The Warren Buffett Way Workbook – What to Consider When Filing My Taxes Online

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

Americans and the IRS might not agree on everything, but they are largely on the exact same page when it comes to e-filing individual income tax returns.

The majority of 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 money because its employees don’t have to spend time manually processing your return. And in return, you can get any refund you are owed quicker, particularly in the event that you have it directly deposited to your bank account.

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

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

  1. Quick affirmation your forms are received: The IRS will affirm a tax filing has been received within 24 hours of electronic submission.  For paper filers, the IRS doesn’t send any acknowledgment that your forms have arrived safely. 

    Timely refunds: When you submit a paper filing, it may take six to eight months to be given a tax refund.  With e-filing, you’ll get your money in 3 weeks or not.  Choosing direct deposit may also accelerate the refund procedure.

  2. Reduced chance of errors: According to the IRS, there’s around a 1% error rate on e-filed yields, compared with a 20% rate of mistakes on paper filings.  The IRS also provides more information on issues discovered on e-filed yields compared with paper returns.

  3. Simple payment process: If you owe the IRS money, it’s simpler to cover at your convenience when you e-file.  It’s possible to submit returns early and pay later if needed, as long as you pay from the April 15 filing deadline.  And you can schedule electronic money transfers to send the IRS what you owe on a date of your choosing again, provided that the IRS receives your payment by Tax Day. You also have the choice to pay your balance by making use of the IRS Direct pay service from the checking account or savings accounts, filing a credit card through a payment processor for a commission, or paying by check or money order. 

  4. Digital storage of taxation information: Submitting returns electronically implies there is an electronic copy of your tax documents.  So if something happens to your paperwork, then you will have an electronic backup.

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

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 less you could have the ability to use the IRS Free File program. 
    2. Free File Fillable Forms — If your income is more than $72,000 and you are comfortable doing your taxes without any help, you can use Free File Fillable Forms from the IRS. The forms do the math for you and offer basic guidance.  You can only do your federal return with these kinds. 
    3. Use an online tax preparation tax or service applications: Tax prep software and online filing services are options.  These choices are an easy way to finish and e-file your forms.  Some applications suppliers charge for their apps, Some are liberated.   The program asks you simple questions about your life and finances to steer you through the completion of your types.  
    4. Get free, in-person tax help: In most states, you can find volunteers to help prepare and e-file returns.  But eligibility for free help is typically limited based on income, and some providers appeal to particular demographic groups. 
    5. Hire a paid preparer: Paid tax preparers, such as CPAs, can e-file returns for you if they’re licensed IRS e-file providers. The IRS maintains a database of authorized providers, but be aware this alternative is likely to be the most costly one. 

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

Is e-filing really secure?

While e-filing is suitable, you could worry about security — particularly with all these data breaches.  But experts agree this isn’t an issue that should deter you by e-filing.

“E-filing a tax return has proven to be an extremely secure way to file your taxes,” states Scott Grissom, vice president of product leadership, advertising and revenue at LegalShield. “In fact, it may be more secure than paper filing as you’re sending your personal information through an encrypted network rather than exposing your data in the mail.”

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

It is very important to employ a trusted service to assist you file 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 because it’s the most convenient way to file your tax information to the IRS and it allows for timely refunds and effortless payment options.  Just be sure that you use tax preparation software from a trusted source, so that you may ensure the information which you provide to transmit to the IRS is going to be kept protected.