The Internal Revenue Service continues to encourage taxpayers to file their tax returns electronically. Since its inception in 1986, use of electronic filing has increased dramatically: In the first year, when the IRS tested the system in three cities, approximately 25,000 tax returns were electronically filed. The IRS reports that nearly 58 percent of all 2008 tax returns were filed electronically.
Through an arrangement between the IRS and the Free File Alliance, an association of approximately 20 companies that provide tax preparation software or services, millions of taxpayers are eligible to use a free online service to help them prepare and electronically file their 2009 federal tax returns. This free service is available to taxpayers whose 2009 adjusted gross income is below $57,000.
The program is very user-friendly, using a question and answer format to help taxpayers identify potential tax deductions or credits for which they might be eligible, and places the information on the appropriate form or schedule. The software performs calculations and checks for errors that could delay the processing of returns. Privacy and security features have been enhanced as well. If you're eligible for a tax refund, you may receive it in as few as 10 days if you use direct deposit. You may also use the free file system to schedule electronic payments if you owe taxes. Thirty-eight states participate in the federal/state e-file program as well.
To determine whether you are eligible to use the free file software, go to www.irs.gov, and click on the "FREE FILE" icon. The instructions are clear and straightforward. You will see a variety of vendors and offers from which to choose. Evaluate the features and requirements carefully, and be sure to use the link provided in the IRS free file site. Do not go directly to a participating vendor's Web site.
Another IRS service, called "Free File Fillable Forms," is available to taxpayers who are not eligible for the free file program. The program, which has no income restrictions, provides electronic access to the most commonly used tax forms. You may use the program to complete the forms on your computer. It's important to note that the program can perform limited calculations, but it is not attached to tax software, and it does not check for errors. Although you self-prepare your return, the program does help you to electronically file. Consider using this service only if you are very knowledgeable about tax return preparation and the forms you will need to use.
You are not required to use either of these programs to electronically file your tax return. Most commercially available tax preparation software programs include e-file processes. You may e-file your return whether you prepare it yourself or have it prepared by a professional. The IRS does not charge for e-filing, but some tax preparers and software vendors might add an e-file charge to do so.
Your return will be processed more quickly if it is electronically filed. If you are entitled to a refund, you will receive it more quickly if you e-file your return. Also consider using direct deposit to further hasten the receipt of your refund. According to the IRS, you may receive your refund in as little as 10 days if you use a combination of e-filing and direct deposit.
You may not electronically file your tax return if you are eligible for the first-time homeowner tax credit, because you must attach proof of purchase documentation to your return.
Whether you use any of the electronic filing options or use a paper return, file early. If you are entitled to a refund you will receive it sooner. If you use a professional tax preparer, you'll get better service and reduce the likelihood of filing a return containing undetected errors.
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