've done is automate substantial portions of the tax-prep experience. … It's all right here because I've used a financial management tool."
Intuit does not have a tax-forecasting feature now, but is testing one to include next year. Its planned TaxCaster system would let users predict how their current and planned transactions influence their tax obligations, using sliders that people can move to see how changing specific values can affect their tax liability.
Intuit currently uses Yodlee's technology as part of its Mint PFM offering, but it plans to switch Mint to its in-house system this year.
Mark Schwanhausser, a research analyst at Javelin Strategy and Research, said that most customers would not sign up with a bank for its TurboTax or H&R Block integration, but he agrees that such features would make it harder for customers to leave.
Tax preparation "just tightens the connection," he said. "From a loyalty point of view, that is a huge piece of the ROI."
Nicole Sturgill, the research director for delivery channels at the research firm TowerGroup in Needham, Mass., said that any banks that have access to one of these systems through an existing relationship with Intuit or Yodlee would be wise to offer tax preparation to their customers.
"If it's a streamlined service and they do the integration well, it can't hurt," she said.
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