E-file is the term for electronic filing or sending your income tax return from tax software via the Internet to the IRS or state tax authority. It's simple and efficient and has become increasingly popular since it was introduced nationally in 1990. As of 2021, more than 94% of federal taxes were filed electronically.
E-filing is generally considered safe. Filing your taxes electronically is actually more secure than snail-mailing your filing to the IRS. There is less chance that the data contained within your tax documents will be compromised, as it's encrypted when sent electronically.
How To Use E-Filing
To e-file, taxpayers or preparers enter tax information into the tax software program. The software checks for completeness and math errors then transmits the return electronically to the IRS via internet connection.
Taxpayers can utilize federal and state e-file systems through paid tax preparers, such as certified public accountants (CPAs) or enrolled agents, provided that they've been accepted as e-file providers by both the IRS and their state. You can also use tax preparation software, such as TurboTax, H&R Block, TaxAct, or Tax Slayer. Most reputable software providers are equipped to file state and federal returns.
Free tax software can also be used to e-file federal and state returns together in states that participate in IRS Free File. However, Free File software is only available to taxpayers with incomes of $73,000 or less in adjustable gross income per year. Some software providers like TurboTax and TaxAct partner with the IRS on Free File and may even offer lower income limits.
The Many Benefits of E-Filing Your Taxes
The benefits of filing taxes electronically over mailing in your return are numerous. From convenience to speed to accuracy, e-filing has become the most popular way to file for American taxpayers, and with good reason.
- Easy: With e-filing, you can file your taxes from anywhere, including the comfort of your own couch. Tax data can be sent any time before the deadline, day or night, according to your own schedule. All popular tax software programs have e-file options, and there are even apps, such as the TurboTax mobile app, that allow you to file directly from your smartphone. The IRS also has an official app, IRS2GO, which allows you to track your tax filings once they've been submitted.
- Faster: When you file electronically, you don't have to bother with making copies, purchasing stamps, or heading to the post office. Once the documents are ready, you simply click a button on your computer to send them directly to the IRS. Also, the IRS processes electronically submitted taxes more quickly, usually within three weeks. Any refunds can be deposited directly into your preferred bank account, meaning you get your money back more quickly.
- More accurate: Because the tax software programs do the math for you, the chance of a mathematical error on your returns is greatly reduced.
- Higher refunds: Many online filers report that it's easier to take advantage of tax credits and tax deductions when they e-file. This may lead to higher refunds or lower tax bills.
- Cheaper: Because e-filing simplifies the tax preparation process, you may be able to forego hiring an accountant or tax service to prepare your taxes for you. This could save you $100 or more. Invest in a good tax software program and you'll be on your way to savings. Additionally, e-filed returns cost 88% less to process compared to a paper return, which saves taxpayers a lot of money.
- Maintain your tax history: E-filing allows you to keep an ongoing record of all your returns. No more digging through files to locate your tax returns from three years ago. Having your tax history at your fingertips can also make forward financial planning easier.
Given the ease and accuracy of electronic filing, it's no surprise that it's become so popular. E-filing can be done from a number of desktop or online tax software titles, and there is free tax software that includes federal e-File.