Tuesday, February 3, 2009

E-Filing: The IRS Wants You To, But It My Be Smart Not To

The IRS wants you to e-file. This we know. It cuts down on manpower for them since it automates much of the process and it gets returns in quicker. For you...

1. It’s easy. You can usually file a state tax return at the same time you electronically file your federal tax return.

2. It’s accurate. No more human errors because e-file checks for math errors and necessary information. This not only increases the accuracy of your return, but it also reduces the need for correspondence with the IRS to clarify errors or omissions.

3. No more second-guessing yourself. When you file electronically, the computer software or online program guides you through the process step-by-step.

4. You’ll get your refund faster. When you use e-file, you can get your refund in as little as ten days.

5. There are more payment options. With e-file, you can file your return early, but wait to pay any balance due by the April deadline. You can also pay electronically using a credit card, electronic funds withdrawal or in some cases the Electronic Federal Tax Payment System.

6. It’s fast. You don’t have to make a trip to the post office. In fact, you won’t even need to walk to the mailbox to send your return. Just click Send.

7. You’ll know the IRS received your return. The IRS will send you an electronic notification acknowledging receipt of your return.

8. You’ll have peace of mind. After clicking send and receiving your notification from the IRS that they received your return…kick back and relax – you’re done!

HOWEVER, you may want to rethink e-filing. It seems like a good deal for you, but it's actually a better deal for the IRS. Why?

1. By e-filing you're essentially giving the IRS more time to look over your return and potentially audit you. E-filing posts in 1o days. Paper returns post in 6-8 weeks. Basically, by e-filing you're giving the IRS an extra 2 months to audit you.

2. E-filing gives the IRS a much clearer picture of your tax return. This is because an e-file is fully inputted while a paper file only has key criteria entered into your master file. Why is more info bad? Because if something ever goes wrong, the IRS will have more info to argue against you with.

3. A paper return has documentation attached to act as proof, such as reasons why your charitable deductions are deductible and the amount is accurate. In e-filing, documentation is not always attached or may not make it to your file. In true government fashion, the IRS will usually choose the low hanging fruit, the easiest targets, the ones with the highest probability of not proving their case when choosing who to investigate. Do you want to be that person?

4. The IRS has significantly sped up the time it takes to receive a refund. In fact, if they are significantly late is paying a refund, they must pay interest on it. The difference between paper and e-file is usually 2-3 weeks. So, the argument that e-filing is a worth the risk since you get your money sooner is flawed.

5. Giving the IRS direct access to your banking info by e-filing and getting Direct Deposits only gives the IRS an easy source to levy if you get into trouble. If you change your bank account frequently, this shouldn't be an issue, but how often do you really do that?

So, why should you e-file? The only real reason is to lessen the government's expenses during the filing season. Other than that, I'd stay away from it.

To file your own taxes and get it right, see the following articles...

CPA?Software? E-File?

No W-2? No Problem

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