Dave Ramsey Baby Step 5 – What to Consider When Filing My Taxes Online

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

Americans and the IRS may not agree about everything, but they’re largely on the same page when it comes to e-filing individual income tax returns.

Nearly all individual income tax returns filed to the IRS are e-filed.  E-filing is a favorite as it’s a win-win for taxpayers and the IRS.

If you e-file your federal income tax return, you conserve the IRS cash because its workers don’t need to spend time manually processing your return. And in return, you could find any refund you’re owed faster, especially in the event that you have it directly deposited to your bank accounts.

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

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

  1. Quick affirmation your forms are obtained: 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. 
  2. Timely refunds: When you submit a paper filing, it may take six to eight weeks to be given a tax refund.  With e-filing, you are going to receive your money in 3 weeks or not.  Choosing direct deposit can also accelerate the refund process.

  3. Reduced likelihood of mistakes: In accordance with the IRS, there is approximately a 1% error rate on e-filed returns, compared with a 20% rate of errors on paper filings.  The IRS also provides more information on issues discovered on e-filed yields compared with paper returns.

  4. Simple payment procedure: If you owe the IRS money, it’s easier to pay at your convenience when you e-file.  You can submit returns early and pay later if necessary, as long as you pay from the April 15 filing deadline.  And you’re able to schedule electronic money 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 choice to pay your balance by making use of the IRS Immediate pay service from your checking or savings accounts, submitting a credit card through a payment processor for a fee, or paying by check or money order. 

  5. Digital storage of tax information: Submitting returns electronically implies there is a digital backup of your tax documents.  If something happens to your paperwork, you’ll have an electronic backup.

The good news: Most taxpayers do decide to e-file and get those advantages — and the process of doing this is easy.

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

    1. Use IRS Free File: If your adjusted gross income is $72,000 or less you could have the ability to use the IRS Free File program.  The forms do the math for you and provide basic advice.  You can only do your federal return with these kinds. 
    2. Use an internet tax preparation tax or service applications: Tax preparation software and online filing services are options.  These choices are a simple way to finish and e-file your own forms.  Some applications providers charge for their programs, Some are free.   The software asks you simple questions about your own life and financing to guide you through the completion of your forms.  
    3. Get free, in-person tax help: In most states, you can find volunteers to help prepare and e-file yields.  But eligibility for free aid is typically limited based on earnings, and a few services appeal to specific demographic groups. 
    4. Hire a paid preparer: Paid tax preparers, such as CPAs, can e-file yields for you if they’re licensed IRS e-file providers. The IRS maintains a database of authorized providers, but you should be aware this option is likely to be the most costly one. 

      Employing online tax prep software is far and away the preferred approach of the majority of taxpayers.  Actually, the IRS says it expected more than four tax returns to be filed through tax return prep program.

      Is e-filing really secure?

      While e-filing is convenient, you may be worried about security — particularly with all these data breaches.  But experts agree this is not an issue which should dissuade you by e-filing.

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

      Dennis Chow, vice president of information security at SCIS Security, explains that the IRS has put safety measures in place to keep your data secure.  “Trainers normally use IRS specific APIs that need ab sessions,” Chow says.  “All this can be routed over TLS encrypted connections.”

      It is very important to employ a trusted service that will help you record your taxes.  Chow advises not to e-file on a public computer or use an online connection which is not private.

      Bottom line

      For many taxpayers, it is sensible 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 certain that you use tax planning software from a dependable source, so you can ensure the information you provide to transmit to the IRS is going to be kept protected.