When it comes to taxes, efficiency and accuracy are essential. The Internal Revenue Service (IRS) e-file system was developed to provide a faster and more secure way of filing tax returns and to improve overall tax administration. E-filing has taken over traditional paper filing, and more taxpayers are opting to file electronically.
E-filing significantly reduces errors, improves the speed at which taxpayers receive refunds, and makes the tax process much more convenient. In this article, we will discuss the benefits of using IRS e-file, the types of forms available for e-filing, who qualifies for e-filing, and when it is most appropriate to use the system.
The Benefits of Using IRS E-file
Taxpayers who use e-file enjoy several benefits. First, because e-filing takes place through a secure system, it reduces the risk of identity theft and other fraudulent activities. Secondly, e-filing is environmentally friendly, as it eliminates the need for paper filing, thus reducing the consumption of paper. Additionally, e-filing saves time since the entire process is automated, thus reducing the number of errors that may happen when using manual filing systems.
E-filing also provides taxpayers with the added convenience of filing their taxes from the comfort of their homes or anywhere they have internet access. Taxpayers can also file at any time of day, even outside regular business hours. Lastly, e-filing increases the speed at which taxpayers receive their refunds. In most cases, the IRS processes e-filed returns within 21 days, as opposed to paper filed returns, which could take up to eight weeks.
Types of Forms Available for E-filing
The IRS has a vast list of forms available for e-filing, and taxpayers can use e-filing for several tax forms. The e-file system supports forms such as Form 1040, for individuals, Forms 1120S, 1065, and 1120 for businesses, as well Form 1099. Taxpayers can also e-file their state tax returns depending on the state.
The IRS has ensured that e-filing is as user-friendly as possible, and taxpayers can easily find the forms and instructions needed to file electronically. Most tax preparation software can quickly generate IRS forms, which taxpayers can use to e-file their returns.
Who Qualifies for E-Filing?
The IRS e-file system is available to all taxpayers who meet the e-file qualifications. There are, however, some limitations to the e-file system. Taxpayers who wish to use the system must meet the following requirements:
1. Have an adjusted gross income (AGI) of $72,000 or less in 2020. Those who do not meet this criteria still have access to free file fillable forms on the IRS website.
2. Must be filing a Form 1040, 1040-SR, 1040-A, 1040-EZ, 1040-NR, or 1040-NR-EZ.
3. Taxpayer’s return must not exceed 100 Forms W-2 and/or 1099-R.
4. Have not received any income outside of the US.
For tax professionals, the IRS e-file system is also available. In fact, tax professionals are required to use the e-file system for most forms. This policy began in 2011 when the agency made electronic filing mandatory for most businesses with assets over $10 million. The IRS requires all tax professionals to file using the e-file system for any form 1040, 1041, 1065, 1120, 1120-S, or 990/990-series return unless they are granted a waiver or have received the IRS’ Notice 2011-6.
When to Use IRS E-file
While taxpayers can use the e-file system throughout the year, some circumstances make it more feasible to use e-file. Let us look at the different scenarios when e-file is most applicable.
Tax Filing Deadline Approaching
The US tax day is generally April 15th, but it varies each year. In such cases, e-filing can be a lifesaver. E-filing is much faster and convenient, especially when the deadline is fast approaching. The e-file system is automatic, which means it is available 24/7. In other words, you do not have to wait for Branch hours to file.
Additionally, the system will notify you of any errors preventing the return’s submission. Filing manually can result in errors, and you may have to make corrections and resubmit, ultimately wasting time. If you file late, you will be penalized. As of 2021, The IRS assesses a late payment penalty of 0.5% of the unpaid taxes per month, and interest is charged at 3% annually.
Refunds
The goal of filing your tax returns is to get a refund, and IRS e-file can help you get your refunds faster. If you choose to receive your refund through direct deposit, you could receive your money within three weeks. The e-file system reduces processing times, making it much faster than traditional paper filing. However, this goes hand-in-hand with sending in accurate tax information.
Taxpayers can make mistakes, ranging from misspellings, missing social security numbers, and entering the wrong tax numbers. Double-checking all information entered and ensuring that it is accurate can help speed up the refunds process. The IRS’s website has several resources, including guides and tutorials, to help you better understand e-filing.
Error-Free Filing
The e-file system provides taxpayers with a considerable advantage when it comes to avoiding errors. The program is built to avoid certain errors that can occur when filing manually. For instance, using tax software will automatically check for errors; some software and websites have built-in features that will suggest deductions to minimize a taxpayer’s tax bill. This means that you can be reasonably confident that your return is free from errors when you use the e-file system.
Conclusion
E-filing has revolutionized tax administration in the US. The IRS e-file system provides taxpayers with the convenience of filing from anywhere, at any time, with the added advantage of filing error-free returns. It also allows taxpayers to receive refunds much faster.
While e-filing provides numerous advantages and while filing manually is still a valid option, taxpayers should be aware of the requirements for using the IRS e-file system. One essential consideration is meeting the qualifications for e-filing and ing the right software.
Using the e-file system when the deadline is approaching, when seeking refunds, and error-free filing can be advantageous for taxpayers. However, taxpayers should ensure that they double-check all information before submitting their returns electronically. The IRS’ website provides several resources and guides for taxpayers seeking to e-file their tax returns.
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