TaxACT At-A-Glance

Q:  What shall I list as being 2nd Story's company information for publication?

A:  Included below is a quick reference table containing general company and contact information.

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Q:  What is 2nd Story's primary goal and mission?

A:  Our primary goal is to provide high-quality tax software at an affordable price. This is accomplished by delivering the utilities, support, and attention that is required to build long-lasting relationships. Thus, our success has been built on our team's foremost commitment to designing the tools and services that empower people to make well-informed financial decisions with ease, while looking out for the cost-conscious.

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Q:  Isn't 2nd Story backed by a large, private equity firm? Has there been any change to the product line because of this transaction?

A:  March 30, 2005, 2nd Story Software and TA Associates, a leading private equity firm located in Boston, MA., announced the completion of an $85 million recapitalization - making TA Associates a major investor in 2nd Story. 2nd Story's founding owners have maintained a significant minority interest; and, continue to run the company 'business as usual'.

2nd Story Software, Inc. remains to be a privately held company. For 2nd Story, a company that has been profitable since commencing business, recapitalization means having a greater ability to build upon TaxACT's success by delivering an expanded host of products and services.

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Q:  Is TaxACT exclusively available as Web-based software?

A:  No. Although TaxACT's Web-based platform is the fastest growing segment of our customer base, TaxACT desktop editions continue to be a significant part of our business. Desktop software may be ordered on the Web at www.TaxACT.com or by contacting 2nd Story's sales center, which is located in Cedar Rapids, Iowa. Our direct sales number is 1-800-573-4287.

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Q:  Is a TaxACT customer's data secured; and, does 2nd Story sell any of the information that it collects?

A:  Customer information is safe and secure with TaxACT. Our technology is protected by state-of-the-art firewalls and all personal data is transferred via industry-standard Secured Socket Layers (SSL) encryption to transmit data.

Encryption is the process that ensures personal information cannot be read or manipulated by an unauthorized party during transit. Data being sent from a TaxACT user's PC is encrypted (scrambled) during transmission and is stored encrypted. The same goes for information traveling in the other direction (i.e. from 2nd Story to parties it communicates with electronically like the IRS and credit card processors,).

There are two levels of encryption commonly available on the market today: 40-bit and 128-bit encryption. While both types offer a level of protection high enough to use and securely prepare an online tax return, 128-bit offers a far higher level of encryption that 40-bit. In order to provide even greater protection of personal and financial information, TaxACT requires its Web-based users to use a browser with 128-bit encryption.

Moreover, all information entered by customer while using TaxACT is used strictly by 2nd Story Software, Inc. to provide the services requested by our customers. We maintain physical, electronic, and procedural safeguards to protect your personal information. (More information regarding our company's Privacy Policy and our practices may be found by visiting http://www.taxact.com/privacy_policy.asp.)

The bottom line is that we believe that protecting the privacy of our customers is paramount to maintaining the satisfaction and security of our users. Therefore, TaxACT does not sell or rent a customer's name or other personal information (including email address) to any third party. Likewise, TaxACT does not employ spyware, adware, product activation technology or other privacy-invading software. We are certified by TRUSTe and are members in good standing with the Better Business Bureau.

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Q:  Why don't I see TaxACT offered in retail outlets like Office Max or Staples?

A:  As you can imagine, we hear that question quite often. The simple reason is that, by eradicating expensive marketing initiatives, we by-pass the marketing channels that cause price increases. Sure, retail is a great way to gain brand recognition. Conversely, selling products via the retail channel tends to cause pricing inconsistencies and increases - a concept that is completely outside of our value-vision.

By eliminating the middleman and emphasizing TaxACT's distribution direct to its end-users via the Web, our customers never need to shop around for the "best price". Plus, we are able to consistently offer our premium wares at rates that are far less than what the other tax software producers promote - even after their rebates have been applied.

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Q:  TaxACT Standard is Free? Nothing is really free, is it?

A:  Yes, "free" means "free" at 2nd Story. With TaxACT Standard, it's free to prepare, print and electronically file a federal return - no gimmicks, restrictions, fine print, or rebates to mail.

It's no secret that the tax preparation software business is an extremely competitive niche in the finance industry. Simply put, we understand that stamping the buzzwords "Fast, Easy, and Accurate" on our package does nothing to distinguish TaxACT's ability to ease the burden of preparing and filing tax returns - nor should the shear number of TaxACT users impress you.

Sure, we realize that some of our customers may only need to use our free product - and we're glad to help. However, by eliminating the financial risk to try TaxACT and by developing TaxACT's functionality so that the comprehensive suite of products addresses the vast majority of tax situations that taxpayers face, we believe that TaxACT establishes the trust necessary to allow us to continue serving our customers as their tax situations have changed or grown more complex.

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Q:  I still don't buy that you offer a completely free product. For example, doesn't it still cost TaxACT users to buy TaxACT 1040 State Software? Besides, I bet you push other more costly products.

A:  Even though we announce the availability of other TaxACT products to our Standard customers, we do so to ensure they use the TaxACT products which best match their needs. What we don't do, is entice our customers into using services that will diminish their tax refunds, such as Refund Anticipation Loans (RALs), or Pay-Day Loans. Likewise, TaxACT customers are not tempted to buy coupons (which entail a registration fee) with their refund for goods and services like computers, accessories, dining at restaurants, cruises, etc.

TaxACT does, however, offer value beyond its free Standard Edition. For example, TaxACT Online Standard users can elect to purchase TaxACT Online 1040 State ala carte - a software service option, which also includes one (1) free state e-file. Those choosing to purchase a TaxACT Online 1040 State Edition do so because TaxACT States are fully integrated with all Federal 1040 versions of TaxACT - helping them to conserve time and money, eliminate the opportunity for costly mistakes to occur, while ensuring they receive a speedy refund.

Another option available to TaxACT Online Standard and Online Deluxe Edition users is to upgrade to TaxACT's best value package - the Online Ultimate Bundle. Our Online Ultimate Bundle includes TaxACT Online Deluxe and Online 1040 State software; and, includes the ability to e-file one (1) federal and state return - for a cost less than what our competitors charge to e-file a single return.

Important to stress, however, is that we do not require our Standard users to purchase one of our at-cost products in order to use our free software.

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Q:  Let's face it, TaxACT's free Standard offer is under significant pressure from the IRS' Free File Program.

A:  2nd Story is proud to be a participating member and industry leader in helping to advance the IRS' public - private partnership agreement with the Free File Alliance. However, our participation in the Free File Alliance in no way alters our corporate culture or vision.

Over the years, TaxACT's free offer has flourished - gaining significant market share. Point of fact, according to week end-reports provided by Hitwise.com, for three consecutive tax seasons (2004, 2005 & 2006) TaxACTOnline.com has been the 2nd highest trafficked online destination for tax preparation services. (See 4-Month Combined Traffic Table for Q&A labeled "If you could tell me only one thing that I didn't know about TaxACTOnline.com, what would that one thing be?")

What makes our free offer so unique? The key factors are simple: TaxACT Standard enables all American taxpayers the ability to prepare, print and e-file their Federal return at no-charge - no restrictions, no exceptions to the rule, no gimmicks, and no fine print.

Since its inception, 2nd Story has very much been a progressive company as we pioneered the concept that everyone can use free tax software to prepare their own federal return.

As of late, senate members who sit atop the Finance Committee have questioned the IRS' motivation by imposing restrictions to the offers made through the Free File Alliance. Independent of the eligibility criteria established by the IRS and the consortium of companies for American taxpayers, TaxACT demonstrates its belief that no American taxpayer should be obligated to pay fees for basic tax software calculations or, to e-file a federal return. This is a real testament which validates a software company can succeed by scaling its fees accordingly for its value-added software features.

After a decade of service, TaxACT continues to help American taxpayers combat the complexities of our nation's ever-changing tax codes by providing Web-based tax solutions that help to conserve time, save money, strategize a tax-savings plan, and avoid making costly mistakes.

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Q:  OK, so TaxACT Standard is free. But I've heard the Standard Edition is only meant for really simple returns. How does TaxACT Standard really compare to Deluxe?

A:  That's a common misperception. Certainly, for a straightforward return, key decision factors such as speedy data entry, accurate calculations and attractive pricing (free) makes TaxACT Standard a popular choice among those filing a simple return. However, TaxACT Standard offers more free forms, schedules and worksheets than any other tax preparation product marketed to do-it-yourself (DIY) preparers. In fact, TaxACT Standard contains all of forms that are offered in its premium counterpart, TaxACT Deluxe - minus Form 1040x (Amended Return).

Choosing the right TaxACT product for the DIY preparer is really contingent upon an individual's tax situation and the amount of assistance that s/he may need to take full advantage of the various deductions and credits that one is entitled to claim. Thus, even though TaxACT Standard contains the necessary forms, schedules and worksheets to complete more complicated returns, users needing additional support or who have a more complex tax situation should consider using TaxACT Deluxe.

TaxACT's Deluxe Edition offers access to more in-depth help features, extra advice and guidance systems, which are typically required by consumers who have sufficient cause to itemize their deductibles. Consequently, if a customer preparer is using TaxACT Online Standard, but is inclined to add TaxACT's Online 1040 State software ala carte and can also benefit from having extra advice and more robust calculators, s/he may realize greater value by purchasing TaxACT's Online Ultimate Bundle. For just $15.95, Online Ultimate Bundle customers receive TaxACT Online Deluxe, TaxACT Online 1040 State, and the ability to e-file one (1) Federal and State return - a total software and service package that cost less than what most of our competitors charge to e-file a single return.

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Q:  Still, other critics have contended in the past that TaxACT Deluxe is for “simple” returns. What does 2nd Story have to say in response?

A:  Those who have shared this opinion about TaxACT Deluxe have never clearly defined what they consider to be a "simple" return.

However, we at 2nd Story contend that we have developed the comprehensive product line that can enable at least 95% of all American taxpayers combat the complexities of our nation's ever-changing tax codes by providing a Web-based tax solutions that helps conserve time, save money, strategize a tax-savings plan, and avoid making costly mistakes.

Both Standard and Deluxe Editions include complex forms, such as forms for Business Income, Capital Gains, Rental Property, itemized deductions, depreciation, and much more.

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Q:  I've noticed that TaxACT does not offer Refund Anticipation Loans (RALs) or Payday loans to its customers. If a customer wants to use a RAL or Payday loan, shouldn't you make the service available?

A:  For some taxpayers, tax season is a time that causes many to reach for the aspirin bottle. Yet, there are millions of Americans who look forward to claiming a significant refund, which they desperately need. The bottom line is that we don't offer RALs or Payday-like loans because it is our corporate belief that these loans greatly diminish a taxpayer's refund.

While there are no precise figures that reveal the total cost of RALs or Payday loans, it cannot be debated that these short-term loans have an extremely low-risk for the lending source. Yet, between the non-prime interest rates that are assessed and other fees (service fees, administration fees, and other special costs that drive-up the amount to e-file these returns), the total annual percentage rate for these loans tend to reach triple digits.

Even worse? More than half of all RALs being issued are to those who are recipients of the Earned Income Tax Credit (EITC), which constitutes a minority of taxpayers. RALs represent a siphon that diverts funds, which are allocated for the purpose of improving the standard-of-living for those living below a designated income criterion. The true benefactors from RALs are the issuers. Simply put: RALs grow corporate profits by draining off funds that were ultimately paid by all taxpayers.

A perfect solution would be to connect those who are "unbanked" or "underbanked" with a financial institution to establish a checking or savings account; and/or, secure a credit card. Unfortunately, the unbanked/underbanked are often unable to establish these banking conveniences. In these instances, rather than resort to RALs, TaxACT has forged relationships which enable its customers to elect to utilize an Electronic Refund Transfer option.

The Electronic Refund Transfer option is available to ALL TaxACT Standard & Deluxe users who electronically file their Federal tax return. For those who do not have a credit card, or would prefer not to pay for TaxACT's tax filing services by credit card, this alternative payment option allows TaxACT users to pay for their tax preparation and filing costs by having the amount deducted from their Federal tax refund – eliminating the necessity for a credit card to use TaxACT. (A small service fee applies.)

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Q:  Why aren't any of TaxACT's editions compatible with accounting packages such as Microsoft Money®, Peachtree®, or Quicken®?

A:  Though there are millions of Americans who use accounting software for tracking small business and personal expenses, in comparison to the entire pool of taxpayers, the percentage remains small. In addition, the amount of time it takes to assign an expense account in the financial programs to a specific tax return is time-consuming and can introduce errors.

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Q:  Why won't TaxACT accept past-year return data imports from other tax software packages such as TurboTax® or H&R Block's TaxCut®?

A:  The primary reason that TaxACT has not been developed to accept past year tax return data imports from other tax software packages is that this particular automation method has proven to trigger mistakes, allows for omissions and may actually increase the amount of time that one must spend preparing their tax return.

In short, not only does this type of automation have the great potential to cause taxpayers to inadvertently make costly omission on their tax return; the inclusion of this feature would also negatively impact the low-cost of our products - two concepts that are completely outside of our company's value-vision.

Additionally, the majority of returns filed with TaxACT are online returns. If TaxACT provided this type of automation, our servers would need to communicate with our competitors' servers to retrieve past year return data. From a security perspective, we choose not to interact with our competitors.

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Q:  By platform, describe TaxACT's pricing structure? Are rebates required?

A:  NO! At 2nd Story, we believe savings should be upfront and without strings attached. Rebates make big corporations rich by enticing customers to think they are getting a discount. But, in reality, few people actually redeem their rebates and some applicants simply never receive their requested refund - leaving a lot of extra savings in the pockets of corporations. TaxACT eliminates the fine print with "Bottom Line Pricing" - providing our customers with straightforward savings and without using the lure of rebates.

Included below are TaxACT's Pricing and Description Charts for each of our supported platforms, which includes two Web-based options and the ability to order tangible software.

Rate Card for TaxACT's Online Editions

TaxACT Standard and Deluxe Online users wanting to prepare a State return must use TaxACT Online States. Prices and product offerings are subject to change without notice.

Rate Card for TaxACT's Desktop Editions (Download or CD-ROM)

CD-ROM shipping & handling fees apply ($5.95 per order). Additionally, desktop users wanting to prepare a State return must use TaxACT State Editions on desktop. Prices and product offerings are subject to change without notice.

Rate Card for TaxACT's Home & Business Editions (Download or CD-ROM)

Purchasers ordering software on CD-ROM will need to include $5.95 for shipping and handling. Prices and product offerings are subject to change without notice.

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Q:  Does 2nd Story make technical support available to TaxACT users at no-cost?

A:  TaxACT's support is top in the industry. For our Standard users, we offer FREE customer and technical support via our Online Service and Support Center, as well as by e-mail (those e-mailing support will receive a response within 48-hours). TaxACT Deluxe users have the option to dial our Support Service's toll phone number, at no additional cost other than the price of a phone call, so that they may speak with a technical representative.

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Q:  Does 2nd Story Software maintain its customer service functions in-house and in the U.S.A?

A:   All of our development, marketing and customer service / support functions are maintained in-house and are located in Iowa. The close proximity of our company's departments allows us to react quickly and concisely to customer feedback and requests. Our development staff works closely with our support services and many of our program changes are the direct result of product suggestions and feedback that we receive from our customers during the tax season.

In addition, 2nd Story Software is dedicated to empowering U.S taxpayers implement well-informed tax-savings strategies with ease, while looking out for the cost-conscious. We do so by utilizing the U.S. labor force exclusively. It is our company's belief that outsourcing beyond U.S. borders and to overseas countries is likely to create communication barriers with our customers and compromise the level of service they deserve to receive. Our customers' feedback has been, and shall continue to be, the foundation of our success.

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Q:  Does 2nd Story make professional tax advice services available to TaxACT customers?

A:  Doing your taxes is stressful - especially when you're stumped by a tax question. Many do-it-yourselfers need the guidance of a tax specialist to discuss their specific tax situation. Via phone or e-mail, TaxACT® TaxPayer Support™ provides its Deluxe desktop and Online service purchasers access to a highly qualified panel of TaxACT tax experts by phone and e-mail at the lowest possible price - NO ADDITIONAL COST!

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Q:  By platform, what are the system requirements to run TaxACT products?

System Requirements for TaxACT Products by Platform

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Q:  If you could tell me only one thing that I didn't know about TaxACTOnline.com, what would that one thing be?

A:  For three consecutive primary tax seasons (2004, 2005 & 2006), TaxACTOnline.com has been the 2nd highest visited online destination for tax preparation services.

Representative of TaxACT's success is a month-by-month aggregate of the data contained within Hitwise's audience measurement week end-reports for the Accountancy & Finance Category, which details the traffic share of the top three tax software titles during the 2006 primary tax season - including TaxACT

Combined 4-Month Traffic Report Table

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Q:  What are some other distinguishing TaxACT Online factoids?

A:  Qualified and quantified, year-over-year, independent statistical studies continue to demonstrate TaxACT's impressive ability to grow its market share:

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Q:  How do TaxACT's users demographics compare to the users of other tax software packages via the Web?

A:  Hitwise's audience measurement studies provide a demographic analysis of taxpayers using Web-based tax products. The next three data charts are derived from Hitwise.com. Each chart is based on data for 10/14/2006 through 4/28/2006; and, is weighted by the number of Online starts. Due to rounding, some categories may not always total 100%.

TaxACT Traffic Share Comparison by Gender

Women represent just over 62% of all traffic to TaxACT Online. The traffic distribution by gender for competing tax products also skews female.

TaxACT Traffic Share Comparison by Age

For domains researched, including TaxACT Online and the Online Population, 25-44 was the age range with the most traffic. For TaxACT Online, this range represented over 47% of its Web traffic share. Age range 18-24 had the lowest traffic; however, this is consistent with the online population.

Traffic Share by Age

TaxACT Traffic Share Comparison by Household Income

Household Income between $30,000 and $100,000 represented just over 48% of the traffic share for TaxACT Online. This too was the range with the highest traffic for both the online population and competitor domains.

Traffic Share by Household Income

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