More than 40 million taxpayers filed electronically last year. This tax season 45 million of the 132 million individual tax returns are expected to be filed by computer or touch-tone telephone.
Taxpayers can now find and file virtually every federal tax form electronically. A cybersignature also is legally binding so you no longer have to physically sign and mail a piece of paper. More states also welcome electronic filing.
- Taxpayers in 37 states and the District of Columbia let taxpayers file federal and state taxes by computer: Alabama, Arizona, 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.
The IRS Website www.irs.gov has lists of companies that provide online filing options along with direct links to tax preparation firms that offer no- or low-cost filing.
- Taxpayers in six states can e-file both their federal and state returns with a single phone call to the IRS TeleFile number. West Virginia and Maryland are new this year, joining Georgia, Indiana, Kentucky and Oklahoma. Only taxpayers who receive both federal and state TeleFile packages can use the combined TeleFile system, however.
Internal Revenue Commissioner Charles Rossotti says that it's cheaper and faster to file electronically and that there's fresh reason to do so this year, given the slowdown in traditional mail that has accompanied new security precautions since the anthrax scare.
Taxpayers who file by computer or touch tone phone can ask for direct deposit of any refund, which should arrive in 14 days or less.
Electronic filers who owe 2001 taxes can arrange for an electronic funds transfer from their bank account, to be debited up through April 15, 2002, or pay projected taxes due if they need an automatic six-month extension until Aug. 15.
Electronic filers also can make estimated quarterly payments by electronic funds transfers for their 2002 tax bill.
Finally, taxpayers can charge the balance to their American Express, MasterCard or Discover credit cards through two companies - Official Payments Corp. (www.officialpayments.com, or 1-888-2PAY-TAX toll-free phone number) and PhoneCard Inc. (www.About1888ALLTAXX.com, or 1-888-ALL-TAXX toll-free phone number) - authorized to accept IRS payment charges.
Each company has its own fee schedule for telephone or Internet payments. You'll also owe interest to your credit card company for any balance you carry.
Installment payments also can be made directly to the IRS at a 6 percent quarterly interest rate plus a one-time $43 fee. Such an arrangement is 20 times cheaper than the penalty for filing late and probably is cheaper than putting your taxes on plastic.
"Be careful about paying taxes with credit cards," because of processing fees and high interest rates, says Jim Southward, head of the California Society of Enrolled Agents in Sacramento.