900 N. Kings Highway, Cherry Hill, New Jersey 08034
856.667.4100 · 215.563.0276 · Fax: 856.667.3652

Money Management (Distributed by the New Jersey Society of Certified Public Accountants)

What You Need to Know About Filing Your Taxes Electronically

Filing your tax return is never a pleasant task, but e-file, the IRS's electronic filing option, can make it less painful, particularly if you are due a refund. With e-file, you can expect to receive your refund in three weeks - and even sooner if you choose to have your refund deposited directly to your savings or checking account. Here are six facts the New Jersey Society of Certified Public Accountants (NJSCPA) says you should know about filing electronically.

1. E-File Minimizes Errors
The IRS reports that electronic returns are less prone to errors by you or the IRS. In fact, the error rate for electronic returns is less than 1 percent compared to the 20 percent of paper returns. There are two reasons: the software used in electronic preparation double-checks the return for accuracy, and the electronic submission eliminates the chance of data entry errors on the IRS's part. Within 48 hours of electronic submission, the IRS acknowledges acceptance of your return. This is your proof of filing. In 37 states, you also can file your state returns the same way.

2. E-File Is Easy To Use
If you choose e-file, you have two options. You can e-file your return using an Authorized IRS e-file Provider - a tax professional, such as a CPA, who has been accepted into the electronic filing program. Or, for added convenience, you can use a personal computer, tax preparation software, and Internet access to prepare and electronically file your tax return information from home.

With the first option, you either prepare your own return and pay a professional only to transmit it electronically, or you pay your CPA or other tax professional both to prepare and transmit your return. In either case, an Authorized e-file Provider submits your return to the IRS. To find a tax professional to file your return electronically, go to the Authorized IRS e-file Provider Database at the IRS Web site (www.irs.gov) and click on "electronic services" at the bottom of the home page.
There is a second option for electronic filing. If you have access to a personal computer, you can prepare your return offline using commercially available software or software downloaded from an Internet site. Or you can prepare and file your return online. The information must then be transmitted to companies authorized by the IRS. They convert the file you send to meet IRS specifications. Although the IRS does not charge for e-file, the e-file participant you choose may collect a fee depending on the specific services you request.

3. E-File Can Be Completely Paperless
You no longer need to follow up electronic filing by mailing the IRS a signed Form 8453-OL. Your software or e-file Provider will walk you through the process of using a self-selected 5-digit PIN that serves as your signature and allows you to file a completely paperless return.

4. Electronic Payments Provide An Alternative To Checks
There are two ways to pay your taxes electronically - either through direct debit from a checking or savings account or by credit card. Both options offer you the convenience of filing early and paying your taxes any time up to the due date of the return. To arrange for direct debit, you supply the IRS with your savings or checking account and bank routing numbers. The IRS has authorized two vendors to accept American Express, Discover, or MasterCard - but not Visa. Be aware that you will pay a "convenience fee" for using your credit cards. And, if you're charging your tax bill primarily to earn airline miles or cash rebates, determine whether your bank treats the payment as a purchase (eligible for miles or points) or a cash advance (not eligible for miles or points).

5. Not All Tax Forms Can Be Filed Electronically
Before you get started, check to see if your return includes any of the forms that preclude you from filing electronically. Examples include forms for noncustodial parents claiming exemptions for their children and for a contribution of a non-cash item (other than securities) to charity. In both cases, a required signature of someone other than the taxpayer complicates the filing.

6. An On-The-Spot Refund Is Really A Loan
A provider who offers you an on-the-spot refund when you file electronically is really giving you a refund anticipation loan. It typically carries a very high interest rate.

If you want to file electronically and need some information and help getting started, speak with your CPA.

[Current Money Management] [Business Information] [Home]

Money Management is a weekly column on personal finance distributed by the NJSCPA.

untitled

This site designed and maintained by the Information Technology experts at Alloy, Silverstein, Shapiro, Adams, Mulford, Cicalese, Wilson & Co.

We appreciate comments concerning our website. Contact our webmaster .