How and Why to File Taxes Electronically

Spring is in the air, which means the birds are singing, snow is melting, and millions of Americans are scrambling to prepare their taxes. This year, don’t let tax filing dampen your spirit. Instead try electronic filing—known as e-filing—to eliminate some of the hassles associated with tax season and even gain some benefits as well.

In the past few years, millions of Americans have started to e-file their returns.  “In a little over three years, our firm has gone from just a handful of returns filed electronically to virtually every return being filed electronically,” says Eric F. Good, a CPA with Andrews, Hooper and Pavlik of Grand Rapids, Michigan.

Some of the advantages of e-filing include:

• Faster refund. With e-filing, your return can be direct deposited in 10 days or mailed to you by check in three weeks; about half the time if you filed a traditional paper return.

• Reduced mistakes. The IRS reports that over 17.5 percent of returns prepared on paper have errors—mostly from miscalculations—and half of those errors result in an overpayment to the government. “With e-filing, the accuracy of the return is improved as clerical errors are avoided, both on the part of the preparer and the IRS,” says Good.

• Assured receipt. You get verification by email that the IRS has received your forms within 48 hours after electronically sending your return to the IRS. In addition, you can track your tax return’s progress on the IRS website at www.irs.gov.

• Environmentally friendly. “E-filing is the ‘green’ thing to do as it saves paper,” says Roger Steensma of Hoffman, Steensma, and Plamondon of Muskegon, Michigan.

• Save time. You can skip that trip to the post office because you can file from your home computer. Plus, you can usually file your state tax returns at the same time.

• It’s safe. The IRS has stringent policies regarding privacy and security issues.

Here’s how to file electronically:

Step 1: Gather your information.

Compile any Social Security numbers you may need, as well as a W-2 form, 1099 forms for dividends, retirement, or other income, or any 1099 forms with income tax withholding, and all other important receipts and records.

Step 2: Choose your e-filing method.

• Do-It-Yourself: You’ll need a computer with Internet access and tax preparation software. Simply follow the directions from the software. For more information on e-filing and a list of IRS tested and approved software companies, visit the IRS website. You may be eligible for free online services if you are in an average- or low-income bracket, older than 65, or in the military. To learn more, go to the “Free File” page at www.irs.gov.

• Professional Tax Service: A professional tax preparer can do your taxes and e-file it for you; or e-file taxes you’ve prepared. Weigh their costs versus the benefits before you select one. To find a tax professional that offers e-filing in you area, use the IRS’s locator service on their website.

• TeleFile: If you’ve received a TeleFile tax package in the mail, you may be eligible to e-file by telephone. Just call the toll-free number anytime day or night and follow the prompts to input tax return information using your touch-tone phone.

Step 3: E-file!

Step 4: Wait or Pay.

If you get a return, you should expect it shortly and can track it as noted above.

If you owe taxes, you can authorize the IRS to withdraw from your checking or savings account directly and even delay the payment up to April 15. If you choose to pay by credit card, beware that you might be charged a “convenience fee,” which can far exceed the IRS’s 7% interest penalty for late payments.

E-filing is the wave of the future. “In many states e-filing will eventually be mandated by the tax authorities, so why not start having the above benefits now?” says Steensma. So this year consider e-filing, and enjoy that spring day with your family instead of standing in line at the post office.

Comments

[Tight Fisted Miser]

I didn't efile and I got my return last week. In my experience if you file early you only have to wait two or three weeks even if you don't efile.

[Andrew]

The option to TeleFile was discontinued several years ago. The IRS now tells people who were using TeleFile to use the Free e-File program they have with various providers.

Also, the tax deadline is April 17th this year (the 15th being a Sunday and the 16th being a holiday in Washington, D.C.)

[My Financial Journey]

Yeah I filed my taxes electronically on Sunday and my state return already showed up in my bank account just 3 days later.

Despite all the benefits that the collection of our income tax brings, it does not take away from the fact that the process for filing income tax can be very demanding, complicated and even costly. The cost of course stems from the fact that because filing an individual or company’ s income tax is quite tedious, the aid of a third party is often contracted.