IRS touts technology for taxpayers

But such fees are beginning to disappear, says Kristin Siolka, an enrolled agent and spokeswoman for the National Association of Tax Professionals headquartered in Appleton, Wis. “Many software companies and preparers no longer charge separately for e-filing.  Instead, they are bundling it into the cost of their services or software packages.”

Actually, fees should not be an issue for 70 percent of taxpayers or some 95 million individuals.  The IRS Free File program allows most taxpayers reporting an adjusted gross income of $52,000 or less (in 2006) to e-file their federal tax returns for free through one of the members of the Free File Alliance LLC.  These are private sector tax software companies who offer access to their services through links from the IRS Web site. 

Many of these firms also offer free state income tax preparation and filing along with free filing for this year’s telephone excise tax refund.  This is a one-time refund available to anyone — whether they are required to file a tax return or not — who paid the federal excise tax on long distance phone service between February 2003 and August 2006.

Despite the large number of taxpayers qualifying for Free File, fewer than 5 percent used the option last year.  Siolka said lack of Internet access and awareness of the program may account for the low numbers.

But awareness does not seem to be an issue where acceptance of e-filing is concerned: A lack of appreciation for its benefits seems the bigger culprit.

“One of the primary advantages of e-filing is that if there is an error in the return, it is immediately identified and the return is rejected, enabling the filer to fix it right away,” says Siolka.  "With a paper return, it can take weeks or months to resolve an issue.”  Those weeks can seem inordinately long if a refund is due; especially considering most errors involve easily remedied corrections to math or Social Security numbers.

“Not only is there less room for error with an electronically filed return, you know it has been received,” adds Denise Sposato, a spokeswoman for H&R Block in Kansas City, Mo., the nation’s largest originator of electronic returns. The IRS confirms receipt and acceptance of each e-filed return after it checks for errors and before it takes payment or refund instructions.  That confirmation, which comes in the form of a unique receipt number, is typically received within 48 hours of transmission — far more conclusive than certified mail.

While the IRS’s reason for pushing filers online is obvious — it represents significant cost-savings for processing returns — the slow acceptance is not.

“Really, there is no reason not to file electronically if you can,” says Siolka.  Though it eliminates the challenge and camaraderie of a frenzied late night run to the post office alongside all the other last-minute paper filers to ensure a return is time-stamped ahead of the midnight filing deadline.

MORE FROM TAX TACTICS

Tax Tactics Section Front

Tax credit is coming back to bite millions Foreign account tax amnesty deadline extended IRS rules for medical deductions are sickening Preparing for the unknown: Higher taxes Under plans, tax on the richest set to rise Deficit can lead to more IRS audits, experts say Large tax bill looms for Jackson estate Small businesses get a ‘tax break,’ for now Start thinking 2009 taxes now Obama vows to simplify the tax code Tax Tactics Section Front   Add Tax Tactics headlines to your news reader: