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When you have your 2006 income tax return filed electronically, you can choose to receive your tax refund in two ways: check or direct deposit. They are the same methods that are used if you were not to use e-file. There is one distinct advantage of receiving your tax refund by e-filing your taxes, though. That is the timeframe of receiving your tax refund.
If you choose direct deposit as your method of receiving your income tax refund, you can expect to receive your tax return in about two weeks after filing your tax return.
If you choose a paper check as your method of receiving your income tax refund, the IRS states you can expect to receive your tax refund in about three weeks from the time your file your income tax return electronically.
E-filing, short for electronic filing, is when you choose to file and submit your income tax return to the IRS through one of the following methods:
Tax Software Program. A tax preparation software program will usually offer different features to help taxpayers during their tax preparation process. A popular feature of many of these programs is the capability to allow taxpayers to file their taxes online. If it is a good tax software program, this feature will be easy and quick to use. The software program will take you step-by-step through your tax return preparation process. It also will double-check your work as you go along. When something does not match, you will receive an error message. Upon correcting the information, you will be allowed to proceed in the process.
Some tax preparation software programs can be downloaded to your computer from the Internet. These are not the same programs as those that are strictly offered online. A downloaded tax preparation software program is found on an Internet site and downloaded to your personal computer. You do not have to be online to use it. Check around to see what is available.
Tax Preparer. When you take your tax return to a tax preparer, ask if they submit tax returns via e-file. Most tax preparers will offer this service. Many charge a fee. Call and ask beforehand. When you have someone else prepare your tax return for e-filing, you will need to take them the same financial documents as if you were filing with the paper method.
Online. An online tax preparation service is usually found on many of the tax preparation firms websites. You must be online to utilize this service. Whenever you purchase a tax preparation software program, see if this feature is offered. You also can obtain some online tax return filing sites by simply performing an online search. Also, many service providers offer this service through the IRS Free File Alliance program. Check to be certain what the fee is, if any.
As popular and convenient online income tax filing (electronic filing) has become, it is not for everyone. If you meet any of these criteria, you probably will not do well with filing your income taxes online.
Okay – you've heard the old adage a million times, “Nothing is certain but death and taxes”, but how apropos! The best news is that online tax filing sites improve constantly.
Online Tax Filing products walk you through the income and expense reporting for both federal and state taxes. Your answers are calculated and automatically placed into the correct forms fitting your required needs. The bonus parts of this are they double check for errors PLUS make tax saving suggestions!
You then print your return and/or file it electronically. Want to hear more great news? Tax return electronic filing is less expensive in some cases. But be careful - state often has additional filing charges and would you believe - sometimes more expensive than federal!
Where's My Refund? is a cool new online tool offered by the IRS that allows you to track the status of your tax refund. Once you file your IRS tax forms, you can use the Where's My Refund? tool to check on the status of your refund. To use Where's My Refund? you will need to provide specific information from your tax return, including your Social Security number, filing status, and your refund amount.
Starting January 1, 2006, balance due payment on federal forms can be made by credit card by phone or Internet. Integrated e-file and pay options begin on January 13th.
If you're not getting a refund, you can pay your balance due via credit card by calling 1-800-2PAY-TAX (1-800-272-9829) or 1-888-PAY-1040 (1-888-729-1040). You may also pay by using www.PAY1040.com or www.officialpayments.com. Your credit card issuer will charge you a convenience fee based on the amount of the payment, in addition to the fee for using this service. Both systems accept American Express, Discover, MasterCard, and Visa.
Can't meet the deadline? E-file form 4868 to request an extension of time - there are no restrictions so all taxpayers qualify. Another way is to choose a company who can help file your taxes. There are links to tax filing companies on IRS.gov. By going directly to a company's Web site, there is a chance you may not get the free Electronic Filing service. Remember - you are under no obligation to buy anybody services.
Any exempt organization can certainly participate in tax return electronic filing by e-filing their returns through an IRS 990 e-file provider. The 990 series of forms are used by tax-exempt organizations including charities, non-profit and private foundations along with other tax-exempt organizations providing information regarding their programs/activities showing that they are operating in appropriately. Information on these returns is open to the public.
More and more Americans are choosing e-file. It is estimated that more than 68 million Americans filed their taxes electronically in 2005. That was about 11 percent more than the year before. The total number for 2006 is expected to grow to almost 135 million - the IRS expects a record number of e-filers this year with taxpayers knowing that e-filing is quick, secure and reliable.
So, you're a procrastinator - you wait to the very last minute to file your dreaded taxes. If you're one of the last-minute filers, be sure to double-check everything. If your tax return electronic filing had an error in it and was rejected, you may need to e-file an extension.
If your electronic filing return was rejected by the IRS, you might need to file an extension before you start to e-file again. First, determine why your electronic filing was rejected. Some errors, such as misspelled names or mistakes in Social Security numbers or birth dates, can be fixed easily and you can resubmit your return to the IRS.
There are two electronic signature methods available for taxpayers when you file online. One method is the Self-Select PIN and the other is the Practitioner PIN. The first uses the taxpayer's prior year original Adjusted Gross Income amount and the second uses a completed signature authorization form.
Corporations with assets of $50 million or above and at least 250 returns are required to electronically file their 1120/1120S income tax returns for tax years ending on or after December 31, 2005. After the first effective year, the requirement will affect corporations that have assets of $10 million or more and have at least 250 returns. Although electronic claims filing is required of certain corporations, others may voluntarily convert to electronic claims filing.
For the most part, online electronic tax filing services are beneficial and helpful, but like all things there are some exceptions. To help you decide, here are the top three e-file products:
• CompleteTax – rated 4 stars out of 5: It may not be as well known as TurboTax or TaxCut but it has wonderful multilevel help and gives a deep interview that that tracks both simple and complex tax returns. One hint on this one: you might have to dig into several levels to get specific help.
• TaxCut – rated 4 stars out of 5: This one has “grown up” over the years and evolved into one of the better e-filing programs. It has a FAQ area as well as hyperlinks for explanations. The questions are comprehensive and it has the ability to import data if necessary. TaxCut offers free technical support with live chat help 24 hours a day, 7 days a week, if you get stuck.
• TurboTax for the Web Premier – 5 stars out of 5: This program has been re-vamped to almost perfection by upgrading the guidance while making it simpler to understand and follow. The con to this, yes it is pricey.
When you are ready to begin the process of e-filing your 2006 income tax return, you will need some documents on hand. You will take information from these documents in order to fill out the electronic tax forms. This does not matter if you do it yourself, or take your tax return to someone else to prepare and e-file.
W-2 for your wages, if you are an employee. You also need to have your spouse's W-2.
1099 series. If you received any income where taxes were not withheld, you need to have this tax form ready.
Social Security number. You need to have this number available for both yourself, your spouse, and any dependents that you are claiming on your 2006 income tax return.
Bank account number - if paying income taxes electronically, or you want a direct deposit of a tax refund
Bank routing number - same reasoning as bank account number applies
Receipts for itemized deduction expenses. These will be used to fill out Schedule A on Form 1040.
Receipts and records for other income or expenses you are claiming.
Once you start the e-filing process, you will need non-financial information such as your name, address, spouse name, exemptions claimed, and filing status. Have this information available to make for an easy and quick online filing of your income taxes. This information is needed to properly submit your income tax return to the IRS.
Since you will be (or are thinking about) filing your 2006 income tax return electronically, the subject of how to sign it may have come up. There are two ways in which you can sign your 2006 income tax return.
The first method makes for a truly paperless income tax return. It is when you obtain a PIN (Personal Identification Number) to file your tax return. Your PIN will be any five digits you choose (except all zeros). You can use your PIN whether you file your own e-file return, or if you have a tax preparer file it.
Each tax preparation software program that supports a PIN system will take you through the process of setting this up. Or, your tax professional who e-files your return can also help you.
The other method of electronically signing your income tax return involves not getting a PIN but still filing and submitting your income tax return using e-file. Some taxpayers are not allowed by the IRS to obtain a PIN to file their income tax return. This group of taxpayers includes:
You will be signing your e-file tax return using what is called an electronic signature. This electronic signature is obtained by using a PIN (Personal Identification Number). This number is for your use only, and it will identify you to the online tax preparation software.
Many commercial tax software companies offer free electronic filing (e-filing) of tax returns in conjunction with the IRS. This partnership program is titled ‘Free File Alliance'. Known as an authorized service provider, these companies can save you a lot of time, money, and frustration.
Free File Alliance is offered through the IRS website at irs.gov. In 2005, over 5 million taxpayers used this program – according to the IRS. Electronic filing of tax returns is on the increase and the IRS plans on making it even better, quicker, and more convenient.
Once you gain access to the Free File Alliance Program, you can begin to see which service provider is best suited to your individual needs. Each participating company has their own set of guidelines that you must meet in order to use their e-filing capabilities. Many involve an adjusted gross income limitation, for instance. Just check around to see what is available and what appeals to you.
Many partners in the Free File Alliance program offer both federal and state filing of income tax returns. This is an added benefit if you have to concern yourself with reporting state income tax.
Free File Alliance is truly free (no charge) for you if you meet the required eligibility criteria. Upon completing the tax preparation process and submitting your 2006 income tax return, you will receive a receipt confirmation. Be sure to print this up. This is proof of when your 2006 income tax return was submitted and received by the IRS.
In order to utilize the e-filing services of many online service providers, you need to meet their eligibility criteria. Reasons may vary regarding the eligibility requirements. Many times this is an income threshold. This means you cannot make over a certain amount in order to use the online electronic filing service program. Other times there may be an age, military, or state limitation.
Once you obtain access to the irs.gov website to e-file, search through the variety of service providers offering electronic filing. Read about their different requirements. Find what you are comfortable with. If there is a fee, is it worth it to you? What does it include? Does the fee outweigh the cost of paper filing? Think about this before deciding to pay any fee.
It is important to note that even though you are submitting your tax return electronically to the IRS, you are not filing directly with them. You need to electronically file (efile) your tax return through a service provider that has been authorized, tested, and approved by the IRS. Only then can you file your taxes electronically.
There are many benefits to this form of tax return filing. For one thing, you will not be alone. According to the IRS, over 70 million taxpayers filed electronically in the 2006 tax year. Wow! And, that number is expected to increase. What makes this method of filing tax returns so popular?
You do not have to fill out the paper tax returns. This can save a lot of time. Some taxpayers, however, find the electronic filing process goes easier when they do have a paper income tax return and applicable tax forms on hand. The information is taken from the applicable return and forms then inputted into the tax preparation software. However, if you simply have a W-2 and just a couple other tax forms, you might like to just directly input the information into the online filing software.
You do not have to collate a paper tax return. This means, you can simply staple together all the attachments to your tax return. You are not required to put them in order to avoid IRS oversight or penalties.
Your math is double-checked along the way. A good electronic filing program will have a double-check system in place. If there is any information that does not add or deduct properly, it will tell you something is wrong.
You are informed of any missing information. If you do not put in your withholding allowances or exemptions, social security number(s), or applicable deductions, you will receive an ‘incomplete information' message. Missing information can also be you claiming a tax credit without any corresponding qualifications, as an example. Once again, this will require you to correct it before you are allowed to move forward.
It is convenient. You can easily sit at home and submit your tax return or have someone else do it. All that is needed is a computer with Internet access.
It is secure. The IRS website is encrypted so that all information transmitted to and from it is secure and safe from hacking. When you submit any information to the approved service providers, it is converted to the file format specified by the IRS. Then, it is transmitted to the IRS.
Fast refund. If everything is submitted properly on your return, you will receive your tax refund in half the time as a paper filed tax return. This time is even quicker if you choose direct deposit as the method for receiving your tax return.
Acknowledgement. Many times upon completing the submission process, the service provider will provide you with an acknowledgment receipt. This note states that your return was successfully submitted. Keep this copy for your records.
When you file your income tax return electronically, you will be paying in the same way you would have had you chosen the paper method of filing your income taxes. You can pay via credit card, authorized electronic funds withdrawal, check, or money order.
For payment by credit card, the IRS accepts Visa, Discover, American Express, and MasterCard.
If you want to pay by making an authorized electronic funds withdrawal you need to have a checking or savings account where the funds can be withdrawn. To use this method, you will need to have your bank account and routing number available. You can choose which date you want the funds withdrawn (up to April 16, 2007). A Department of Treasury financial agent does the withdrawal transaction.
Of course, if you pay by check or money order, you must mail your payment into your designated IRS service center. Your check or money order needs to be made out to the United States Treasury. You also need to include IRS Form 1040-V (Payment Voucher).
|Jennifer Mathes, Ph.D.|