When filing your taxes, there’s more than one method of turning your paperwork over to the IRS. Forms can be submitted electronically, a process commonly referred to as e-filing, or you can send your return through the mail.
It turns out that these methods for submitting returns aren’t created equal. In fact, the IRS encourages business owners to consider the advantages of paperless filing. More and more taxpayers have opted to file their annual returns using the e-file method. It’s an environmentally-friendly option that also benefits taxpayers. Here are just four reasons choosing to e-file may be best for you and your business.
#1 - Greater accuracy
Filing by the deadline is crucial if you want to avoid owing the IRS even more money. Interest on late or underpayments can be steep. There are options like extensions for filing your return and payment plans for taxes you owe. However, another important key is accuracy. After all, errors on your return can also result in hefty fines and penalties.
When filing online, there are some safeguards in place. You’ll receive confirmation from the IRS that your return has been received. Then, within about 24 hours, you’ll be notified if its system has detected any common errors. These could include incorrectly entering social security numbers, mistakenly selecting a filing status, or inaccurately figuring credits or deductions.
Using the e-file method also helps to improve accuracy for the IRS. An employee doesn’t have to manually enter your return into the system line by line. This means it’s less likely there will be a mistake processing your return. There’s less opportunity for human error.
#2 - Faster processing
Taxpayers who file online also have their returns processed faster. In recent years, the IRS has been bogged down by heavy backlogs of paper returns. Even when operations are running smoothly, an e-filed return can be processed in three weeks. A paper return can take two or three times as long.
Processing time may be especially important if you’re owed a refund. If that’s the case, e-filing is the way to go. Some taxpayers have seen refunds from e-filed returns in as little as a week. Most see their refund within 21 days. Taxpayers who have to rely on mail delivery have a longer wait. The IRS has to sort, process, transcribe, and approve their paper documents. This takes more time.
| When it’s time for your annual tax return, you can choose between electronic filing (e-file) and mailing a paper form. However, these options are not exactly equal, and one may be more advantageous.
# 3 - More security
Some taxpayers hesitate to file online because they want to protect their personal information. However, the IRS has strict security guidelines. Its modern encryption safeguards tax returns, making filing online incredibly safe. Industry leaders continue to partner with the IRS to combat fraud and identity theft. In fact, e-file is the most secure option for filing your return.
It’s also important to remember that the alternative has flaws as well. Paper returns sent through the mail can be lost. Mailed returns aren’t as easy to track and take longer to process. This means it will likely take more time before the taxpayer realizes something is wrong. However, e-filed returns receive nearly instant confirmation of receipt.
If they’re expecting a refund, taxpayers who e-file and use mailed forms can track their refund. This may help those who mailed their returns detect a problem, such as the IRS not receiving their return. However, they won’t be able to check the system for four weeks. Those who e-file can check after three or four days.
# 4- Added convenience
It’s unlikely that anyone will say taxes are a convenient task. However, some steps can make it a little easier. E-filing lets you file anywhere and usually in less time. Some taxpayers can even file from their smartphones. If you’ve got a few minutes between meetings, you can start a form and save your progress to return later. This means you can capitalize on smaller blocks of free time and make progress on your return.
E-filing also saves time by guiding you through the process. A paper form has printed instructions. These will include directions for portions of the form or scenarios that may not apply to you. The e-file platform can help you move through the process more seamlessly. You won’t be caught up by sections of the form that aren’t relevant to your situation. Sometimes the same entry is needed repeatedly, like adding your signature. With e-filing, this can often be done once and copied for additional instances.
Finally, it’s also best to keep records of your taxes for three to seven years, depending on your circumstances. Having a stack of paper forms can mean clutter. Throwing out old tax records could be risky if you don’t take precautions to protect your identity. But with e-filing, you can store your old returns easily. You don’t have to worry about space, and your documents won’t be damaged by the elements.
Other considerations
Choosing the e-file option for your tax return has a lot of advantages, but it isn’t necessarily perfect. If you prefer to file as soon as possible, you should know that the IRS sometimes delays the opening for e-filing. In recent years, taxpayers weren’t able to e-file until late January.
Many taxpayers use tax software to help them maximize refunds and prepare their returns. While many of these services are low-cost or even free, fees can easily exceed $100 for more complex situations. The circumstances that these preparers consider complex can vary. Some might charge more if you made any self-employed income. Others will increase fees for processing situations like having an HSA account or retirement fund.
Some scenarios can’t be filed using e-file. These could include people who need to send refunds to a third party or if a form is required that can’t be filled out online. It’s also worth noting that you won’t be able to attach any images or PDFs.
Don’t wait for Tax Day
However you choose to file, you need to file on time. Keeping track of tax deadlines throughout the year can save you a lot of headaches when Tax Day arrives. Whether you’re a new business filing taxes for the first time or you’ve been running things for years, ComplYant has the resources to help you tackle your business taxes.
In fact, check out our webinar, Bookkeeping and Accounting Secrets for Small Business Owners, to spend less than 30 minutes on your books each month. Our free resources can help you set yourself up for success so that tax season is a breeze.
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