By Ryan S Himmel

It’s no surprise that as the convenience factor is playing a larger role among taxpayers, the number of taxpayers filing taxes online (i.e. E-Filing) has increased significantly in the past couple of years. In fact, according to the IRS, 150M taxpayers are expected to E-File their 2009 tax returns. If you are considering joining the crowd, below are some factors to help you decide whether or not to file your taxes online.

The Benefits of E-Filing

1) Tax Refunds Come Faster!

That’s right; you will receive your tax refund in about half the time or as fast as 3 weeks by filing online. This is because the tax returns are processed faster since no mailing is involved & all of your tax information is sent electronically.

2) Receive Proof Of Receipt Immediately

You will receive a receipt for filing your taxes online immediately and a confirmation number should your tax information inadvertently get misplaced.

3) Less IRS Mistakes

Since the IRS doesn’t have to re-enter data into the system, the IRS is less likely to make errors.

4) Less Taxpayer Errors

Generally speaking, taxpayers are less likely to commit errors as many of the most widely used e-file programs (i.e. IRS E-File Program, TurboTax, TaxAct, TaxComplete) highlight errors before the tax return is filed. But keep in mind that they are NOT full proof so also check the tax information yourself. Please also note that some of the software programs are free to file a federal tax return but most require you to at least pay to file a state return.

5) Eco-Friendly & Cheaper

Less paper, printing & mailing expenses to the taxpayer & the IRS.

Risks For E-Filing

1) Taxpayers Become Too Reliant on the Tax Software

Many taxpayers & preparers may become too reliant on the tax software by allowing the programs to do the work and not double checking the numbers themselves. Programs can make mistakes as well and it is possible there could be a mistake in the data you entered online. E-Filing was designed so that processing a tax return would be faster, more convenient and cheaper. It wasn’t designed to replace the amount of thought & care put into filing a tax return especially for complicated issues like transferring stock investments in IRAs. Make sure you double check your tax return.

2) Failure to Maintain a Hard Copy or Software Backup

Many taxpayers may also forget to print hard copies of their tax returns & also save a soft copy on a flash drive or other computer storage device should the tax return become misplaced. Please maintain backup copies of your returns in multiple secure locations as the law doesn’t really protect you if your files are misplaced.

3) Taxpayers May Use Community Computers

There is a risk that many taxpayers without access to a personal computer may use community computers at libraries and other public places. There is a risk that your identification can be compromised on one of these networks, so try to use a more secure resource or file your tax return via mail.

Ryan S. Himmel is the founder of the website BIDaWIZ – the online marketplace for trusted answers from licensed business professionals (i.e. CPAs, CFAs, CFPs & More). Visit us at BIDaWIZ to get answers to all of your tax questions or any accounting or finance concern.

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