Watch CBSN Live

E-Filing Your Taxes

The IRS estimates that 95 percent of American taxpayers could file electronically if they wanted to. CBS News Saturday Morning Money Editors Ken and Daria Dolan reviewed some of the advantages.

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?

• 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.

•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.

•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.

•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."

©1999 CBS Worldwide Corp. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed