Peter Lynch Portfolio Holdings – Is It Best To E-File My Taxes?

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

Americans and the IRS may not agree about everything, but they are 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 popular because it’s a win-win for taxpayers and the IRS.

If you e-file your federal income tax return, you save the IRS cash because its workers do not have to spend time manually processing your return. In return, you could find any refund you’re owed faster, particularly in the event that you have it directly deposited to your bank accounts.

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

If you are Considering e-filing, some of the advantages include:

  1. Quick confirmation your forms have been obtained: The IRS will affirm a tax filing was received within one day of digital submission.  For paper filers, the IRS doesn’t send any acknowledgment that your forms have arrived safely. 
  2. Timely refunds: When you submit a paper filing, it can take six to eight months to receive a tax refund.  With e-filing, you’ll receive your money in 3 weeks or less.  Choosing direct deposit may also speed up the refund procedure.

  3. Reduced chance of errors: According to the IRS, there is approximately a 1 percent error rate on e-filed returns, compared with a 20% rate of mistakes on paper filings.  The IRS also provides more information on problems discovered on e-filed yields compared with paper yields.

  4. Easy payment process: If you owe the IRS money, it is easier to pay at your convenience if 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, provided that 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 or savings accounts, submitting a credit card through a payment processor for a commission, or paying by check or money order. 

  5. Digital storage of taxation data: Submitting returns electronically means there’s an electronic backup of your tax documents.  If something happens to your paperwork, then you’ll have an electronic backup.

The good news: Most taxpayers do opt to e-file and find those benefits — and the practice of doing so is simple.

How to e-file a tax return?

  • Free File Fillable Forms — If your income is more than $72,000 and you are comfortable doing your earnings without any help, you can use Free File Fillable Forms from the IRS. The types do the math for you and provide standard guidance.  You can only do your federal return with these forms. 
  • Utilize an online tax preparation tax or service software: Tax preparation software and online filing services are alternatives.  These options are a simple way to finish and e-file your forms.  Some applications suppliers charge for their apps, Some are free.   The program asks you simple questions about your own life and finances to steer you through the completion of your types.  
  • Get free, in-person tax help: In most states, you can find volunteers to help prepare and e-file yields.  However, eligibility for free help is normally restricted based on income, and some providers cater to specific demographic groups.  For example, Tax Counseling for the Elderly programs focus primarily on assisting filers that are 60 and older. 
  • Hire a paid preparer: Paid tax preparers, such as CPAs, can e-file yields for you if they are licensed IRS e-file providers. The IRS maintains a database of licensed providers, but be aware this option is very likely to be the most costly one. 

    Employing online tax preparation software is far and away the preferred approach of most taxpayers.  Actually, the IRS says it anticipated over four in five tax returns to be submitted through tax return prep software.

    Is e-filing really stable?

    While e-filing is suitable, you may be worried about security — particularly with all these data breaches.  But experts agree that this isn’t a problem which should dissuade you from e-filing.

    “E-filing a tax return has turned out to be a very secure way to file your taxes,” says Scott Grissom, vice president of product leadership, advertising and sales at LegalShield. “In fact, it may be more secure than paper filing since you’re sending your private information through an encrypted system rather than exposing your data in the mail.”

    Dennis Chow, vice president of information security at SCIS Security, clarifies the IRS has put security measures in place to keep your information safe.  “Vendors typically utilize IRS specific APIs that need token sessions,” Chow says.  “All of this can be routed over TLS encrypted links .”

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

    Bottom line

    For many taxpayers, it is sensible to e-file a yield since it’s the most convenient way to submit your tax information to the IRS and it allows for timely refunds and effortless payment choices.  Just make sure to use tax preparation software from a dependable source, so that you can make certain the information which you provide to transmit to the IRS is going to be kept secure.