Electronic filing best way to get a refund
By Carole Feldman
WASHINGTON ó A tip for taxpayers who want to see their refunds faster: File electronically.
That advice from the Internal Revenue Service could come in handy for people in economic straits. Last year, the average refund was $2,429.
The number of returns filed electronically has more than doubled over the past 10 years. Last year, nearly 90 million ó about 58 percent ó of the more than 155 million tax returns were filed electronically. The IRS expects that number to increase this year.
If you file electronically and choose direct deposit, your refund will be in your bank account in 10 days. “When you go the paper route, it can take four, six weeks, even longer to get that paper check in there,” said IRS spokesman Terry Lemons.
The IRS says about 66 million refunds were direct-deposited last year, up 8 percent from 2007.
If you owe money, you can pay your tax bill through direct electronic withdrawal from your bank account or by credit or debit card. Even if you file early, the payment isn’t due until the April 15 tax deadline.
In addition to quick receipt of a refund, there’s another advantage to filing electronically: The most common errors on tax returns are mathematical, Lemons said.
Tax preparation software programs do the math for you. They guide you line-by-line through tax forms and point out any errors. And they remind you to check for any updates to the form.
So if filing electronically seems like a no-brainer, why do many people still file the old-fashioned way?
“Some people just like to do it all by hand,” Lemons says. “That group is diminishing rapidly.”
Other people buy tax software, fill out the forms on the computer, then print it out and mail it in. “They don’t want to have any of the fees with electronic filing,” he said.
This year, the IRS plans to expand its Free File program, and some of the the tax software companies are eliminating fees. TurboTax, for example, will let you electronically file five federal returns free when you purchase the boxed software program. Same with TaxCut 2008, H&R Block’s software.
In 2008, more than 4.8 million people filed electronically at no charge using the IRS’ Free File. That represents a nearly 24 percent increase over 2007. The IRS estimates that 98 million taxpayers will be eligible to use the software-based part of its Free File in 2009, when the maximum Adjusted Gross Income rises from $54,000 to $56,000. The program is available in English and Spanish.
New this year, the program also will offer Free File Fillable Tax Forms, similar to their paper counterparts, that any taxpayer, regardless of income level, can fill out on their own and file electronically.
In addition, some companies in partnership with the IRS will offer low-cost electronic filing.
“With free electronic filing, there’s no reason why people shouldn’t do it,” said Bob Meighan, vice president of the Consumer Tax Group at Intuit Inc., which publishes TurboTax.
Meighan says that filing electronically is safe, done over secure lines with military-level encryption. “I’ve never seen a single case or ever heard about an electronically filed return being compromised,” he says.
To file electronically, you can either use your computer with an IRS-approved tax-preparation software program or go to a professional tax preparer.
To sign the returns, use a five-digit Personal Identification Number that you select. To authenticate the signature, the prior year’s PIN or adjusted gross income must be included. Once the form is received, the IRS will send an electronic acknowledgement. Supporting documentation can be mailed using Form 8453.
Taxpayers in 37 states and the District of Columbia also can file state tax returns at the same time as federal ones. The IRS will forward the state form.
Participating states are Alabama, Arizona, Arkansas, Colorado, Connecticut, Delaware, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland, Michigan, Mississippi, Missouri, Montana, Nebraska, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, Utah, Vermont, Virginia, West Virginia, Wisconsin and the District of Columbia.
If you need more time to file your federal return, you can do that electronically, too, using Form 4868. Even though you can get an automatic six-month extension, however, you still have to pay any taxes due, or penalty and interest charges will begin to accrue.
Further information about e-filing can be found on the IRS Web site, www.irs.gov.