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This article was fact-checked by our editors and Christina Taylor, MBA, senior manager of tax operations for Credit Karma Tax®. It has been updated for the 2020 tax year.
Americans and the IRS may not agree on everything, but they’re largely on the same page when it comes to e-filing individual income tax returns.
The majority of individual income tax returns submitted to the IRS are e-filed. E-filing is popular because it’s a win-win for taxpayers and the IRS.
When you e-file your federal income tax return, you save the IRS money because its employees don’t have to spend time manually processing your return. And in return, you could get any refund you’re owed faster, especially if you have it directly deposited into your bank account.
But what about security? And can electronic filing really give you access to all the forms you might need if you have a complex tax situation? Are there ever situations when you can’t e-file? Let’s look at the advantages of e-filing, and whether it might be the best filing option for your needs.
- Benefits of e-filing a tax return
- How to e-file a tax return
- You can submit paper forms when you e-file
- Is e-filing really secure?
- Are there situations in which you can’t e-file?
Benefits of e-filing a tax return
Taxpayers who opt to file taxes electronically can reap many benefits.
“When you electronically file, you speed up the tax preparation and filing process,” says Frank Moscardini, a LegalShield advisory council member and managing partner at Shimanovsky & Moscardini in Chicago. “By e-filing a return, you’re cutting down the IRS processing time by weeks. E-filing also cuts down on the paperwork you’re required to keep by creating a digital file.”
If you’re thinking about e-filing, some of the advantages include:
- Quick confirmation your forms have been received: The IRS will confirm a tax filing has been received within 24 hours of electronic submission. For paper filers, the IRS doesn’t send any acknowledgment that your forms have arrived safely.
- Timely refunds: When you submit a paper filing, it can take six to eight weeks to receive a tax refund. With e-filing, you’ll get your money in three weeks or less. Choosing direct deposit can also speed up the refund process.
- Reduced chance of mistakes: According to the IRS, there’s around a 1% error rate on e-filed returns, compared with a 20% rate of mistakes on paper filings. The IRS also provides more information on problems discovered on e-filed returns compared with paper returns.
- Easy payment process: If you owe the IRS money, it’s easier to pay at your convenience when you e-file. You can submit returns early and pay later if necessary, as long as you pay by the April 15 filing deadline. And you can schedule electronic funds transfers to easily send the IRS what you owe on a date of your choosing – again, as long as the IRS receives your payment by Tax Day. You also have the option to pay your balance by downloading the free IRS2Go app, using the IRS Direct pay service to pay from your checking or savings account, submitting a credit card through a payment processor for a fee, or paying by check or money order. Just be aware delaying payment after the filing due date (typically April 15) will result in interest and penalties.
- Digital storage of tax data: Submitting returns electronically means there’s a digital copy of your tax documents. So if something happens to your paperwork, you’ll have a digital backup. Some online tax prep software charges you to store your past returns, but Credit Karma Tax® doesn’t.
The good news: Most taxpayers do opt to e-file and get those benefits — and the process of doing so is easy.Learn about common tax-filing mistakes and how to avoid them
How to e-file a tax return
You have four options for submitting an electronically filed tax return to the IRS.
- Use IRS Free File: If your adjusted gross income is $72,000 or less you may be able to use the IRS Free File program.
- Free File Fillable Forms – If your income is more than $72,000 and you’re comfortable doing your taxes without help, you can use Free File Fillable Forms from the IRS. The forms do the math for you and offer basic guidance. You can only do your federal return with these forms.
- Use an online tax preparation service or tax software: Tax prep software and online filing services are alternatives. These options are an easy way to complete and e-file your forms. While some software providers charge for their programs, Credit Karma Tax® is always free. And it makes filing easier by importing information from past tax years, whether you did your prior year’s return with Credit Karma Tax or certain other tax software. Plus, it asks you simple questions about your life and finances to guide you through the completion of your forms.
- Get free, in-person tax help: In most states, you can find volunteers to help prepare and e-file returns. However, eligibility for free help is typically limited based on income, and some services cater to specific demographic groups. For example, Tax Counseling for the Elderly programs focus primarily on helping filers who are 60 and older.
- Hire a paid preparer: Paid tax preparers, including CPAs, can e-file returns for you if they’re authorized IRS e-file providers. The IRS maintains a database of authorized providers, but be aware this option is likely to be the most costly one.
Using online tax prep software is far and away the preferred approach of most taxpayers. In fact, the IRS says it expected more than four in five tax returns to be submitted through tax return prep software in 2017.
You can submit paper forms when you e-file
While filing taxes electronically is convenient, many taxpayers have paper forms that need to accompany their tax return.
Depending on what forms you need to submit — and what e-filing method you use — you may have a few different ways to submit required paperwork to the IRS.
- If available, forms must be submitted electronically: There are electronic versions of most common forms you’d need to submit.
- The IRS accepts forms and documents in PDF Format: The IRS indicates there’s variation among tax prep software programs regarding support for submitting PDFs.
- You can send your forms and documentation by mail: After e-filing your return, you can mail in additional forms and supporting documents. The paperwork should be accompanied by Form 8453, U.S. Individual income Tax Transmittal for an IRS e-file Return.
Your state may also require you to submit some paper documents along with your tax return. Local tax administration agencies provide information on when and where to send forms. The Federation of Tax Administrators has a helpful list of each state’s tax agency so you can find information for where you live.How long should you keep tax records?
Is e-filing really secure?
While e-filing is convenient, you may be worried about security — especially with so many data breaches. But experts agree this isn’t an issue that should deter you from e-filing.
“E-filing a tax return has proven to be an extremely secure way to file your taxes,” says Scott Grissom, vice president of product leadership, marketing and sales at LegalShield. “In fact, it can be more secure than paper filing since you’re sending your personal information through an encrypted network as opposed to exposing your information in the mail.”
Dennis Chow, vice president of information security at SCIS Security, explains that the IRS has put security measures in place to keep your data safe. “Vendors typically utilize IRS specific APIs that require token sessions,” Chow says. “All of this is routed over TLS encrypted connections.”
However, Chow warns that your data is only as secure as your tax preparer’s or tax software’s security.
“The main concern is that you’re still submitting personal identifying information to a vendor’s systems,” he said. “How it is secured at rest, and in transit as it remains on their systems, is a whole different story.”
That’s why it’s so important to use a trusted service to help you file your taxes. Chow advises not to e-file on a public computer or use an internet connection that isn’t private. “Take into account situational awareness to protect yourself,” he says.
Are there situations in which you can’t e-file?
Most taxpayers can e-file, but there are a few limited exceptions.
“There are situations where you have no choice but to manually file a hard-copy tax return,” Moscardini says. “The most common are when there is an issue or dispute regarding a qualified dependent deduction.”
When you submit your tax return and claim a dependent, you must include the dependent’s name and Social Security number. If someone already filed with the IRS and claimed the same dependent, the IRS will not accept your e-filed return. “The IRS may require you to submit additional information in support of your qualified dependent deduction,” according to Moscardini.
Moscardini also explains taxpayers may prefer not to e-file in cases where identity theft is an issue so they can provide appropriate documentation of their identity. And e-filing may not be easier when a taxpayer is requesting innocent spouse relief to try to avoid legal responsibility for a current or former spouse’s failure to comply with tax obligations.
If you’re filing a very late tax return, you may also be unable to e-file as electronic returns are accepted only until November in the year when taxes are due.
For most taxpayers, it makes sense to e-file a return because it’s the most convenient way to submit your tax information to the IRS and it allows for timely refunds and easy payment options. Just make sure to use tax preparation software from a trusted source — such as Credit Karma Tax® — so you can ensure the information you provide to transmit to the IRS will be kept secure.
Christina Taylor is senior manager of tax operations for Credit Karma Tax®. She has more than a dozen years of experience in tax, accounting and business operations. Christina founded her own accounting consultancy and managed it for more than six years. She co-developed an online DIY tax-preparation product, serving as chief operating officer for seven years. She is the current treasurer of the National Association of Computerized Tax Processors and holds a bachelor’s in business administration/accounting from Baker College and an MBA from Meredith College. You can find her on LinkedIn.