The days of filing your taxes in paper-based form, and mailing them to the IRS at 11:55 PM on April 15 are fading away.
According to IRS figures, over 126 million U.S. tax filers e-filed their own tax returns on 2018 (for the 2017 tax year.) That represented 92% of all tax returns filed in the U.S., compared to 31% in 2001.
As of May, 2018, a whopping 85.3 million taxpayers received their tax refund via direct deposit, right from the IRS into their bank account.
Five Reasons to File Taxes Online
That's an impressive growth rate and clearly, Americans are perfectly fine with e-filing their own tax returns. You really can't blame them, as the benefits of filing online are starting pile up, with these advantages at the top of the list:
1. You Get a Faster Refund
By filing digitally, American taxpayers get a refund much more quickly, as the IRS is able to turn refunds around faster when they receive an e-filed tax return.
According to the IRS, e-filers will receive their tax refund within three weeks of the date when the IRS receives your return. Get direct deposit and you'll get your refund even faster than that.
If you file your taxes via U.S. mail, it usually takes between six and eight weeks to receive your tax refund.
2. You're Filing a More Accurate Tax Return
Accuracy is a big deal with tax returns, and e-filing does improve tax filing accuracy. That's because e-filed returns are handled via programmed software that is built to uncover mistakes and not inaccuracies in real time. Plus, new-age tax software helps taxpayers do a better job of filling out their returns accurately. Data shows that e-filed tax returns are more accurate that paper-based returns.
3. Two-for-One Tax Filing
Most U.S. states allow taxpayers to e-file their federal and state tax returns simultaneously.
4. Immediate Confirmation
When you file your taxes electronically, the IRS sends you an immediate confirmation, either by email or text, noting that your tax return has been received.
5. No Need for Cumbersome File Cabinets
While you can keep hard copies of your tax returns in a desk or storage cabinets, with e-filing, you don't have to. You can either have a professional tax preparation service safely store your taxes electronically, or you can do so yourself, with easy-to-use document storage software.
Why You Might Hesitate to E-File Your Taxes
In this, the age of data breaches and identity theft, it's certainly understandable to have reservations about the security and safety of tax returns (and refunds) when you file digitally.
While the IRS has really stepped up its game in safeguarding taxpayer's personal financial data, hackers and I.D. theft specialists are always looking for an opening and will stop at nothing to separate people from their personal data.
The actual IRS tax return e-delivery operation is safe - the federal government has gone to great lengths to make sure consumer tax returns are safe and secure when e-filing. However, identity fraudsters aren't above using techniques like phishing and malware to trick you into sending tax return data (especially Social Security numbers) inadvertently.
One effective scam occurs when identity theft fraudsters purport to be from the IRS and email you, or call you, and claim there's been an error with your tax return and you need to send it back, or confirm your personal data.
If that scenario plays out, you could use your Social Security number, which, among other negative outcomes, could lead to a scammer using your Social Security to file a bogus return, and have a hefty refund transmitted to their bank account. By the time you and the IRS find out, the scammer is likely long gone.
According to the IRS, if you e-file your tax returns, and the transmission is rejected because the system already has your tax return recorded and confirmed, that means you've already been victimized by a tax fraudster.
In that event, the IRS advises continuing to pay and file your taxes by paper-form and file a complaint with the Federal Trade Commission.
Also, make sure to contact all three major credit reporting agencies - Experian (EXPGY) , Equifax (EFX) and TransUnion (TRU) and have a fraud alert placed on your credit report and freeze any activity on your credit cards and credit accounts with your bank or credit card provider.
Five Tips to Maximize Your E-Filing Experience
If you feel confident that your data is secure and you want to file your taxes digitally, get the job done right by taking the following steps:
1. If You Have a Professional Tax Preparer
If you're having an accountant or professional tax specialist handle your taxes for you, you don't have to do a thing. Your tax professional will e-file your taxes for you, and provide an e-file copy (or hard copy version) to you.
If you had your taxes done by a professional tax preparation firm (think TurboTax or H&R Block (HRB) ), work with that preparer's system and make sure to get a copy of your tax return sent to you. In most cases, the tax preparation firm will send your tax return in, via e-file, for you.
Taxpayers who are filing as 1040A or 1040EZ filers - meaning they don't itemize their deductions, don't have children, or have major deductible expenses - may be able to e-file their tax returns for free via the major tax preparation firms the IRS works with.
Even if you have itemized deductions, or have more complex returns prepared by a professional tax services firm may not have to spend more than $100 or $150 to e-file their tax returns. It's best to approach such firms and see what options they offer when filing your tax returns, and how much that could cost.
2. Know the Dates for Filing
The IRS requires you to e-file your taxes by midnight on Monday, April 15.
Ideally, you'll want to file as early as possible. That way, you'll get your refund faster and, if you're concerned about tax fraud, filing early gets you ahead of potential tax fraudsters who may try to file fraudulent taxes using your name. Yes, there's a remote chance of that happening, but why take a chance?
3. Sign Up for Direct Deposit Before You E-file
If you want to get your tax refund as soon as possible (and who doesn't?) make sure to sign up with the IRS for direct deposit payment straight into your bank account, or have your professional tax preparation provider do that for you.
That will ensure getting your refund more quickly and take any worries away over having your physical tax refund check stolen from your mailbox.
The IRS has a handy online and mobile tool to check the status of your tax refund called the Where's My Refund tool. It updates every 24 hours and can give you a regular status check on when your tax refund payment will arrive.
If you owe taxes money to the IRS, you can pay directly, via direct pay, debit or credit card, or check through the digital-based federal tax payment system. Learn more at the IRS payments page.
4. File Free With IRS
You can e-file your taxes free with the IRS at the filing portal link, at IRS Free File.
You'll need to have an adjusted gross income of $66,000 or less. If that's the case, the IRS will steer you towards a free tax return filing option, via the IRS-approved tax preparation companies, like H&R Block or Turbo Tax.
If you're AGI is over $66,000, the IRS does offer various tax return filing options.
5. Sign the Return
The IRS offers an electronic signature option when you sign off on your e-filed tax returns. Consumers have two signing options - both involving the use of electronic personal identification numbers (PIN).
The first option is a "self-select" option, which allows the taxpayer to either provide their previous years' adjusted gross income figure or provide a PIN they have previously used with the IRS to sign off and file their tax return.
The second option, known as practitioner PIN, does not mandate the taxpayer provide an AGI figure for access. Instead, the taxpayer and practitioner (i.e., tax specialist the taxpayer is working with) must sign the tax return, and then confirm the signing authorization request generated by the IRS.
An Easy Way to File Taxes
The IRS has done a good job of easing the pain of tax filing via e-filing digitally and millions of U.S. taxpayer are taking full advantage, and in growing numbers every year.
If you're wondering if 2019 is the year you'll file your taxes electronically, there's no time like the present to find out.
You only have until April 15 to join the IRS digital revolution.
Visit TheStreet's Tax Center