How To E-File Your Tax Return - Library How To E-File Your Tax Return

By Jonathan Weber,
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As paper tax forms are slowly phased out by both the IRS and state revenue departments, taxpayers have been offered more and more incentives to file taxes online – including immediate receipt confirmation, automatic error checking, and faster tax refunds. Experts believe that by the end of the next decade, virtually all federal income tax returns will be filed – and paid – online, through the IRS’ eFile system.

1. What eFiling Options Are Available?

In order to eFile your tax return, you need to make use of the IRS's FreeFile program, a suite of income tax software, or a paid tax preparer who is authorized to submit e-Filed returns to the IRS.

There are dozens of popular software suites and filing services available - which one you choose should depend on your yearly income and the complexity of your tax return. Here are some of the most popular options available for preparing and e-filing your federal or state tax returns.

eFile Your Tax Return - Comparison of Income Tax Software

IRS FreeFile - Third Party Software

Some private companies, in affiliation with the IRS, offer free eFiling software for individuals with simpler tax returns. TurboTax (see below) is one such company.

No free eFiling software is available through this program for individuals with an AGI of over $57,000. Not all states support free e-filing in this way.

IRS FreeFile - Free Online Forms

The IRS provides digital forms that can be used to eFile your own taxes, without the use of any tax preparation software. There is no income or complexity limit to use these forms.

Keep in mind that these forms offer limited assistance in calculating or verifying your tax burden, and should only be used by experienced tax preparers.

TurboTax - Tax Preparation Software

TurboTax is the most popular brand of income tax preparation software in the United States, which provides both free (basic) e-filing services and paid tax preparation software for taxpayers with more complex tax returns.

Basic tax returns (Form 1040EZ) can be e-filed for free through TurboTax's software interface. Several premium editions of TurboTax exist for users who need to claim itemized deductions, investment income, and small business income.

Read our review of TurboTax 2012

H&R Block At Home - Tax Preparation Software

H&R Block At Home, previously TaxCut, is TurboTax's main competitor. As the name implies, H&R Block At Home is published by H&R Block, one of the largest tax preparation firms in the United States.

H&R Block At Home is based on the same software used by professional tax preparers in H&R Block offices nationwide, and provides a more affordable tax prep option for individuals who wish to prepare and e-file their own taxes.

Read our review of H&R Block At Home 2012

Use A Paid Tax Preparer

You can have your state and federal tax returns e-filed for you if you use a professional tax preparer to help complete your tax return.

Professional tax preparers include specialists at tax-prep firms like H&R Block and Jackson Hewitt, CPAs from money management and financial services firms, and individual licensed tax preparers.

A professional tax preparer can be a great asset, especially if you have a complicated tax return, but using a paid preparer will almost always be more expensive then buying tax software and e-filing your own return.

2. Which E-Filing Option Should I Choose?

If you can't decide which of the options listed above are best for you, try to find the situation that best describes you below for our advice on weighing your e-filing options.

I'm a lower or average-income taxpayer with a simple tax return

If you made less then $57,000 this year, you'll be able to use at least one of the professional tax preparation software suites available at no cost through the IRS's FreeFile Alliance program. Free software from well-known companies like TurboTax should be more then sufficient to help you complete and e-file your tax return, and the savings you'll get by avoiding software or tax preparer fees will be significant. Price: Free

I don't qualify for the FreeFile program, but I still have a fairly simple tax return

If you earned too much to qualify for free tax software through the IRS FreeFile Alliance but still have a fairly simple tax return (mostly W4s and 1099s), any entry-level paid software package should be sufficient to file your return at a price that still beats most paid preparers. Price: $50-$60

Read reviews of TurboTax and H&R Block At Home

I have a fairly complicated tax return, but I'm familiar with filing my own taxes

If you have investment or business income, you'll have to file more then just a 1040 form. If you are confident with your personal finances and are interested in saving money come Tax Day, an advanced tax software suite (like TurboTax's Premium package) will offer step-by-step guidance in completing your tax return and qualifying for dozens of deductions and credits. Price: $100-$150

Read reviews of TurboTax and H&R Block At Home

I have a complicated tax return, and I don't have much experience filing my own taxes

If you have a complicated tax return and don't have the time or experience to file your own taxes, a paid tax preparer might be the best choice for you. A paid preparer will sit down with you individually and complete your tax return on your behalf, and attempt to help you minimize your tax burden through qualifying deductions and credits.

The benefits of a paid preparer include the ease of getting your return prepared, the experience of your preparer, and support during audits. The primary con of using a paid tax preparer is price - even a simple tax return will often cost more to file using a paid preparer then by using paid tax software. Price: $150-$500

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