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 If you didn't take advantage of the IRS efile system last year, then you're among a shrinking segment of America that still files paper copies of their federal tax forms. If you're reading this publication, then you've got Internet access, so there is really no good excuse not to file electronically.
Filing Taxes via eFile
For those of you still holding out and filing your IRS form 1040 through the mail, we're going to share some eFile hints that we hope will move you into the electronic age.
According to the IRS website, over 60 million tax returns were filed using the eFile software system in 2004. They expect that number to continue to grow over the years as people get more comfortable with the electronic filing of tax returns. There are some big advantages to eFile, and we are hard pressed to find any disadvantages.
Advantages of the IRS eFile System
Perhaps the biggest advantage of the IRS eFile system is that it is electronically-based. The software is specifically written to take advantage of a computer's ability to accurately add and subtract numbers on your tax form. Computers are also great at accurately storing your information, thereby letting you walk away from your tax return and pick up later on right where you left off.
The eFile software programs used are extremely sophisticated in their approach to gathering information. This efficiency also saves you time when preparing your taxes. Typically, the eFile partner's system would use an interviewing technique to see which sections of the tax form apply to your situation. This interview can quickly determine if a tax deduction or tax credit applies to you.
Another advantage of the IRS efile system is that all of the tax forms you need are right there at your disposal. This eliminates the need to run to the local library or post office for a special form. The time savings with the entire electronic system can be substantial.
One misconception is that electronic exchange of information over the Internet is not secure. With the sophisticated security algorithms used today that threat is minimized. So to summarize, the government's eFile process is fast, accurate, and secure.
Finding an IRS eFile Software Provider
Now that you're convinced that eFile is the way to go, you need to find an eFile provider or partner. To understand why you need a provider, we'll give you a quick background on the process.
The IRS through its eFile software providers allows for the electronic exchange of tax information files. The IRS itself does not allow you to fill out a 1040 on their website - you need to work with an eFile partner or provider. There are many free eFile partners out there, if you want more information on finding a free partner, check out our article on Tax Preparation.
The eFile provider will supply the interviewing software and prepare the appropriate tax forms for you automatically. It is the provider that will create the electronic tax file to be exchanged with the IRS. So you would visit the provider's website, answer the interview questions, and then the provider constructs your tax return, checks for errors, readies the file format, and sends it securely to the IRS.
As a user, this all happens in the background and you just sit there clicking your mouse - it's really that simple. The provider does all the work.
Preparing Information for Efile
Well, maybe that last statement is stretching it a bit. If you're preparing for eFile, then you need to do a little more than click a mouse. Just like any other time you've filled out your taxes, you need to gather some information so that your time is minimized during an eFile session.
eFile Checklist
So what kind of information do you need to get ready when you're going to eFile? Here is the recommended checklist form the IRS:
- Social Security numbers for all dependents.
- W2 forms from all your employers.
- Bank account numbers if you plan on getting a refund electronically or paying any tax due electronically.
- Any 1090 form that you've received for dividends, income tax withholding, or other forms of income.
- Your 1090G if you've received a refund of state or local income taxes.
- Receipts for any itemized deductions you might be taking on Schedule A. This might include job related expenses, mortgage interest, and property taxes.
- Records and receipts for any other income or expense you think might affect your federal income tax liability.
eFile Returns and Refunds
Once you've completed your eFile questionnaire or interview, the provider will compile your return and check it for errors. Once it's gone through all its checks, you need to approve the tax return, which is usually done via an electronic signature. After you've approved it, the eFile provider will send your return to the IRS after which a series of emails will be sent to you confirming the IRS's receipt of your tax return. Now all you have to do is the waiting for your refund to arrive.
Storing eFile Returns
eFile allows you to keep you return stored or archived in several ways. The first way is through the service providers themselves, which retain copies on their servers. Efile providers also allow you to download your tax return in electronic format such as a PDF file, allowing you to keep a copy of your tax return on your personal computer. So if you still want a paper copy for your records, eFile lets you do that too - just print one out.
One of the nice features of eFile is that the system allows you to send the IRS your routing information for your bank (those numbers that identify your bank account). This means the IRS can electronically deposit your refund into the bank account of your choice. This speeds up the process and makes handling a check from the IRS a thing of the past.
Speeding-Up Refunds
Finally, if you're one of those impatient fellows that decided to go with the eFile system because of its speed, then we've got more good news for you. The IRS has devoted a section of their website - appropriately named Where's My Refund.
All you need is some of the information from your tax form and the IRS will give you a status update. Using this system you can track the exact status of your tax refund and also have a better understanding of when your check is being mailed to your home by the government. You can also use this refund information to predict when the electronic transfer to your bank account will be made.
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