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by Thomas Hoffman

(IDG) -- H&R Block Inc. is getting a jump on the 1999 tax season by launching an aggressive Web-based tax preparation and filing service for the more than 80 million people who currently use shrink-wrapped software or pencil-and-paper to file their tax returns.

The venerable Kansas City-based tax service has several strengths in its corner, including a trusted brand name, attractive pricing ($9.95 to prepare and file federal returns electronically, $4.95 for state returns) and a growing population of computer-savvy Generation Xers who are inclined to file their taxes online.

Not to mention a Congressional mandate to have 60% of all tax returns filed electronically by 2002 and 80% by 2007.

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Do-it-yourselfers "never walk into H&R Block offices, and that's who we're going after," said Aaron Horvath, manager of interactive marketing. The company is still trying to determine how much additional revenue the Internet services should deliver, he said.

The company plans to take down its current Web site next month and replace it with the new tax filing features on Jan. 12. Horvath said the investment is in the seven-figure range, but he declined to provide details.

Under the company's plan, customers will be able to visit its Web site and use a browser-based version of its retail software to prepare their taxes. Customers won't have to pay for the use of the software until they've completed their returns and filed electronically, said Horvath.

The cost of using shrink-wrapped software to prepare tax returns ranges from $19.95 to $45, excluding coupons and rebates, said industry experts.

Still, the company faces competitive pressures and the risk of reducing some of its 18 million customers, who typically spend $80 to $100 to have an H&R Block accountant prepare their taxes.

In addition, CCH Inc., a Riverwoods, Ill.-based tax research and publishing firm, said it plans to offer Web-based tax preparation and filing services for just $7.50 for both state and federal returns. The company, a top provider of professional software for tax preparers, is officially announcing its Complete Tax service for small businesses and consumers next week. The capabilities won't be available until late December, though, a company spokeswoman said.

Under the CCH service, customers will be able to download a worksheet from the CCH Web site onto their own computers, fill it out and e-mail the worksheet back to CCH, which will then file it electronically for them.One of the differences between the two services: Customers who use the H&R Block service will have the option of receiving their refunds within 24 hours of filing through a direct-deposit loan the company will offer for $19.95.

Meanwhile, the spokeswoman for CCH said her company is negotiating with several top Web sites for the right to provide its Complete Tax service directly from their sites. That may be key in helping CCH draw the kind of sales volume needed to compete with H&R Block, industry experts said.

"If they could get one of the bigger names, like a Yahoo [Inc.] or an AOL [America Online Inc.], that would be a big help," said JimLears, a tax member at Clifton Gunderson LLC in Baltimore.

As for H&R Block, said Lears, "they run somewhat of a risk of eating into their own market, but it's not very high. They have deep pockets and the marketing wherewithal" to attract new customers online.

Meanwhile, Irving, Texas-based H. D. Vest Inc. announced this morning that it plans to let consumers prepare and complete their 1999 tax returns for free on its Web site, regardless of income or complexity.

The company hopes this free service will build its brand recognition among consumers, as well as encourage them to use the firm's other services, such as optional referral to a Vest financial adviser.