eFile - Income Tax Return Electronic Filing

Electronic filing, online tax preparation, and online payment of taxes are getting more popular every year. If you have wondered about eFile, here are the answers to frequently asked questions.

• Why eFile?
• How will I know that the IRS has received my income tax return?
• Can I avoid having to file anything on paper?
• Can I eFile my state tax return, too?
• Will my income tax return data be kept confidential?
• Can I eFile if I owe money?
• How much does it cost to eFile my income tax return electronically?
• If I'm getting a tax refund, when can I expect to receive it?

Here are some reasons why electronic filing makes sense for most taxpayers:

• Fewer mistakes. Using tax software such as TurboTax substantially reduces errors. According to the IRS, more than 17% of income tax returns prepared on paper have mistakes, such as missing information or taxes calculated using the wrong tax tables; half of those errors cause folks to overpay their taxes. But less than 1% of returns prepared electronically contain errors. If there is a mistake on your return, the IRS can detect it and send back an error report in as few as 48 hours so that you can quickly fix the problem.
• Speedier preparation. You can get the job done a lot faster if you tackle it with your computer. Filing from your computer saves you the trip to the post office, too.
• Faster refunds. If you send in your return by mail, you can expect to wait up to six weeks for your refund. But last year, folks who used TurboTax to eFile their returns and elected to have their tax refunds deposited directly into their bank accounts had their refunds in eight to 15 days (Tax year 2007 IRS processing delays may occur). If, however, you still prefer to send the IRS a paper return, TurboTax gives you that option.

When you send a return by mail, you have no way of knowing if the IRS received your return unless you pay extra for certified mail with a return receipt. It could take weeks for you to get that receipt. But if you file electronically, the IRS notifies you by e-mail within 48 hours that it has received your return. And if the IRS detects any errors, it will send an error code that TurboTax will translate into a text message telling you what the problem is, how to fix it, and how to retransmit your return.

It's now possible to file a completely paperless return, right down to your signature. You can use a self-selected Personal Identification Number (PIN) just as you would at a bank ATM. The PIN is your electronic signature.

The number of forms that must be signed and mailed on paper goes down every year. If you want more information about a particular form or about the whole process, review the information on the IRS Web page, e-file Using a Computer.

The following 37 states and D.C. allow you to eFile your state return at the same time you file your federal tax return online, from your personal computer. This is called the Federal/State eFile for Taxpayers program. Essentially, you send both returns to the IRS, and the IRS electronically forwards your state return to the tax authority in your state.

A few states allow you to file your state return directly, including California, Illinois, Maine, Massachusetts, and Minnesota.

Yes. The IRS, the states, and tax preparers are under the same rules of confidentiality for eFiled returns as they are for paper returns. They may not reveal or discuss any information contained in your return unless you authorize them to do so. Tax software developers also must operate under these rules, and they must protect customer confidentiality during the eFiling process. To ensure the integrity of your electronically filed tax return, always use only proven, high-quality eFiling software.

Yes. You can still pay with a check sent via snail mail, if you want. As long as the check is in the mail by the due date of your return—April 15, 2008, for 2007 returns—the payment is considered to be on time. Or you can advise the IRS to debit your checking or savings account for the amount due. No matter when you file your return, you can tell the IRS not to tap your account until the due date. A third option is to charge the balance due to a credit card. This method will cost you extra money, though; you'll have to pay a "convenience fee" of about 2% to the third party that handles the transaction. States are gradually adding these options.

Because the IRS and states do not charge for eFiling, the only costs associated are those charged by a tax preparer or tax software. Depending on the software brand and version, electronic filing charges for the previous filing charges have ranged from free to $25. Tax preparers may charge more.

For tax returns eFiled this past tax season, taxpayers using TurboTax and electing to have their refunds deposited directly into their bank accounts received their federal refunds on average within eight to 15 days. Tax year 2007 IRS processing delays may occur.

Refunds from tax returns filed on paper can take up to six weeks, depending on the time of year you filed the tax return.

Updated for tax year 2007