Money Talks: IRS Wants You to E-File

By: Stacy Johnson
By: Stacy Johnson

More than 130-million income tax returns will be filed this year. About 38 percent of those filings will be done electronically--by telephone or by the Internet. And the IRS is making every effort to more than double the number of e-filers in the next couple of years.

In the 1990s the IRS set out to prove that it's serving you, not you serving them, with a campaign to be more user friendly and to make it less painful to pay your taxes.

It's made itself available 24-7, and with a Web site that answers any and all tax questions--although not always easily--you could say they've done what they set out to do. In fact, the IRS is doing everything it can to get individual taxpayers and businesses to use their E-File system.

Since 1996, the IRS has found that electronic returns have an error rate of less than one percent compared to 20 percent on paper returns. They figure that's because the software used is more accurate and electronic submission eliminates the chance of errors on the IRS's part.

Because of all that, the IRS wants to get 80 percent of all American filers to file their taxes electronically by 2007. They're making it easier by getting more states to join the electronic bandwagon. This year 37 states are offering E-file options, and free of charge.

The only drawback to E-filing is if you owe, it's on a credit card you'll likely go. Should you use credit to pay your taxes? That's answered in our next story

For seven years now American taxpayers have been able to file tax returns from their home computers and start getting refunds back lickety split.

And when you owe the IRS? You can pay Uncle Sam lickety split, too. You do it with your credit card. Unheard of in the old days, but a growing trend these days.

In 2001, nearly 285-thousnad taxpayers paid by credit card, an increase of 31 percent. In order to whip out the plastic, you have to file electronically, or be filing a 1040EZ by phone.

But, this convenience will cost you. The fee you have to pay seems to work out to more than two percent. So, about $25 bucks on a $1,000 tax bill.

A friendly, convenience-minded IRS is a great thing. But this convenience? An expensive way to tax your credit. The better option is allowing the IRS to debit your checking or savings account. There is no convenience fee on that service and the real plus is you can allow the withdrawal to occur as late as April 15, not immediately.


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