Last year, one million taxpayers filed their returns over the Internet. Now, the IRS is offering incentives to reach Congress' goal of having 8 percent of all returns filed electronically by the year 2007.
If you're one of the 14.5 million taxpayers who already use a computer to help you with your taxes, you're a likely candidate for e-filing.
But electronic filing is especially suited to anyone who normally uses a simple 1040ez, or a 1040 form. That covers the vast majority of taxpayers.
What are the advantages of e-filing?
Â• You'll get your refund in half the time. If you e-file, the IRS can turn your refund around in one or two weeks, compared to a couple of months for paper filers. And, you can have your refund deposited directly into your checking or savings account.
Â•If you e-file, you can tell the IRS when and where to take its money. For instance, if you e-file in March, you can tell the IRS to take the money owed from your checking or savings account on any date prior to April 15.
Â•E-filing is more accurate and safe. According to the IRS, the error rate for electronic returns is 0.5 percent, vs. a 20 percent error rate for paper returns. The reason is that when you send a return on paper, someone at the IRS enters the information into a computer. With e-filing, your return goes directly into the IRS computers. Also, if you e-file, the IRS will send you an e-mail confirming that it got your return, which may be more reliable than certified mail.
Â•If you e-file, you can pay your federal taxes with a credit card directly over the Internet, and even pay in monthly installments. Remember, though, that will cost you your usual credit card interest charges.
You can use software programs to e-file your taxes. The IRS Web site has information about the companies that have become its partners "to bring affordable, convenient, user friendly e-file options available from home or through an Authorized IRS e-file Provider."
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