How to File Your Taxes Electronically

If you’re tired of hauling a pile of tax forms to the post office, standing in line to mail them, and waiting more than a month for a refund check to arrive, then electronic tax filing could be the route for you.

Business owners have a wide range of IRS electronic filing options to choose from, including employment tax returns, excise taxes, returns for partnerships or corporations, individual tax returns for self-employed or sole proprietorships, and returns for estates and trusts.

More E-Filers than Ever
The IRS’ e-file program has grown increasingly popular. In 2006, 73 million people filed federal taxes electronically; by 2008, that number had risen to almost 90 million. Twenty states now require tax preparers to e-file, and 38 states allow you to e-file your federal and state taxes together so you can press “send” once and e-file both returns.

Electronic tax filing is constantly evolving. The IRS’ updated electronic filing version is called Modernized e-File, or MeF. Software problems in earlier e-file versions have been ironed out, and additional forms have been introduced since MeF started in 2004. If your business makes many federal tax payments throughout the year, you can simplify your filing process by participating in the IRS’ Electronic Federal Tax Payment System. EFTPS is a secure government Web site where you can electronically pay quarterly estimated tax or set up payment transfers to be paid weekly or monthly.

How to Get Started
If you use an accountant or tax preparer, you can ask them to file and pay your electronic tax filing. Most professionals can e-file on your behalf. If you use tax-preparation software and do your own taxes, most major tax programs include the e-file option. When you complete your form, select e-file and go through the steps to verify your bank account for electronic fund transfers. There are many advantages to filing electronically rather than mailing off your tax forms.

1.         It’s easy.  You or your tax preparer just press “send” when your return is ready. You can then print out a copy of your tax forms for your records or store a PDF file of the form on your computer. Rather than mailing off a check to the IRS for tax owed, or waiting many weeks for an IRS refund check to arrive, you can either send or receive your funds via electronic funds transfer from your bank account. Cash-squeezed self-employed filers can also pay by credit card.

2.         It’s accurate.  The IRS reports its e-file process has a 99 percent accuracy rate. When you send a paper file, a clerk at the IRS has to rekey in all your figures, resulting in a much higher rate of error.

3.         It’s fast.  Here’s the best part: When you e-file, the IRS sends you an official receipt within 48 hours. With a paper filing, you’re left to wait and wonder whether your taxes ever arrived. Generally, electronic deposit refunds arrive weeks sooner than mailed out refunds, cutting the time until your refund is in the bank. The IRS sends you a notification when the deposit has been made.

4.         It’s safe.  You probably routinely give your credit card number online to retail Web sites or hand your card to merchants at retail stores. The IRS’ e-filing process is more secure than these transactions. But when communicating with the IRS, avoid scams. Remember that federal and state tax agencies never use e-mail to ask for personal information.

Electronic tax filing is now the predominant method. With a little guidance, you can do it yourself.