Millions of Americans were expected to file their federal taxes online this year, providing evidence that as a country we are feeling more positive about Internet security. This dramatic increase in online tax filing bodes well for ecommerce owners. After all, if Americans are willing to trust the internet with their personal tax information, then security concerns related to online shopping (where such concerns still exist) shouldn’t be difficult to overcome.  It’s still important to have your privacy policy posted in a prominent place on your web site as an added security blanket for consumers.

In 2006, 49 million tax returns were filed online and that number was expected to increase exponentially this year. Recent surveys indicate that 39 percent of consumers intended to file their 2006 taxes online, up from 28 percent just three years ago.

Why are Americans willing to take this calculated risk? Speed, convenience and choice have apparently won out over security fears and concerns according to Lynn Franco, director of the Conference Board Consumer Research Center. “Whether using professional tax services or do-it-yourself software, electronic filing continues to grow year after year.”

Online filing is particularly attractive to people who are getting refunds, because it allows your money to be in your account much faster than if you filed paper returns. This year, the IRS offered consumers the option of splitting their refunds among up to three accounts. Last year more than 70 percent of online filers chose to receive their refunds by direct deposit. If you owe money to the IRS, payment can be made online through a new Electronic Federal Tax Payment System web site at the following address:  www.officialpayments.com.

According to a recent article published on webpronews.com some of the advantages of filing online include:

• Speedier refunds: When filed electronically refunds can land in your bank account in a matter of days as opposed to weeks when paper returns are filed.
• Direct Deposit: This year the IRS will allow you to spread your refunds among up to three bank accounts. This added convenience has great appeal to consumers.

• Acknowledgement of returns: Receipt of online returns is confirmed using an electronic acknowledgement system. This assures consumers that their returns have been successfully received and that the processing can begin.
• Fewer errors: Statistics show that while electronically filed returns have very few mistakes, more than 12% of paper tax returns have some sort of error. If you have ever experienced the nightmare of an error on your tax return then you understand why this is so important.
• Easy to use: Tax software and web sites that allow consumers to prepare and file online are getting easier to use every year. This comes as a welcome relief for technophobes and encourages more Americans to take advantage of online filing.

While you put yourself at some degree of small risk any time you share personal information on the internet, the IRS assumes some of the risk associated with online filing. A troubling report published by the U.S. General Accounting Office several years ago identified critical weaknesses in the handling of online taxpayer information. Every cloud has a silver lining and the report was no exception. After the report was published the IRS initiated an intense online security effort that has led to significant improvements in the ability to keep personal information safe.

If you have your online tax returns prepared by a professional, they will manage some of the security risk. The IRS requires that these companies obtain third-party privacy and security certification. The IRS also monitors their security measures to ensure compliance.

At any rate, it will be very interesting to find out exactly how many consumers filed online. By all indications the number will be huge. Take this as a good omen and make sure your ecommerce site is ready to accommodate this new breed of American who is apparently feeling better every day about doing business online.