Tax Filing Via Smartphone? Consumers Not There Yet: ADI
Millennials may prefer their smartphones and mobile devices overall, but when it comes to taxes, they use their desktops, just like Boomers and Gen Xers. That’s one of the findings in a new report from Adobe Digital Index, which looks at the 2016 tax season.
Millennials may prefer their smartphones and mobile devices overall, but when it comes to taxes, they use their desktops, just like Boomers and Gen Xers.
That’s one of the findings in a new report from Adobe Digital Index (ADI), “Tax Day Digital Insights,” which looks at the 2016 tax season. Other data from the research supports that filing kicks off in earnest in early February, only after all the required forms (e.g., W-2s, 1099s) come trickling in, and there’s a rush to fund IRAs and get credit close to the April 15 cutoff.
To understand how tax season plays out, ADI analyzed 1.2 billion visits to tax-filing sites, 86 billion visits to banking sites, and 9 billion visits to retail investing sites between January 2015 and March 2016. ADI also surveyed 1,000 U.S. consumers and looked at 600 million impressions on blogs and social media.
Desktop Still Rules
Until fairly recently, doing taxes meant being holed up with paper documents and an adding machine for hours or days. Now online tax filing is common. ADI’s survey shows that 65% of consumers filed online last year, and 70% of online filers found the process “easy” or “very easy.”
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But such easy filing remains a desktop activity, despite the efforts of tax-filing brands. Intuit, for instance, ran an ad in early January in which Nobel laureate George Smoot shows a clueless millennial how to use the company’s smartphone app.
Despite the technological progress to mobilize and streamline document collection, consumers haven’t gotten the message, at least in this tax season. As of the end of March, only 11% of consumers who filed online used smartphone apps, and 6% used tablets, according to ADI.
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According to ADI’s consumer survey, millennials were more likely to use multiple devices for online tax preparation. Although they tended to supplement with smartphones, they employed their desktops at an equal rate to Gen Xers. “With document-laden tasks like tax filing, millennials buck their own trend,” said Matthew Roberts, senior analyst for ADI. About one-fifth of them still file via paper and snail mail, he added.
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“Companies invest a lot of money building mobile apps nowadays, but it takes an ongoing and sustained marketing effort to inform users about the new features in the apps. This is a perfect example of a great technology solution that consumers don’t know about,” said Tamara Gaffney, principal analyst at ADI.
A Longish Process
ADI’s data shows that the online tax-prep business is maturing—i.e., growth is slowing—as online becomes the norm. Per ADI, online visits to tax-prep sites has grown 14% so far this year, which is a 12.5% slower growth rate than at the same point last year. More smartphone use could spark another wave of users for this industry, according to ADI.
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And whether online or offline, tax filing remains a longish process. For most consumers, the process usually starts in earnest around Feb. 2, Groundhog’s Day. At that point, most W-2s and 1099s have been received. In terms of days of the week, Monday is the most popular day to start filing, according to ADI, but Sunday is the most popular for completion.
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“Tax filers would appear to prefer taking care of business during the work week but find themselves spending precious weekend time to complete the task,” Roberts said.
With the majority of consumers seeing online filing as easy, the challenges of tax preparation seem to be more around gathering all the necessary paperwork before completing the filing. “The tools exist to create a central repository for all the documents and all the information consumers have to pull together,” Roberts said.
Despite that obstacle, 44% of consumers said they complete their taxes a few months before the filing deadline. Millennials are most likely to report procrastinating; some 22% said they start only a few days or less before the filing deadline.
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A Tale Of Two Tax Days?
The pattern of filing shows that there are really two tax days. Those who anticipate a refund—some 80% of Americans get money back on their taxes, with the average refund around $2,800, according to the IRS—have strong motivation to get their acts together early. For these fortunate consumers, their filing activity—their real tax day—is early February. For those who anticipate owing, their day remains the official filing deadline, which this year is April 18.
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For those who can’t wait to get their refunds, some credit-card companies offer refund anticipation loans that get consumers their refunds a week or two faster than the government. (Such companies charge interest for the expedited refunds.) That has been a boon to credit-card companies and other creditors. According to ADI data, credit application starts increased 31% during the 2015 tax season.
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Those who expect to owe money, meanwhile, often take advantage of the mid-April deadline for putting money in an IRA to lower their taxable income. From Jan. 1 through March 30, 2015, consumers opened IRAs at three times the normal rate, according to ADI.
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Talk on social media, of course, follows “real life.” In addition to posts about opening up IRAs and applying for credit, many consumers are chatting about their tax filings. The South leads the rest of the country for such mentions, which include such harsh hashtags as #identitytheft and #refundfraud. Those in the West, however, are more apt to take to social media to talk about their tax refunds.
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According to Roberts, much of the social media posts revolve around anticipated refunds not going toward a great new purchase or vacation, but to far more mundane things, such as paying off debt or property repair, thus yielding a negative sentiment.
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The age-old wisdom is that tax refunds are a shot in the arm for the economy, but the social media buzz reflects that a lot of tax refunds probably go to servicing previous obligations rather than net new spend. While some brands may benefit—those that sell necessities such as new tires or home-improvement items—most don’t.
“The social chatter we are picking up about the lack of spending on discretionary purchasing could be bad news for marketers hoping to cash in on refund spending this year,” Gaffney said. “Marketers should always be watching this type of social trend to guide their strategy.”