According to the Internal Revenue Service, in 2018 an impressive 90 percent of U.S. taxpayers filing their federal tax returns did so through an e-filing service. Not only is it convenient for taxpayers, the IRS prefers it, too, and encourages taxpayers to file electronically with its Free File program that makes filing taxes affordable for all. E-filing can result in receiving your tax refund faster as IRS employees don’t have to process returns manually, saving the agency time and money while streamlining the tax filing process.
Pros and Cons of E-filing
E-filing, or electronic filing, is a way of preparing and filing your taxes digitally without having to manually fill out and mail in a paper return. Paper returns take much longer to receive and process, and are more likely to contain errors than their electronically filed counterparts. When it comes to e-filing your return, you can file them yourself using your W-2 or pay someone at an authorized e-file provider to prepare your taxes for you.
Some advantages of electronic filing are reduced processing times, 24 hour confirmation that the IRS has received your forms as well as faster refunds – especially when you choose direct deposit. You're also less likely to submit a return with an error when you file electronically. According to the IRS, there is a 1 percent error rate among returns that are e-filed as opposed to a whopping 20 percent error rate found with mailed paper returns.
A common e-filing drawback is that you may find yourself needing to include paper forms or other supporting documents along with your tax return, but there are many IRS forms that can be submitted electronically – if there is an electronic version of said form available.
The IRS also accepts forms and supporting documents in PDF format, however not all tax preparation software supports this. As a last resort you can e-file your return, and mail additional forms to the IRS, but this requires filling out yet another form, IRS Form 8453, U.S. Individual Income Tax Transmittal for an IRS e-file Return.
Read More: What Tax Returns Cannot Be e-Filed?
Using IRS Free File
Free File is an IRS service through which all taxpayers can receive free tax preparation help. And, although millions of taxpayers use it annually, some taxpayers aren’t aware that it’s available to them. This service is made possible through a partnership with Free File Alliance. According to the IRS website, "Free File is a partnership between the IRS and the Free File Alliance, a group of industry-leading private-sector tax preparation companies that have agreed to provide free commercial online tax preparation and electronic filing."
Many popular tax preparation companies that you are likely already familiar with such as H&R Block® and TaxAct® all offer IRS Free File services for federal tax returns. If your adjusted gross income was less than $66,000 during the 2019 tax year (for taxes to be filed in 2020), you can use Free File, but keep in mind that you need to make $34,000 or less to use the TurboTax® Free File software.
If you earned more than $66,000, then you can still file your taxes for free, but you will have to use the IRS Free File Fillable Forms. The IRS recommends that taxpayers only use Free File Fillable Forms if they’re accustomed to, and comfortable with, filing their own taxes.
This is because the Free File Fillable Forms provide only basic guidance with filling out your tax return, whereas using IRS Free File through a private tax preparation company makes filing simple and does most of the work for you. If you are self-employed, you can also take advantage of this program. In addition to tax preparation assistance, you can also file an extension online through Free File, and some providers can assist with your state returns as well.
IRS Volunteer Tax Assistance
As a taxpayer, you have four different e-filing options for your federal tax return. You can use an IRS-authorized e-file provider’s commercial software, the IRS Free File or Free Fillable Forms program, a paid IRS-authorized tax preparer or free in-person tax preparation help from volunteers who can also electronically prepare your tax returns.
The first choice, online filing using a tax preparation service, is a less costly option for filing your taxes than hiring a tax preparer because you can do it yourself by following the software’s instructions, but it's not always free.
However, if you can’t take advantage of IRS Free File software or Free Fillable Forms, you may be able to participate in one of the IRS volunteer programs to assist you with filing your taxes on time through the Volunteer Income Tax Assistance, or VITA, program.
According to the IRS, VITA “offers free tax help to people who generally make $55,000 or less, persons with disabilities and limited English speaking taxpayers who need assistance in preparing their own tax returns.” If you qualify, certified volunteers will help you prepare a basic tax return and file it electronically.
There is also another free filing program that assists taxpayers 60 years of age and older with preparing their taxes or with any pension and retirement-related issues that senior taxpayers in their retirement years may face. Tax Counseling for the Elderly, or TCE, is a volunteer program staffed by IRS-certified volunteers from various private or public nonprofit agencies and organizations, according to the Benefits.gov website.
For more information on these volunteer programs, such as locations, qualification criteria or what you need to bring with you, you can visit the IRS or Benefits.gov websites.
IRS Form 8879
When you have someone else prepare your income tax return, such as a certified public accountant, she will need you to sign IRS Form 8879, IRS e-file Signature Authorization, before she can submit your return. Because the IRS has required that nearly all tax preparers file their clients' returns electronically, your CPA should be familiar with the form.
In years prior, when paper returns were the norm, your tax preparer would prepare, print and deliver your tax return to you for mailing. Now, tax preparers have the onus of submitting the return, and the process is not complete until the return is e-filed and accepted by the IRS or state agencies.
Form 8879 has a declaration that you must sign and date, which states that you have reviewed your tax return and that the information on Form 8879 matches the information reported on your return.
Signing the declaration authorizes the Electronic Return Originator, or ERO, to use a personal identification number to electronically submit your return. Your tax preparer, or ERO, knows to collect this signature from you, however, to be on the safe side, when you get your taxes prepared make sure that your tax preparer has had you sign this form as she cannot electronically file your taxes without it.
- IRS: Free File – Do Your Federal Taxes for Free
- IRS: About the Free File Program
- IRS: e-file Options for Individuals
- IRS: Six Reasons To E-file
- Free File Alliance: Home
- Credit Karma: Is E-filing Really a Better Way To File Your Taxes?
- IRS: About Form 8453, U.S. Individual Income Tax Transmittal for an IRS e-file Return
- IRS: Free Tax Return Preparation for Qualifying Taxpayers
- Benefits.gov: Tax Counseling for the Elderly
- IRS: About Form 8879
- The Tax Advisor: Form 8879 – Requirements, Possible Problems, and Best Practices for Practitioners