5 reasons to file taxes online
The Internal Revenue Service continues to push people to file their returns electronically, and has increased the types of returns that can be e-filed.
Overall, more than 61 million individual returns were filed online in 2004, up from 51 million in 2003. Eventually, the IRS hopes to have 80% of all individual returns sent electronically. Achieving such a goal means roughly doubling the current number of people filing electronically.
The IRS runs print, television and radio promotions for e-filing, but don't let the advertising campaign fool you. E-filing has benefits for taxpayers, but the major beneficiary of the program is the IRS. That's a big reason why the IRS has set up a free e-filing program. Every electronically filed return is one less envelope arriving in the IRS's mailbox, one less paper return that has to be stored, one less set of numbers that have to be manually entered into the agency's computer system.
In short, e-filing is a big money-saver for the government.
In 2004, the IRS extended its e-filing program to include S corporations and C corporations for the first time. While this is a big expansion of the number of potential e-filers, many tax professionals say they are going to hold off on e-filing the business clients' returns until they're sure most of the electronic flaws in the system have been worked out.
Individual e-filing has been around for several years, and many taxpayers feel that it's more convenient for them as well as for the government.
Here are five potential e-filing benefits.
1. There will be fewer IRS employee errors. This is one of those seemingly rare cases where what's good for the IRS is good for you also. Electronically filed returns don't have to be keypunched into the IRS's database. That means the IRS can hire fewer employees.It also means that you don't have to worry about whether your data has been accurately transferred. No keypunch errors and no IRS notices based on incorrectly entered information. That's a win-win.
2. There will be fewer taxpayer errors. Some basic taxpayer mistakes — missing or incorrect Social Security numbers, for example — will result in the IRS computers rejecting an e-filed return. You can usually fix and re-send the corrected returns. That's better than sending in an incorrect paper return and getting a letter from the IRS several months later.Note: In its promotional literature, the IRS bills this feature as promoting more accurate returns, and says that "IRS computers quickly and automatically check for errors or other missing information . . ." This does not mean that e-filing protects you from the possibility of being audited. It just means that some basic errors will be recognized — and that returns with those basic errors will have to be corrected before the IRS accepts them.
3. You likely will get a faster refund. The IRS says that businesses and individuals who e-file will typically get their refunds within 14 days. Folks who mail in their returns can wait as long as six weeks for a check. Note, however, that the faster refund turnarounds are only goals — the IRS makes no guarantees as to when you'll actually get a refund, electronic or otherwise.If you want to file a paper return, there's an in-between option that can cut your waiting time for refunds. On your Form 1040, you can request that any refund be directly deposited into your bank savings or checking account. That will slice one to two weeks off of your wait.
4. You can file from the convenience of your home PC. If you do your own tax returns using one of the widely available consumer tax programs, you can send in your return directly from your family or home-business desktop PC. More than 14 million people filed returns from their own computers in 2004."We're really seeing tremendous growth in terms of the number of people e-filing from their home computer," says IRS spokesman Anthony Brandt. "And in almost all cases, people who start to e-file their returns like it enough that they continue to e-file in subsequent years."
5. You can piggyback your state e-filing. In most cases, if you live in a state with an income tax, you can file online with your state at the same time you send in your federal return. The IRS will take the information you've sent and forward the appropriate data on to your state tax agency.