Warren Buffett Letter 2018 – What to Consider When Filing My Taxes Online

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

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

Nearly all individual income tax returns submitted to the IRS are e-filed.  E-filing is popular because it is a win-win for taxpayers and the IRS.

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

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

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

  1. Quick confirmation your forms have been 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. 
  2. Timely refunds: When you submit a paper filing, it can take six to eight weeks to be given a tax refund.  With e-filing, you’ll receive your money in three weeks or not.  Choosing direct deposit can also accelerate the refund process.

  3. Reduced likelihood of mistakes: In accordance with the IRS, there’s around a 1 percent error rate on e-filed returns, compared with a 20% rate of errors on paper filings.  The IRS also provides more information on problems discovered on e-filed returns compared with paper returns.

  4. Easy payment procedure: If you owe the IRS money, it is easier to pay at your convenience if you e-file.  You can submit returns early and pay later if needed, provided that you pay from the April 15 filing deadline.  You also have the option to pay your balance by using the IRS Direct pay service from the checking or savings accounts, submitting 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 result in interest and penalties.

  5. Digital storage of tax information: Submitting returns electronically implies there is a digital backup of your tax records.  So if something happens to your paperwork, then you will have an electronic backup.

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

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

    1. Utilize IRS Free File: If your adjusted gross income is $72,000 or less you may be able to use the IRS Free File program.  The forms do the math for you and offer standard advice.  You can simply do your federal return with all these kinds. 
    2. Use an online tax preparation tax or service software: Tax prep software and online filing services are options.  These choices are a simple way to finish and e-file your forms.  Some applications providers charge for their programs, Some are liberated.   The program asks you simple questions about your own life and finances to guide you through the completion of your forms.  
    3. Get complimentary, in-person tax aid: In most states, you can find volunteers to help prepare and e-file yields.  However, eligibility for free aid is typically limited based on earnings, and a few services cater to specific demographic groups.  For instance, Tax Counseling for the Elderly programs focus primarily on assisting filers that are 60 and older. 
    4. Hire a paid preparer: Paid tax preparers, such as CPAs, can e-file yields for you if they are authorized IRS e-file providers. The IRS maintains a record of authorized providers, but you should 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 more than four in five 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 so many data breaches.  But experts agree that this is not an issue that should deter you from e-filing.

“E-filing a tax return has proven to be a very secure way to file your taxes,” states Scott Grissom, vice president of product leadership, marketing 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 as opposed to exposing your data in the email.”

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

It is important to use a trustworthy service to assist you file your taxes.  Chow advises not to e-file on a computer or utilize an online connection that is not private.

Bottom line

For many taxpayers, it makes sense to e-file a return because it is 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 planning software from a trusted source, so that you can ensure the information which you supply to transmit to the IRS is going to be kept secure.