As per the U.S. Internal Revenue Service’s (IRS) report, in 2016 over 85% of taxpayers e-filed their 2015 tax returns. Some individuals, however, are still skeptical when it comes to e-filing. Common reasons for taxpayers opting out of e-filing are identity theft & financial data theft, even though the IRS has taken great lengths to prevent these.
In today’s digital world, e-filing one’s tax return can be significantly advantageous. Here is how e-filing a tax return proves useful, and why you should e-file.
E-Filing A U.S. Tax Return
The IRS provides three ways for a taxpayer to e-file their income tax returns:
- By using IRS free-file. This method is available to taxpayers with adjusted gross income of less than $64,000.
- By using commercial tax prep software to prepare and file your taxes and transmit them through IRS approved electronic channels.
- By using a U.S. tax professional
E-Filing Proves Easy & Helps File Accurately
The IRS e-filing tax software provides step-by-step guidance through each section of a tax return when filing online which ensures an accurate tax return filing. The IRS e-filing software also calculates the amount for any tax credit, based on the income and other details entered, making tax filing a breeze. Basically, if an individual’s tax situation is not complex, involving various sources of income, gains, paid foreign taxes, tax credits, and deductions, he/she should be able to file their return themselves.
E-Filing Ensures Proper Safety & Security
As mentioned above, the fear of identity theft, and confidential data breach often causes U.S. taxpayers to choose paper-filing over e-filing. Taxpayers should be aware that the IRS e-file meets strict security guidelines, and uses advanced encryption technology to protect tax returns. Additionally, the IRS continues to carryout tax security summits in collaboration with state tax authorities, tax industry leaders, and financial institutions to stay at par with tax identity thieves, and come up with new measures to monitor and prevent tax identity theft and false refund claims. The IRS has processed more than one billion e-filed returns safely and securely.
E-Filing Can Be Done Conveniently from Your House and Provides Instant Confirmation
Taxpayers can either use the IRS free file option, buy commercial tax software or ask their tax-preparer to e-file their tax return. As part of the delivery process, IRS computers automatically check the return for mistakes. If they find easy-to-fix mistakes, like a math error or an incorrect Social Security number, it is immediately sent back to you. You can fix it and send it right back. This saves time and prevents a simple mistake from holding up your refund. Paid tax preparers often prefer to e-file their clients’ tax returns as it provides instant confirmation of the tax filing.
E-Filing is Free for Qualifying Taxpayers
If taxpayers are well-versed with the US tax laws, they can use the IRS Free File option, available on IRS.gov to file their U.S. federal tax returns at no cost. Additionally, the Volunteer Income Tax Assistance (VITA) program offers free tax preparation for those earning $54,000 or less, while for the elderly, i.e. taxpayers above age 60, can reach out to IRS Tax Counselling centres for assistance. However, if you have a complex tax situation, involving sale of house or any property, inheritance, income from other sources, business losses, or capital losses, it is highly recommended to consult a tax professional, as he/she can assist you with not only filing your tax return but also plan and help you save on taxes.
E-Filing Allows All Tax-Related Data To Be Maintained In One Place
To verify their identity, starting with the 2017 tax season onward, U.S. taxpayers will need to provide the ‘Adjusted Gross Income’ (AGI) amount from their previous year’s tax return. If using a tax-filing software for the first time, taxpayers will need a copy of their last filed return for this purpose. However, if the taxpayer has been regularly using the IRS e-filing option, the software will automatically pick up the AGI amount from their prior year’s filed tax return. Using IRS e-filing option allows you to store all your tax documents, such as: transcript, prior years’ tax filings in one place which can be assessed any time through the website or mobile application.
E-Filing Eases The Complex U.S. Health Care Coverage Reporting Requirement
Many U.S. taxpayers are still confused about the Affordable Care Act (ACA) minimum insurance coverage requirement. The IRS, being aware of this issue, has updated the e-filing tax software with the current tax provisions of the health care law, providing help to taxpayers with each line on the tax form that is related to the Affordable Care Act.
Note that the IRS has extended the health insurance information forms deadline for 2017.
E-Filing Enables Faster Processing of Tax Refunds
Although the IRS has delayed certain refunds for 2017, generally e-filing ensures faster refunds. When e-filing a tax return, if the taxpayer makes a mistake or missed out a particular section, the software notifies the tax-filer to rectify the errors or complete the missed section(s) thus enabling accurate and complete tax returns. This ensures faster processing of the tax return and refund. In addition, the taxpayer can opt for direct deposit of their refund to their bank account. The IRS issues more than nine out of 10 refunds in less than 21 days – however, some returns need further review and take longer.
E-Filing Provides Tax Payment Flexibility
Taxpayers have until April 18, 2017 to pay their taxes without interest or penalty. Taxpayers can e-file their returns early and pay at any time before the deadline. If it is difficult to make a one-time tax payment, taxpayers can set up automated equated payments until the deadline date to have the amount directly transferred from their bank account to tax account. Tax payments can also be made on the e-filing website using debit and credit cards, however, there is a fee to use these systems.
You can also pay in cash at a 7-Eleven store that participates in the IRS’ PayNearMe program (payment limits are up to $1,000 per day and there is a fee of $3.99 per payment). Of course, you may still mail a cheque or money order to the U.S. Treasury at your local service center.
AG Tax Can help
If you have any tax-related queries, need assistance with tax planning or filing your tax returns please contact us. Our team comprises of highly experienced tax professionals with extensive knowledge of US and Canadian tax laws as well as cross-border compliance.
Furthermore, as a full service accounting firm, AG Tax assures complete assistance with even your most complex tax needs.
We can assist with:
- Canadian Personal and corporate tax returns
- Cross Border Taxation and Business Planning
- US Personal and Corporate Taxation
- Disclosure of Foreign Assets and other information filings
- Retirement planning
- Estate Planning, Inheritance tax advice
To obtain a quote or to arrange for a tax consultation to discuss your queries, please contact us at:
- 604-538-8735 (Greater Vancouver Area, BC)
- 780-702-2732 (Greater Edmonton Area, AB)
Disclaimer: The information in this publication is accurate as of the time of its publication. AG Tax assumes no responsibility for changes to tax legislation subsequent to the publication of this document. The information provided is for general information purposes only and should not be acted upon without seeking professional advice. If you would like to engage our services, please contact our staff and obtain authorization to send our firm confidential information. A client relationship is not created by the transmission of information. A client relationship is only formed with our firm when a scope and engagement letter signed by the firm and the potential client detailing the terms of engagement is present.