Still lagging behind in filing your taxes electronically? The IRS would like to encourage you to change your ways-and is providing more than one incentive to do so.
Last year, the number of people from Mississippi filing electronically increased by 8.9%. Nearly 457,092 Mississippians submitted their 2003 tax return electronically, and the IRS expects that number to increase to more than 475,000 for 2004 returns. Nationwide, this is expected to be the first year that more than half of Americans file electronically.
“We encourage all our individual clients to e-file if they qualify,” said Vance Randall, CPA, of GranthamPoole Certified Public Accountants in Jackson. “Many tax professionals will not agree to file a return unless it is e-filed. We don’t require our clients to e-file if they do not prefer that, even if they qualify. While we do allow the client to make the ultimate decision, we encourage clients to e-file if they qualify. We advise e-filing, whether the taxpayers prepare the returns themselves or have a professional prepare them. Many of our clients are now e-filing, and are finding it very beneficial.”
Mark Green, IRS spokesman for Georgia and Mississippi, said there are a number of good reasons to file electronically, “replacing the pencil with a mouse”:
• The IRS provides free assistance through tax software vendors to prepare electronic returns.
• Filing electronically cuts down on errors.
• You can receive a refund in less than 10 business days if you choose direct deposit rather than waiting four to six weeks for tax refunds on returns submitted through the mail.
• E-filing can take some of the anxiety out of waiting to see if your return has been accepted. You get an acknowledgment notice within 24 hours if there are any mistakes that mean the return hasn’t been accepted.
• Payments can be made online quickly and easily.
• The IRS takes stringent precautions to protect the confidential nature of the information in your return.
Are there any cases why someone shouldn’t e-file?
“I can’t think of a single reason,” Green said. “Back in 1986 when e-file first started, I electronically filed all returns for IRS employees in the state of Georgia — about 3,000 employees. I felt so strongly about e-filing that I continued to do it free of charge on my own free time for anyone who wanted it.”
Green said both people who hire professional tax preparation firms and those who do their own taxes benefit from e-filing. He believes the e-filing option can be particularly helpful to people from rural areas who might not have easy access to a local tax preparation company.
With free filing, taxpayers choose a software vendor from the IRS Web site. Green said once you choose a particular company, you will be sent directly to the company’s commercial Web site. Any questions about a particular service or company should be directed to the company providing the free service and not the IRS.
Green said the government believes that private industry, given its established expertise and experience in the field of electronic tax preparation, has a proven track record in providing the best technology and services available.
“In addition, the government believes a partnership with private industry will provide taxpayers with higher quality services by using the existing expertise of the private sector, maximize consumer choice, promote competition within the marketplace and meet objectives in the least costly manner to taxpayers,” he said.
While other services may be available for a fee from the tax preparation company, taxpayers are under no obligation to buy additional products and services such as an Individual Retirement Account (IRA) or a mutual fund or other investment related products for a fee.
While some companies have income limits on the free file options, others are open to anyone. In Mississippi, state returns can also be filed through free file.
Last year, an estimated 3.4 million returns were filed for free. Green said in addition to saving money and time for the government, e-filing is encouraged as a way to provide a vehicle for compliance.
“For those individual who would normally not file for whatever reason, it makes it easy to do not only from home, but free, as well,” he said.
E-filing may also cut down on errors as the software helps prevent mistakes such as math errors. Green said the free e-filing companies have a strong track record of filing accurate returns.
“The providers that give free service to taxpayers are under much scrutiny to make sure their product does work, and that it is private,” Green said. “Also, any problems must be fixed immediately or they are no longer entitled to participate. We continually test them to make sure software works, and that they stand behind the service they provide.”
Green suggests filing early rather than late in the season. Fewer errors are seen towards the beginning of the filing season. And with e-filing, the taxpayers is notified within 24 hours if the return is accepted or rejected for reasons such as leaving off a Social Security number or the name of a child.
Despite all the advantages, Green said a lot of people will continue to be more comfortable with a paper return.
“The paper return is still and will be a continuing operation for folks who do not like the Internet or electronic features,” he said.
Businesses are also encouraged to take advantage of filing electronically. As with individual returns, this can help cut down on errors as well as items that will cause concerns at the IRS.
“For example, tons of individuals in the small business society do depreciation,” Green said. “Unfortunately, depreciation is one of those gray areas where people tend to cut short proper calculations. You can make mistakes that can cut yourself short by increasing liability. But doing this electronically, all the information that is needed in order to depreciate the items, equipment and property is available for corporate returns. We find more large corporations are taking advantage of this. They are looking at avenues where they don’t have to employ an accounting firm because they can do this in house.”
For more information, see the Web site www.irs.gov.
Contact MBJ contributing writer Becky Gillette at firstname.lastname@example.org.