Spring is in the air, which means the birds are singing, snow is melting and millions of Americans are scrambling to prepare their income tax returns. 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 gain some benefits as well.
In 2004, 60 million Americans e-filed their returns via computer, according to the Internal Revenue Service. “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 certified public accountant with Andrews, Hooper and Pavlik in Grand Rapids, Mich.
Some of the advantages of e-filing include:
Faster refund. With e-filing, your return can be direct deposited into your bank account in 10 days or mailed to you by check in three weeks; about half the time it would take if you filed a traditional paper return.
Fewer mistakes. The IRS reports that 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,” Good says.
Assured receipt. You get verification by e-mail that the IRS has received your forms within 48 hours after electronically sending your return to the federal agency. In addition, you can track your tax return’s progress on the IRS website: 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, an accounting firm in Muskegon, Mich. (pop. 40,105).
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 W-2 forms, 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 a modem, 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 locator service on the IRS 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 refund, you should expect it shortly and can track it as noted earlier.
If you owe taxes, you can authorize the IRS to withdraw the amount due from your checking or savings account directly and even delay the payment until 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 percent 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 benefits now?” Steensma says. So this year consider e-filing, and enjoy that spring day with your family instead of standing in line at the post office.
