During tax season, many families will attempt to file their taxes on paper. However, this is a long and cumbersome process. If an individual taxpayer chooses to file without the help of a certified public accountant (CPA), the process can take hours. And, if mistakes are made, the repercussions can take the form of fines or an audit. In fact, nearly 50 percent of taxpayers will be audited in their lifetime because of errors or omissions, according to the Surviving an IRS Tax Audit guide.
E-filing is the latest, most popular way to file taxes. Filing online not only reduces the errors made during this process, but also cuts down on the amount of time it takes to file. What’s more, most e-file Web sites provide tax experts, communication specialists and economists to help e-filers through the process.
Here are a few other benefits to filing online, say tax experts:
The growing popularity and convenience of e-filing prompted the IRS to provide the Free File service to eligible taxpayers. However, only taxpayers with an adjusted gross income (AGI) of $50,000 or less qualified for the service. The IRS warns that taxpayers who used Free File in the past might not qualify for the services going forward. Free File users should check IRS.gov in mid-January for information.
If a taxpayer doesn’t qualify for Free File, there are other options. But according to the IRS, taxpayers should take certain precautions before buying e-filing software or filing online, such as:
Get the Facts About Free Services Provided by Commercial Companies: Members of the tax software industry provide free tax-preparation and electronic filing services -- not the IRS. Once taxpayers choose a particular company, they will be sent directly to the company's commercial Web site. Any questions about a particular service or company should be directed to the company providing the free service and not the IRS, and you should contact the company to resolve any income tax issues. To find out how to contact the company, refer to the company's Web site for more information about customer service options.
The government believes that private industry, given its established expertise and experience in the field of electronic tax preparation, has a proven track record in providing the best technology and services available. In addition, the government believes a partnership with private industry will provide taxpayers with higher-quality services by using the existing expertise of the private sector, maximize consumer choice, promote competition within the marketplace and meet objectives in the least costly manner to taxpayers.
Make Sure the Company’s Web Site Links to IRS.gov: By going directly to a company's Web site and not through IRS.gov, taxpayers may be charged a fee. To find out more about each company’s pricing policies and fees, refer to pricing information on the company's Web page or the More Details link next to each company’s free offer description and then scroll down to the bottom of the page and find the section called Fee-Based Offer Information.
Know That You Are Under No Obligation to Purchase Additional Services: During the course of preparing an online tax return, taxpayers may choose to browse other products and services some companies may provide for a fee. Taxpayers are under no obligation to buy additional products and services. The decision to buy these services is entirely up to the taxpayer. For example, a company may offer an individual retirement account (IRA), mutual fund or other investment-related products for a fee. There is no obligation to buy these products or services for preparing and e-filing a federal income tax return. As long as the taxpayer meets the company’s free offer criteria, it’s acceptable to simply prepare and e-file your federal return for free.
You May Exceed Eligibility Requirements After Selecting a Company: Taxpayers may determine that after they start preparing a tax return with a particular company, they are not eligible for the company's free service and may be subject to a fee. If this notification occurs, taxpayers have the following options:
For example, if taxpayers select a company whose free services are provided to individuals with an AGI of $26,000 or less and based on the tax data the company determines the AGI exceeds the $26,000 limit, taxpayers will be notified that they may be subject to a fee. It is important to understand each of the company's eligibility criteria before selecting a company.
Tax Information and Data Will Be Protected: Tax return preparation is accomplished using proprietary software approved by the IRS; transmittal is through the established IRS e-file system. Each company must attain a third-party privacy and security certification. Alliance companies must comply with all federal rules and regulations on taxpayer privacy for paying and free customers. These rules prohibit use of tax return data for purposes not specifically authorized by the taxpayer.
The IRS monitors the progress of each of the companies. If any problems develop, the companies are required to alert the IRS. If appropriate, the IRS will remove the company from the IRS.gov site until the problem is resolved.
All e-filing services require a little research. But filing taxes online can save families time and money and maybe a little sanity too.
