Dave Ramsey Advice Column – Is It Best To E-File My Taxes?

Is e-filing really a much better way to record your taxes? 

Americans and the IRS might not agree about everything, but they are mostly on the exact same page in regards to e-filing individual income tax returns.

The majority of individual income tax returns submitted to the IRS are e-filed. 

When you e-file your federal income tax return, you conserve the IRS money because its workers do not need to spend time manually processing your return. And in return, you can get any refund you’re owed quicker, especially if you have it directly deposited into your bank account.

But what about security?  And can electronic filing really provide you access to all of the forms you might need if you’ve got a intricate tax situation?  Are there situations when you can’t e-file?  Let’s look at the benefits of e-filing, and whether it may be the best filing choice for your requirements.

If you’re Considering e-filing, a Few of the advantages include:

  1. Quick affirmation your forms are received: The IRS will affirm a tax filing was received within one day of electronic submission.  For paper filers, the IRS does not send any acknowledgment that your forms have arrived safely. 

    Timely refunds: When you publish a paper filing, it can take six to eight months to receive a tax refund.  With e-filing, you’ll get your money in three weeks or less.  Choosing direct deposit can also speed up the refund process.

  2. Reduced chance of mistakes: In accordance with the IRS, there’s approximately a 1% error rate on e-filed returns, compared with a 20% rate of errors on paper filings.  The IRS also provides more info on problems discovered on e-filed yields compared with paper returns.

  3. Easy payment process: If you owe the IRS money, it is simpler to cover at your advantage when you e-file.  It’s possible to submit returns early and pay afterwards if needed, provided that you pay from the April 15 filing deadline.  And you can schedule electronic funds transfers to easily send the IRS what you owe on a date of your choosing again, as long as the IRS receives your payment by Tax Day. Additionally you have the option to pay your balance by making use of the IRS Direct pay service from the checking account or savings account, filing a credit card through a payment processor for a fee, or paying by check or money order.  Just be aware delaying payment following the filing due date (typically April 15) will lead to interest and penalties.

  4. Digital storage of tax data: Submitting returns electronically means there is an electronic copy of your tax records.  If something happens to your paperwork, you’ll have an electronic backup.

The good news: Most taxpayers do decide to e-file and find those benefits — and the process of doing this is simple.

How to e-file a tax return?

You have four choices for filing an electronically filed tax return to the IRS.

    1. Utilize IRS Free File: If your adjusted gross income is $72,000 or not as you may be able to use the IRS Free File program. 
    2. Free File Fillable Types — If your income is more than $72,000 and you are comfortable doing your taxes without help, you can use Free File Fillable Forms from the IRS. The forms do the math for you and provide basic advice.  You can simply do your federal return with all these kinds. 
    3. Utilize an internet tax preparation service or tax applications: Tax preparation software and online filing services are options.  These options are an easy way to complete and e-file your forms.  Some software providers charge for their programs, Some are free.   The software asks you simple questions about your own life and financing to steer you through the completion of your forms.  
    4. Get complimentary, in-person tax help: In most states, you can find volunteers to help prepare and e-file returns.  However, eligibility for free help is normally restricted based on earnings, and some providers appeal to specific demographic groups.  For instance, Tax Counseling for the Elderly programs focus primarily on assisting filers that are 60 and older. 
    5. Hire a paid preparer: Paid tax preparers, including CPAs, can e-file returns for you if they’re licensed IRS e-file providers. The IRS maintains a database of licensed providers, but you should be aware this option is likely to be the most costly one. 

Using online tax prep software is far and away the preferred approach of most taxpayers.  In fact, the IRS says it anticipated over four in five tax returns to be filed through tax return prep software.

Is e-filing really stable?

While e-filing is suitable, you may be worried about safety — especially with all these data breaches.  But experts agree that this is not an issue that should dissuade you from e-filing.

“In actuality, it can be more secure than paper filing as you’re sending your personal information through an encrypted system as opposed to exposing your information in the email.”

Dennis Chow, vice president of data security at SCIS Security, explains the IRS has put safety measures in place to keep your data safe.  “Vendors typically utilize IRS particular APIs that require ab sessions,” Chow says.  “All of this can be routed over TLS encrypted connections.”

It is important to employ a trustworthy service that will help you record your taxes.  Chow advises to not e-file on a public computer or use an online connection that isn’t confidential.

Bottom line

For many taxpayers, it makes sense to e-file a return since it’s the most convenient way to file your tax information to the IRS and it allows for timely refunds and easy payment options.  Just make sure that you use tax preparation software from a trusted source, so you can make certain the information which you supply to transmit to the IRS is going to be kept secure.