What is e-file?

e-file is how the Internal Revenue Service refers to the electronic filing of tax returns. It started out as a pilot project in 1986 with 25,000 tax returns being filed electronically. Today, one out of every five taxpayers files electronically, and the IRS goal is for all taxpayers to file electronically by 2007.

The greatest benefit of electronic filing is the speed at which you can receive a refund compared to paper returns. When coupled with direct deposit, you can receive your refund in as few as 10 days.

Even if you owe taxes, e-file allows you to file now and pay later. If you owe a balance, you can e-file in January, but delay payment until April 15th. More importantly, e-file provides a confirmation of your filing.

How Conventional Returns Work

If you mail in a paper return, it goes through the following process:

• The U.S. Post Office delivers your return.
• Your return must be hand-sorted by category.
• Your return is manually numbered, coded and edited.
• Finally, your return is keypunched and stored on magnetic tape at the IRS service center. These tapes are then processed weekly for the preparation of refund checks.

The e-file Advantage

• With e-file, the transmission process is as quick as a phone call.
• The IRS computers receive your data from your tax professional.
• An electronic validity check is performed to verify, among other things, the Direct Deposit and Social Security numbers.
• Accepted returns are input electronically to the same tape system as paper returns.
• The process is completed within the same day.
• The transmitter receives an acknowledgment from the IRS within 24 hours of the initial transmission.

Who Can Use e-file?

Practically anyone who files forms 1040EZ, 1040A or 1040 may file electronically. A completed Form 8453, U.S. Individual Income Tax Declaration for Electronic Filing is needed to authorize electronic transmission of your return. Your Enrolled Agent will have the necessary forms. If you are filing a joint return, both you and your spouse must sign the form.

Direct Deposit

Direct deposit is a free government service that enables you to have your tax refund deposited directly into your checking or savings account-the fastest and safest way to receive your refund. Payments are sent by electronic funds transfer, thereby eliminating the need to print and mail checks.

Refund Anticipation Loans (RALs)

Your Enrolled Agent may assist you in applying for a RAL. The RAL is a loan made by a financial institution designated to receive the direct deposit of the anticipated refund. Once your return has been acknowledged as accepted by the IRS, the financial institution may extend to you a loan in an amount based upon your refund. There will usually be an additional fee for this service.

Tax laws are subject to change at any time.

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