Why Not E-File Your Tax Return This Year?
Get the working capital your business needs–learn more about Entrepreneur Lending, powered by CAN Capital »
Today, most people are finding they can prepare and file their own tax returns in minutes, securely, online. Since 1986, when e-filing began with just 25,000 tax returns filed online, the number of e-filed returns has risen exponentially, with more than 68 million individual returns e-filed in 2005--that's more than 50 percent of all returns.
The backbone driving this trend is the IRS' E-File (or "electronic filing") system. E-file is the way to file your taxes directly with the IRS. For more and more Americans, it's become the quick, easy and smart way to get your taxes where you want them to be--done!
E-filing online offers several real and practical advantages that help explain its growing popularity:
- Lower cost. Tax returns can be prepared with web-based tax software and e-filed for tens of dollars. Many companies offer free use of their tax software and only charge a small fee to e-file a return. Complete e-file packages range from about $10 for short-form (1040A and 1040EZ) services to about $50 for long-form (1040) tax services. Using a paid tax preparer is at least twice as expensive. According to a report by the Brooking Institution, the national average for a paid tax return is about $100.
- Easy and convenient. With web-based taxes, there's no software to download or install. Using a secure account, internet pages lead you step-by-step and verify the math. Because the tax software is web-based, a user can access their secure account and work on their tax return wherever and whenever they access the Internet. No more last minute trips to the Post Office--just hit Send. Once completed, the IRS provides an official acknowledgement that the tax return was received. If you owe money, you can authorize an electronic funds withdrawal from your savings or checking account or use a credit card.
- File in minutes. About 70 percent of all individual tax returns use "short" tax forms (1040A or 1040EZ). Studies conducted by the IRS suggest that more than ten hours are needed, on average, to prepare a 1040A tax return using paper forms. Meanwhile, several e-file companies report that people using online tax software prepare and file their short-form tax returns in under an hour. One company reports that about 50 percent of their online tax software customers completed tax returns, in one sitting, in under 30 minutes.
- Refund in days. With IRS e-file, you can receive your tax refunds in about half the time, compared to paper filers, or even faster by having your tax refund directly deposited into your bank account. With e-file, you can get your refund in nine to 15 days. With paper forms, you can hope to get your refund in three to six weeks.
- Greater accuracy, fewer errors. E-File tax software greatly reduces the chance for errors. You're less likely to hear from the IRS down the road because e-filed returns are automatically checked for accuracy--and they've been found to be 99 percent accurate. If errors are detected, you (or your tax preparer) will receive an electronic message indicating the error and you'll be allowed to correct the mistake and resubmit the tax return without penalty. Conversely, the IRS reports up to a 20 percent error rate in paper tax returns. Also, those using paper forms are more likely to receive an IRS penalty or have their payments misapplied.
- Socially responsible. By using e-File, you're helping to save resources now and for future generations--less paper, less time, less energy. It's a more efficient, friendly way to prepare and file your tax return.
- Peace of mind. After e-filing your tax return, the IRS provides an official acknowledgment of your return--you'll get confirmation within 48 hours that the IRS received it. This is something you don't get with paper-form tax returns. And e-file is secure: The IRS reports that e-file transmissions are absolutely secure, and IRS E-file meets or exceeds all government security standards.
Research shows that more than 80 percent of taxpayers who've tried e-file are "very satisfied" with the benefits of IRS E-file. Eighty-three percent of individual taxpayers who use IRS e-file remained loyal and e-filed the following year.
Getting started with IRS E-file is easy. The IRS maintains a list of authorized E-file Partners and authorized e-file providers at their site.
Scott Cronk is president of www.Taxhead.com, an online tax software company.