Pros & Cons of e-Filing Taxes
With the U.S. income tax day quickly approaching, you may be considering different options for filing your tax return this year.
Over the years there has been a paradigm shift in how Americans file their income taxes. In 2008, 58% of taxes were filed electronically. In 2014, 86% or 117 million tax returns were filed electronically.
Filing your taxes using online services such as TurboTax, TaxACT, H&R Block, TaxSlayer and eSmart Tax can be less expensive and quite educational, as you’re learning about how the tax filing process works first hand. One drawback is that any errors in your return are your responsibility.
Here are the pros and cons for filing taxes electronically:
Fast: An electronic tax return will be accepted by the IRS within 1 or 2 days. As an e-filer you’ll receive an immediate confirmation via email or text message that the IRS has accepted your return. According to the IRS, the majority of refunds from electronic filings are processed within 21 days, while paper-based tax filings are processed within 4 to 6 weeks. Those individuals filing simple tax returns with direct deposit may receive their refund in as little as 10 days.
Nearly Error Free: It’s estimated that up to 21 percent of paper returns contain errors, while the IRS has stated the error rate for electronic returns is about 0.5%. Most e-filing tax software programs are designed to catch math and data entry errors.
Less Expensive: According to the IRS, if your Adjusted Gross Income (AGI) is $60,000 or less, you may be able to use their Free File software.
Convenience: Many software programs save data you’ve entered from previous years making it easier and faster to file your taxes for the new tax year.
Limited: Some software programs may be limited in scope for complex returns. For complicated tax returns it may be best to complete your taxes via a paper filing with a tax professional’s assistance. Also, there are still some IRS tax forms that are paper based and are not yet available in electronic format. Here’s a complete list of IRS forms available for electronic filing and those forms with known limitations: www.irs.gov/uac/List-of-Available-Free-File-Fillable-Forms.
Security: Unfortunately, there’s always a slight risk of fraud/ID theft when sending personal information online. It’s best to make certain your computer’s antivirus software is kept up-to-date.
Additional Fees: You may incur an additional fee to file your state tax returns through some software programs.
Advertisements: While following the steps to complete your taxes using a software program, you’re very likely to receive advertisements for other services offered by the software company. These ads may impede the filing process somewhat.