Originally created 02/10/02

Benefits of filing electronic returns



April 15 won't be the same if President Bush gets his way: He wants to give the nation's 132 million taxpayers 10 more days to file taxes in future years - if they file electronically.

Electronic tax filing, or e-filing for short, "is an immediate and important way to reduce the burden for both taxpayers and the government," Treasury Secretary Paul O'Neill said in previewing a plan to be part of Bush's $2.1 trillion budget next week.

Internal Revenue Commissioner Charles Rossotti added that the IRS will work with the tax preparation industry to expand ways to provide electronic filing for free when customer surveys show taxpayers who file electronically like doing so because:

- Tax preparation software makes for more accurate returns, checking for math mistakes and missing information so you're not likely to hear from the IRS.

- Electronic filers get refunds in 14 days on average and 10 days for direct deposit to their bank.

- Thirty-six states and the District of Columbia let taxpayers file electronic state and federal returns to the IRS. (States are Alabama, Arkansas, Colorado, Connecticut, Delaware, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland, Michigan, Mississippi, Missouri, Montana, Nebraska, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, Utah, Vermont, Virginia, West Virginia and Wisconsin.)

- Electronic signatures and self-selected personal identification numbers finally make filing paperless.

Forty million taxpayers filed electronically last year, including 6.8 million by home computer, and the IRS predicts 45 million will e-file this year.

But Congress wants 80 percent of all taxpayers filing electronically by 2007 to cut costs. The government spent $22 million to print and mail 40 million tax packages and 23 million computer filing brochures for the 2001 tax season even though the IRS no longer sends forms to people who filed electronically or used a professional tax preparer.

Bush's carrot of extra time might get taxpayers to stick with electronic filing - especially if filing is free - but Congress will have to OK the change.

Some tax Web sites provide free online filing already, but most big-name providers charge:

- TurboTax charges $19.95 for federal returns done by April 1, and $29.95 thereafter, plus $12.95 for state returns. Filing is free for taxpayers with less than $25,000 income, and people with Fidelity, Salomon Smith Barney or Vanguard investment accounts get discounts.

- H & R Block charges $19.95 to prepare and file federal and state returns online by March 31, and $29.95 thereafter.

O'Neill said that Uncle Sam isn't getting into the tax preparation software business but wants "to open a constructive dialogue with those who already have established expertise in this field."

On the Net:

www.irs.gov