About e-file

Electronic filing involves the transmission of your tax return to the IRS from the computer of a tax preparer, tax preparation software program or online tax preparation service. You or a tax professional prepare your return. To file electronically, you must use an authorized service since the IRS does not have direct electronic filing with them. You can use an authorized provider, such as TaxBrain.com. You must have a valid Social Security number for every person included on the tax return to electronically file with the IRS. Be sure you also have all W-2's, Forms 1099 for dividends and retirements, receipts and bank account numbers (for a faster refund). E-filing through the IRS website starts Jan. 12, 2007 for taxable year 2006. If you e-file and don't use a Self-Select PIN, you must send Form 8453-OL or 8453 on the next working day after the IRS has accepted your return. Be sure to include your name, address, social security number and signature on the form. To complete Form 8453-OL, Part I, refer to the information on your tax return. Failure to file this form could result in suspension of e-filing.

Electronic filing offers a faster refund than paper filing. Refunds are usually mailed within three weeks, but direct deposits into your bank account are even quicker. You simply authorize a direct deposit by supplying your bank account routing number. Other benefits of e-filing include:

• Minimal Paper
• Fewer IRS errors
• No additional cost in most cases, like TaxBrain. However, some software, preparers and online services still charge extra for this service.
• Proof of Filing - The taxpayer gets a proof of filing letter and tracking number, which is not available via mail or courier.
• Timely filing. Can't get lost in the mail.
• Security. Less chance of identity theft.
• Faster refund processing.
• Payment by check or direct deposit.
• For complex returns, all your data goes into the system. With paper returns, the IRS doesn't keep your detailed supporting schedules. With paper, the IRS depends more on the taxpayer for record keeping.
• IRS verification of the return. The taxpayer gets notified right away if there is a problem rather than waiting months for an IRS notice and then a lot more paperwork to correct the problem.

Back To Top

Benefits of e-filing

The popularity of e-filing is a testament to its benefits. According to the IRS, over 65 million taxpayers filed using e-file during the 2005 tax year. The IRS has a goal of obtaining over 80% e-filing of tax returns.

Here are some of the benefits of e-filing:

• Even when compared to the paper filing, e-filing users receive their refund in half the time. If taxpayers choose to receive their refund via mail, the average time is three weeks. Whenever taxpayers choose to receive their refund by direct deposit, they can receive their refund in even less time than those not using direct deposit.
• E-filing is very easy to use. The IRS likes taxpayers to know how easy it is to use and proudly states that. Users do not have to have a lot of computer experience to use e-filing.
• Information that goes into e-filing is always done through an encrypted, secure mode. That helps ease taxpayers minds by insuring their personal information is safe.
• Using e-file provides reliability. Taxpayers can be assured that the system will be up and running. Also, information will be double-checked by the software programs to make for an error-free tax return submission.
• Using e-file helps save time by having your tax return done in a matter of minutes. Instead of having to deal with envelopes, finding the correct mailing address, and shuffling numerous papers, users of e-file avoid all that.
• Either preparing their own tax return, or having someone else prepare it, taxpayers have the convenience of having it done then and there. They do not have to wait around for it to be done. Most tax software programs have included an IRS confirmation showing that the IRS has received your return. This confirmation is instantaneous.

Another added convenience factor concerns simply sitting down at your computer and doing your taxes. Tax software programs, or online e-filing programs, offer line-by-line assistance. You cannot overlook any item (such as your Social Security number) since the e-filing software program will catch it. Other benefits include minimal paper and no additional cost in most cases, like with TaxBrain. However, some software, preparers and online services still charge extra for this service.

Back To Top

Drawbacks of e-filing

Everything has its drawbacks, including taxes. Even though the IRS has made it simpler to file taxes through e-filing, there are some drawbacks:

• If you're not comfortable with using a computer, e-filing can seem tedious and time consuming.
• If you do not have a computer but you want to prepare your own taxes, you will need to go to the library or other computer rental spot and pay for the time. This is why online tax prep sites are great because you can access the information from anywhere.
• If you're computer doesn't have the right hard drive requirements to install the e-file software, you may be out of luck. Again, online tax preparation is a good alternative in this case because you can get to your information from any computer.
• If someone forgets to print a copy of their return, they may be out of luck. If a taxpayer saves their e-filed return to their hard drive, does not make a backup copy, and their hard drive crashes, Que Sera, Sera. TaxBrain is an especially good choice in this scenario because we offers a 5-year safe keeping storage for $9.95.

  Back To Top

  
  
  

  Payment Options

  There are a variety of payment options available to taxpayers using e-filing. When taxes are due, taxpayers e-filing through the IRS e-file program can pay by:

  • Direct debit. This is done by authorizing an electronic funds withdrawal (direct debit) from a checking or savings account. This option is also available when you file online at TaxBrain.com.
  • Credit card. This can be done by any of the following: (Discover Card®, American Express®, MasterCard® or VISA® Card). TaxBrain recommends using Pay1040.Com
  • Check (payable to the United States Treasury). If you EF, must attach to the payment coupon not the 8453-OL.
  • Money order (payable to the United States Treasury). This can be done using Form 1040-V, Payment Voucher. This is a hard copy form that needs to be mailed along with the money order.
  • EFTPS (Electronic Funds Transfer Program Service) through the IRS. This allows taxpayers to schedule recurring payments (installments) from their affected bank accounts. EFTPS offers another way to pay your federal taxes. Best of all, it's free. In fact, it's recommended for installment agreement payments. For details on how to enroll, visit www.EFTPS.gov or call EFTPS Customer Service at 1-800-555-4477 or 1-800-945-8400. A note about EFTPS: Taxpayers must enroll in advance and allow 60 days to complete activation.

  Back To Top

  
  
  

  Preparing For e-filing

  Whether you file your tax return yourself or have a professional tax preparer file your taxes, here are some suggestions to follow to save you time and money:
  
  Financial records:
  
  Income: Be certain you have received all of your income forms. If you have worked for multiple employers, make certain you have one from each employer. If you received income from other sources be certain you received documents stating such. These can include 1099s for interest, miscellaneous income, annuities, IRA, rents and royalties, prizes, awards, gambling winnings, gifts, insurance proceeds, dividend earnings, and lottery winnings – among other income sources. Statements regarding mutual fund accounts, stock accounts, and bank accounts will also be needed. For a full listing, refer to the Tax Preparation portion of this site.
  
  Deductions/expenses: Be certain you have the proper documentation for deductions and expenses you intend to claim. Cancelled checks, receipts, bills, invoices, appraisal statements, property tax statements, financial statements, bank statements (for debit card transactions), credit card statements – these are among some of the items needed to claim your expenses. Other deductions/expenses can be found in the Tax Preparation portion of this site.
  
  Tax Credits: You also will need documentation for the credits you are claiming. Credits may include child care, dependent, earned income, educational, adoption, and the elderly – among others.
  
  Final Steps: When preparing the return yourself, here are some final steps to make prior to submitting your return (software programs should help with most of this):

  • Check and double check your calculations.
  • List your correct Social Security number for . This both your and your spouse, if filing jointly.
  • Review the checked boxes that state your filing status and exemption claims
  • Double check the Social Security numbers of each dependent.
  • Double check that you've claimed the deductions you are entitled to if you are age 65 or older, or blind.
  • Make sure the refund due to you or your tax payable is on the correct line.
  • For direct deposit or debit, make sure you have provided the correct routing number for your bank account.
  • If you are filing jointly, both you and your spouse must electronically sign the return.
  • Print up a copy of the return for your records.
  • Attach the Federal copy of your W-2 to your printed copy.
  • Attach all appropriate forms and schedules to your printed copy.

  Back To Top

  
  
  

  States A-I : E-filing Options

  States offer a variety of online tax filing services to help taxpayers during tax return time. Many states that do not offer individual income tax e-filing, do offer e-filing for businesses, sales taxes, payroll taxes, and other taxes. TaxBrain.com generally doesn't recommend using a state's e-file through the state Web site. Typically, only simple returns can be done on these sites and states don't always guarantee their services. If a taxpayer is going to e-file, it is highly recommended that they get a federal acknowledgment before they try to file their state return. Mismatched federal & state data is a very real problem for people using state filing sites.
  
  Most states provide state only e-filing of personal income tax returns. A few, however, offer both state and federal e-filing. Broken down, the following states provide taxpayers with electronic filing (e-filing) capabilities for their personal income tax return:

  • Alabama – State personal income tax return only, not federal.
  • Alaska – none available
  • Arizona – State personal income tax return only, not federal.
  • Arkansas – State personal income tax return only, not federal.
  • California – State and federal tax returns can be e-filed.
  • Colorado – State personal income tax return only
  • Connecticut – State personal income tax return only
  • Delaware – State only
  • District of Columbia – Both federal and state income tax returns can be e-filed.
  • Florida – none.
  • Georgia – State only e-filing of income tax returns.
  • Hawaii – Both federal and state income tax returns can be e-filed.
  • Idaho – State only e-filing of income tax returns.

  Back To Top

  
  
  

  States L-W: E-filing Options

  Most states offer e-filing for state personal income tax returns. Some also offer e-filing for federal income tax returns. The majority of states also offer many more e-filing options for business owners. E-filing includes payroll taxes, sales taxes, and other business-related taxes. Check with your local state to see what they have available that is needed for a business tax return.
  
  Here is a continuation of what states offer taxpayers e-filing an individual income tax return:

  • Louisiana – State only
  • Maine – State only
  • Maryland – State only
  • Massachusetts – 3^rd party vendors only...no individual taxpayers can e-file
  • Michigan – State only
  • Minnesota – 3^rd party vendors only..no individual taxpayers can e-file
  • Mississippi – State only
  • Missouri – State only e-filing of individual income tax returns
  • Montana – State only e-filing of individual income tax returns
  • Nebraska – State only e-filing of individual income tax returns
  • Nevada – no e-filing for any income tax returns
  • New Hampshire – no e-filing for any income tax returns
  • New Jersey – State only e-filing of individual income tax returns
  • New Mexico – State only e-filing of individual income tax returns
  • New York – State only e-filing of individual income tax returns
  • North Carolina – State only e-filing of individual income tax returns
  • North Dakota – State only e-filing of individual income tax returns
  • Ohio – State only e-filing of individual income tax returns
  • Oklahoma – Both federal and state e-filing
  • Oregon – Both federal and state e-filing
  • Pennsylvania – State only e-filing
  • Rhode Island – Both federal and state e-filing
  • South Carolina – State only e-filing of individual income tax returns
  • South Dakota – no e-filing of individual income tax returns
  • Tennessee – State only e-filing of interest & dividends (their income tax)
  • Texas – none
  • Utah – State only e-filing of individual income tax returns
  • Vermont – State only e-filing of individual income tax returns
  • Virginia – State only e-filing of individual income tax returns
  • Washington – none (has no state personal income tax)
  • West Virginia – State only e-filing of individual income tax returns
  • Wisconsin – State only e-filing of individual income tax returns
  • Wyoming – no e-filing for personal income taxes
  
  Each state has their own website address, of course. Check with your local state to see if there are any other requirements you need to know to ease your tax preparation process.

  Back To Top

  
  
  

  Where to e-file

  The IRS Web site offers online e-filing through partnering companies.

  • Some of these companies provide e-filing services for no charge. When choosing a company, be sure to link to the company's Web site through IRS.gov. By going directly to a company's Web site (instead of linking through the IRS Web site), you may not get the free service.
  • Other companies charge a fee. Think about if a fee is worth a quicker refund. Fees can go as high as $45, for instance. The bottom line is you should never pay extra to e-file. If you take your return to someone else (such as a CPA or enrolled agent), they will have the software and computer available to process your return. E-filing is becoming the preferred method of tax filing. Learn why by partaking.

  Back To Top