When it comes to preparing your tax return, we've come a long way. It wasn't that long ago that you had to make sure you had all the right paper forms to complete your taxes, requesting them by mail from the IRS if you couldn't find one at the local library. Getting all the numbers right involved checking and double-checking your calculations, and you even had to figure out exactly how much postage you'd need in order to get the returns back to the right place.
Paper returns aren't yet a thing of the past, but they're increasingly giving way to an easier way to file your returns. Electronic filing has a number of benefits both for you and for the IRS, and according to the latest available statistics, about 90% of taxpayers have discovered the advantages of e-filing. Below, we'll go through some of the reasons why electronic filing has become so popular.
The advantages of electronic filing
There are several benefits that electronic filing gives taxpayers. They include the following:
- Instantaneous transmission of your return information to the IRS ensures that it won't get lost or stolen in the mail.
- Processing of e-filed returns is faster than paper returns, allowing you to get any refund you're due more quickly.
- Greater accuracy in your return.
- You don't have to include copies of W-2s and other tax documents as part of your return.
- Forms are more readily available.
- Most tax preparation software packages offer electronic filing as part of their packages.
You don't have to use tax software in order to file electronically. The IRS Free File service is available to those who make $66,000 or less, and it includes not only the ability to e-file but also the fillable forms you'll need to do so. Moreover, if you get help from programs like Volunteer Income Tax Assistance or Tax Counseling for the Elderly, then they'll electronically file your return once it's prepared.
Dealing with rejection
There are a couple of situations in which you'll have to deal with an unexpected rejection of your electronic filing. However, in many cases, that'll actually be a good thing, because if you'd included the same mistake on a paper return, you might well have never known about it until you got a notice from the IRS informing you of an error.
For instance, the IRS might reject your e-filed return if your name is misspelled, you enter your Social Security number incorrectly, or you fail to include a required tax form or other documentation. If you've e-filed, then all you have to do in most cases is to fix whatever the problem was and then immediately resubmit your return. If you'd done a paper return, you might well have had to file a new amended return with all the hassles that entails.
Another common case of rejected returns comes up if two or more returns include the same dependent. This often happens with divorced spouses with children, and it can lead the IRS to contact the interested parties to figure out why they're claiming the same person as a dependent, urging them to figure out who's actually entitled to do so. Resolving the situation will often require you to file a paper return, especially if you can't come to an amicable resolution with an ex-spouse.
Some things to watch out for with e-filing
There are a couple things to bear in mind with electronic filing. First, there's a time limit for filing electronically, as the IRS stops accepting e-filed returns shortly after the mid-October deadline for extended returns. So if you miss both those deadlines, you might have to file a paper return. The same is true for certain special tax forms as well as returns for previous years.
In addition, if you're trying to amend a previously filed return, you won't have the option of filing it electronically. Only original returns can be e-filed.
Be smart about e-filing
Despite these limitations, e-filing is usually the best way to file your taxes. With a dwindling number of people holding out for paper filing, it's worth looking at how you can file electronically and reap the benefits that it brings.