Forget that paper tax return! Electronic filing, online tax preparation, and online taxation are becoming more and more popular every year. E-filing is a good idea, which states let you e-file. The wonders of e-filing are how much e-filing costs and how quickly you can get your refund.
Here are the reasons why an electronic filing makes sense to most taxpayers:
Fewer mistakes: Using tax software reduces errors substantially. According to the IRS, 20% of the income tax returns prepared on paper are faulty. This causes people to pay more in taxes. But errors contain only about 1% of the returns generated electronically. If you make a mistake, the IRS detects it and sends back the error report within 48 hours. Thus the problem is rectified quickly.
Quick preparation: You can do that work very faster with your computer. Filing from your computer saves your travel time as well.
Faster refunds: If you send your return by mail, you have to wait up to 6 weeks for your refund. But opting for e-filing your return and getting your refund deposited directly into your bank account is the fastest way to get your tax refund. However, if you still want to send a paper return, tax software gives you that option.
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How Tax preparation software is approved for Electronic filing
The IRS requires all tax preparation software to be used to prepare electronic returns to meet the requirements for a Modernized e-File Assurance Testing (ATS), as briefly explained below:
1. The IRS issues a series of test tax returns and instructions. These publications can be found in the MeF User Guides and Publications page. Software vendors notify the IRS at e-Help Desk that they plan to provide a list of forms they plan to include in their tax preparation software.
The IRS doesn’t require to support all forms of software vendors. They are allowed to develop tax preparation software to suit their clients’ needs.
2. Software vendors use test scenarios in the above publications to create test returns and format in a specific Extensible Markup Language (XML) format.
3. The software vendor transmits XML formatted test tax returns to the IRS.
4. An e-help Desk assistor checks data entry fields on the return.
- These checks ensure that the tax calculations on the test returns match the answers provided by the IRS on the test returns.
- These checks ensure that the software correctly formats the test tax return data in XML format and the data can be successfully transmitted to, received and viewed the tax return by the IRS.
5. When the IRS determines that the software performs all the required functions, it is allowed or approved for electronic filing.
6. Software vendors are permitted to market their tax preparation software as approved for electronic filing to corporations and/or tax professionals after the approval from IRS is received.
E-filing is something essential for today’s emergency era. This, in turn, reduces the number of errors in tax filing. Also, your time is saved. Using electronic filing software, you can successfully make an income tax return.