Watch stocks you care about
The single, easiest way to keep track of all the stocks that matter...
Your own personalized stock watchlist!
It's a 100% FREE Motley Fool service...
Once you've gone through all the hassle of preparing your taxes, the last thing you want is to wait any longer than you have to for your refund. By filing taxes online, you can slash your waiting time and get the money that's coming to you a whole lot faster.
Why paper is passe
According to the IRS, nearly 100 million taxpayers filed their taxes online last year, with more than a billion tax returns sent through the IRS' e-file system since 1990. Part of that explosion in popularity has come from IRS regulations that now require professional tax preparers who send in 10 or more individual or trust tax returns to use electronic filing.
But a big portion of the increase in filing taxes online has come from the many benefits that electronic filing has compared to using a paper return. First of all, when it comes to tax preparation, whether you use professional tax software or the IRS' own fillable forms, online filing can help you avoid simple math errors and other typos that can jeopardize the accuracy of your return and end up causing additional delays to resolve. By contrast, with paper returns, it's all up to you to make sure that you don't make any costly mistakes.
Secondly, free options for filing taxes online now exist for taxpayers of all income levels, resulting in less expense than you'll pay in postage to mail in your return. Putting a stamp on your return envelope may not seem like that big a deal, but if you have a long return with many pages, figuring out exactly how much postage to use without visiting the post office can be a guessing game. Moreover, if you want to send your return by certified mail in order to get acceptable proof that you filed your return on time, you'll pay additional costs. By contrast, Free File software options offered through the IRS website give taxpayers with income of $57,000 or less access to sophisticated tax software that makes tax preparation much easier, with some software companies also including state income tax returns as well.
Showing you the money
But the biggest benefit to filing your taxes online is the speed with which you'll get your income tax refund. According to the IRS, using electronically filed returns and including your banking information on your return for direct deposit of your refund can result in your refund being processed and put into your bank account in as little as seven days.
Paper filers, on the other hand, can expect to wait weeks or even months to get their refunds, especially for those who elect to get a paper check mailed back to them. Depending on how much money you expect to get back, that wait can be costly if it prevents you from doing smart things with your refund like paying off high-interest debt or making an investment.
How filing taxes online works
The mechanics of online tax filing have gotten increasingly streamlined over the years as the IRS has worked out the inevitable kinks in the system. If you use tax software, then your software package should make it as easy as pushing a button when your return is ready to file. Similarly, if you use the Free File system available through the IRS website, then when your return is fully prepared, an option will appear allowing you to electronically file it.
One concern that many people have about electronic filing is the possibility of identity theft. Online providers use encryption to transmit returns electronically, ensuring that identity thieves won't be able to intercept your tax data in transit. On that score, electronic filing is actually more secure than mailing, especially if you leave your return in your home mailbox, where someone could take it before your postal worker picks it up.
Yet identity thieves who get your Social Security number from other sources can cause trouble, as more than a million cases of identity theft have involved false filings from thieves seeking to steal your refund money. To protect yourself, all it takes is setting up a personal identification number with the IRS. That way, a falsely filed return without that PIN will immediately trigger alarms at the IRS, preventing further damage.
Get your refund faster!
If you don't want to wait for your money, filing your taxes online is the obvious choice. Now that it's fast and inexpensive, there's little reason not to use electronic filing -- even if you're not expecting a refund.
To get more tax help, be sure to check out our Motley Fool ONE Tax Center. Once you provide your email address, you'll get access to an extensive report put together by Fool financial expert Robert Brokamp, and it can be yours free. With tax season winding down, this limited-time offer won't last long, so click here right now and claim this valuable tax resource today!