Electronic Filing (E-Filing)
What Is Electronic Filing?
E-Filing is when a taxpayer electronically files or sends his or her income tax return via the Internet to the Internal Revenue Service or IRS. For the 2018 tax year, the IRS reported that nearly 128 million people e-filed their own tax return. In other words, approximately 92 percent of federal taxes were filed electronically.
You can file your taxes for free electronically on the IRS website if your adjusted gross income for the tax year is $66,000 or less. If you make over $66,000, you will need to use a third-party’s tax software, hire a tax company, or complete a paper return by following the form instructions.
Benefits of Electronic Filing
Easy and Convenient
E-filing does not require paper forms, envelopes, or postage. You can file your taxes from the comfort of your home in your pajamas.
Tax software programs are designed to do the math for you. As a result, it minimizes the chance of a mathematical error.
Since your tax information is transmitted directly to the IRS and your respective state tax agency’s computer systems, the IRS does not need to manually re-input your data from a traditional paper return into its system. E-filed returns contain fewer mistakes.
The IRS receives your e-filed tax return almost instantly. No more trips to the post office and waiting for your paperwork to be delivered.
Also, the IRS processes e-filings faster than paper returns. You can expect your tax refund check within three weeks. I could possibly be even sooner if you choose to accept your refund directly into a bank account. A paper return usually takes between four to eight weeks to process and receive a refund check.
Potential for Higher Refunds
Tax software programs usually ask a series of questions to apply as many tax credits and deductions as possible. This thoroughness can help you get the maximum return you are eligible for. It could also help lower the amount of taxes you would owe.
Tax software programs may eliminate the need to hire an accountant or tax firm to prepare your taxes. Some tax programs even offer free federal and state e-filing. Others advertise a free meeting with a tax professional if you’ve purchased the software. Unfortunately, those with more complicated tax situations may find the need to purchase more advanced software to e-file. This specifically includes the freelancers and self-employed individuals.
Electronic Tax History
E-filing keeps a continuous electronic record of all your previous tax returns. By filling out basic information to confirm your identity, you can easily look up your tax history without digging through old files.
Is E-Filing Your Taxes Safe?
In general, electronic filing is exceptionally safe and secure. Your data, including your social security number and bank account numbers, is specially encrypted. This security measure prevents any unauthorized access as your information is transferred from your tax software to the IRS or state tax agency. Moreover, many consider e-filing safer than mailing your tax return, which may be lost, stolen, or simply misplaced.