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IRS e-file Hints

Last updated 29th Nov 2022

Taxpayers that didn't take advantage of the IRS e-file system last year are among a shrinking segment of Americans that still file paper copies of their federal tax forms. Anyone that reads this article has access to the Internet, and the ability to file electronically.

Filing Taxes using e-file

According to the IRS website, over 155 million individual tax returns were filed using the e-file software system in 2020 (tax year 2019). They expect that number to continue to grow, as taxpayers get more comfortable with the electronic filing of tax returns. There are some big advantages to e-file, and most individuals will be hard pressed to find any disadvantages.

Advantages of the IRS e-file System

Perhaps the biggest benefit of the IRS e-file system is that it is electronically-based. The software is specifically written to take advantage of a computer's ability to accurately add and subtract numbers on tax forms. Computers are also great at accurately storing information; thereby letting the filer walk away from their tax return and restarting the process later on.

The e-file software programs are extremely sophisticated in their approach to gathering information. This efficiency also saves the filer time when preparing tax returns. Typically, the e-file partners' system would use an interviewing technique to see which sections of each form apply to a taxpayer. The interview process can quickly determine if a tax deduction or credit applies to an individual.

Another advantage of the IRS e-file system is that all of the tax forms are immediately available to complete. This eliminates the need to run to a local library or post office to find a special form. The time saved with the entire electronic process can be substantial.

One common misconception is that electronic exchange of information over the Internet is not secure. With the sophisticated security algorithms used today, that threat is minimized. This makes the government's e-file process fast, accurate, and secure.

Finding an IRS e-file Software Provider

The IRS, through its e-file software providers, allows for the electronic exchange of tax information files. The IRS also allows taxpayers to fill out a 1040 on their website using the Free File Fillable Forms, eliminating the need to work with an e-file partner or provider. There are a number of free e-file partners, and more information on finding one can be found in our article: Tax Preparation.

free file
The e-file provider will supply the interviewing software and prepare the appropriate tax forms automatically. The provider will also create the electronic tax file to be exchanged with the IRS. The entire process is straightforward, and involves a series of interview questions followed by an error checking program and the assembly of the final file format. Once electronically signed, the provider stores and securely transmits the information to the IRS.

Preparing Information for e-file

Whenever preparing a tax return, it's far more efficient to gather information together before starting the process. The same holds true when completing a return electronically. Gathering the required paperwork ahead of time will minimized disruptions during an e-file session.

e-file Checklist

The following is the recommended checklist from the IRS:

  • Social Security numbers for all dependents.
  • W2 forms from all employers.
  • Bank account numbers, if electing to receive a refund electronically or paying any tax due electronically.
  • Any 1090 form that was received for dividends, income tax withholding, or other forms of income.
  • Form 1090G if a refund of state or local income taxes was received.
  • Receipts for any itemized deductions taken on Schedule A. This could include job related expenses, mortgage interest, and property taxes.
  • Records and receipts for any other income or expense that might affect a taxpayer's federal income tax liability.

Returns and Refunds

Once the e-file questionnaire or interview has been completed, the provider will compile the return and check it for errors. When this process is finalized, the return is approved using an electronic signature. Once approved, the e-file provider will transmit the return to the IRS. At this point, a series of emails will be sent to the filer, confirming the IRS's receipt and status of the tax return.

Storing Returns

E-file allows taxpayers to keep their return stored, or archived, in several ways. The first is through the service providers themselves, which retain copies on their servers. E-file providers also allow individuals to download their tax return in electronic format, typically as a PDF file that can be stored on a local computer. Paper copies can be printed out from these electronic documents.

One of the nice features of e-file is the system allows the IRS to electronically deposit a refund directly into a bank account. This speeds up the process, and makes handling a check from the IRS a thing of the past.

Speeding-Up Refunds

Finally, the IRS has devoted a section of their website to providing the status of a tax refund, appropriately named Where's My Refund.

Information that's contained right on a tax return is all that is needed for the IRS to provide a status update. Using this system, it's possible to track the exact status of a tax refund, and also have a better understanding of when a check is being mailed home. The information can also be used to predict when the electronic transfer will be made to a bank account.

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Moneyzine Editor