In 2006, some 73 million people--more than half of all individual taxpayers--filed their federal taxes electronically. At the state level, 13 states now require tax preparers to e-file, and 38 states allow combined federal-state e-filing.
IRS and state e-filing is more secure than giving a retailer your credit card, says Chuck Petz, vice president of tax software development at Petz Enterprises Inc. in Tracy, California, which operates e-filing site Taxbrain.com. The advantages of e-filing:
It's easy. Most filers or tax preparers fill out tax forms online anyway, so just press "send." Petz suggests mailing in your signature, though.
It's accurate. Electronic filing means fewer mistakes. Mailed-in returns have to be hand-keyed into computers by IRS workers, making the error rate higher.
It's fast. The IRS usually sends an e-mail receipt within 48 hours. And e-filers generally get their refunds in two weeks, direct-deposited into their bank accounts.
It's safe. IRS e-filing is highly secure, but to avoid scams, make sure you know the rules. Use IRS-approved e-file tax software or preparers. Remember, IRS and state tax agencies will never use e-mail to request account or Social Security numbers or other personal information.
For business owners, everything from W-2 forms to estimated quarterly tax payments can be filed online. See www.irs.gov for details.
Carol Tice reports on business and finance for The Seattle Times, Seattle Magazine and other leading publications.