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Overview

Quick Facts

  • More than 61 million personal income tax returns were electronically filed in 2004 - that is nearly half of all total individual returns. This year, the IRS projects the number of e-filed returns will surpass the number of paper returns filed for the first time in history.
  • Authorized providers filed 43 million returns in 2004, up 17 percent from the previous year.
  • Thirty-eight percent of tax professionals are committed IRS e-file users, which means they e-file more than 75 percent of their returns.
  • Approximately 78 million individuals who file an individual tax return are eligible for Free File. Each participating software company has its own eligibility requirements.
  • In 2005, the IRS hopes to process 70 million e-filed returns, marking a 14 percent increase over 2004.
  • 37 states accept Forms 990 and 990EZ to satisfy their filing requirements.
  • IRS e-file is available to taxpayers who use a tax preparer or prepare their taxes themselves. A listing of online applications and software that can be found at retail stores nationwide is available on www.irs.gov.

  • Cost

  • The IRS does not charge a fee to file electronically. However, some authorized IRS e-file providers, tax preparation software companies and Internet providers charge a nominal fee, ranging from $7 to $30.

    • Accuracy

  • The accuracy rate for e-filed returns is 99 percent.
  • IRS e-filed returns automatically are checked for accuracy. If errors are detected, the taxpayer or tax preparer will receive an electronic message indicating the error and will allow the sender to correct the mistake and resubmit without penalty.
  • Tax preparation software retains basic taxpayer information - such as date of birth and Social Security Numbers - from year to year, which greatly decreases the possibility of errors from transposed numbers and related mistakes.

  • Proof of Receipt

  • The IRS sends an electronic proof of receipt within 48 hours of when the taxpayer or tax preparer submits the tax return.

  • Refunds

  • On average, taxpayers who use IRS e-file receive their refunds in half the time of paper filers and in as few as 10 days with Direct Deposit.
  • During 2004, 49,218,000 refunds were directly deposited, up from 44,422,000 during 2003, an increase of almost 11 percent.

  • Payment Options

  • Taxpayers who owe money can choose to pay electronically. Electronic payment options help ensure timely receipt of payments and provide proof of receipt. Taxpayers can:

    • 1. Pay by authorizing an electronic funds withdrawal from their bank account for as late as April 15, no matter how early in the tax season they file. This is a free service.

    2. Pay by credit card (American Express®, Discover®, MasterCard® and Visa®). Companies that provide this service charge a convenience fee.

    3. Enroll in the Electronic Federal Tax Payment System (EFTPS). Once a taxpayer is

    enrolled in this free service, all federal tax payments can be made online or by

    phone. Tax professionals can also take advantage of EFTPS by using the Batch

    Provider software that is also available free of charge. Visit www.eftps.gov for more information.

    Security

  • The IRS does not have access to bank account information or credit card numbers, nor does it participate directly in any payment transactions.

    • Federal/State e-file

  • Currently, 37 states and the District of Columbia participate in the Federal/State e-file program, through which taxpayers can file federal and state income tax returns together. Tax software automatically transfers relevant data from the federal return to the state return as the information is entered.
  • Log onto www.irs.gov for a list of participating states.
  • Tax-exempt organizations can now e-file their 990, 990EZ, 1120 POL and 8868 request for extension forms. In 2005, the IRS will add Form 990 PF. Several states and local governments also accept the 990 electronically.

    • Free File

  • Free File, introduced in 2003, allows eligible individual taxpayers and qualified small business owners to prepare and e-file their tax returns using free online services.
  • More than 60 percent of American taxpayers - 78 million people - are eligible to use Free File.
  • In 2004, 3.5 million Americans took advantage of Free File.
  • Log onto Free File or www.firstgov.gov for eligibility details.

    • Electronic Signatures

  • Most taxpayers who use IRS e-file can electronically "sign" their tax forms using a self-selected, five-digit personal identification number (PIN).
  • Taxpayers who use a tax preparer can either enter their PIN themselves or authorize the preparer to electronically sign the form on their behalf.

    • More Information

  • For additional information, visit www.irs.gov.
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    History

    In 1986, the Internal Revenue Service began offering IRS e-file to Americans filing personal income tax returns. The goal of IRS e-file was - and still is - to make submitting tax returns easier and to give taxpayers and tax preparers peace of mind that submitted tax forms arrive at the IRS in an accurate, timely manner.

    In 2004, more than 59 million individual (1040) forms were filed using IRS e-file. The IRS' goal is to have 80 percent of all tax forms e-filed by 2007.

    Electronic filing is just one of the many ways tax professionals, individuals, businesses and tax-exempt organizations can work electronically with the IRS. The IRS recently introduced e-services, which enables qualified preparers to handle common functions online. Other ways to work electronically with the IRS include:

  • Paying balance-due accounts electronically
  • Tracking refunds through "Where's my Refund" on www.irs.gov
  • Applying for Employer Identification Numbers (EINs)

    • The IRS will continue to expand and improve its electronic offerings. Look to this electronic press kit or to www.irs.gov in the coming months for new information.

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    Questions and Answers

    Q: Why does the IRS want Americans to e-file their taxes?

    A: Accuracy and efficiency are just as important to the IRS as they are to the taxpayer. IRS e-file helps achieve both.

    Q: I prepare my taxes using tax preparation software. Then I print the forms and mail them to the IRS. Do I get the same benefits as someone who electronically submits their form?

    A: No. Forms that are electronically prepared but then printed and mailed are treated the same way as forms that are prepared by hand. The IRS must re-key your information, which could increase the chance for transcription errors. Also, it takes longer for the IRS to contact paper filers about errors than it does when the taxpayer can be notified electronically.

    Q: Why are forms more accurate when they're e-filed?

    A: There are several reasons:

  • Submitted forms are checked automatically by the IRS. If there is an error, the IRS will send back the form and allow the taxpayer or tax preparer to make the change and resubmit the form.
  • Data can be saved from year to year, dramatically cutting down the chance of transcription errors.
  • Data goes into the IRS system exactly as it was submitted. No re-keying of information is necessary.

    • Q: Why is there an extra charge to e-file taxes?

    A: The IRS does not charge a fee to file forms electronically. However, some software providers, and some tax preparers, do charge a fee. Free File is an option for more than 60 percent of Americans, allowing them to electronically prepare and file their tax forms for free.

    Q: I discovered an error after sending an e-filed return. Can I stop the transmission?

    A: Once the first transmission is sent, it cannot be cancelled. If the return is rejected by the IRS, you may edit it and send it again. If the IRS accepts the return as sent, the only option is to file an amended return on paper.

    Q: Can I e-file an amended return?

    A: No, the IRS does not allow the e-filing of amended returns.

    Q: Is there a greater chance that e-filers will be audited?

    A: No. And the IRS has no more data saved on those who e-file than it does on paper filers.

    Q: Why do refunds come more quickly with IRS e-file?

    A: Because data goes directly into the system, speeding up the process.

    Q: Which tax preparers can e-file taxes on behalf of clients?

    A: Tens of thousands of tax preparers nationwide are "Authorized IRS e-file Providers." Check with your tax preparer or log onto www.irs.gov to find one in your area.

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    Software

  • The IRS partners with more than 30 software providers. For details on these providers and the packages they offer, visit www.irs.gov.
  • Software providers are working to develop tax preparation software that supports all types of electronically filed returns. With many software options on the market, the following should be considered when choosing the best option:

    • 1. Price: Software packages differ in the volume and types of returns they support, and this is often reflected in their price.

    2. Shipping Date: The earlier the software arrives, the more time the user has to

    become familiar with it before the tax season rush.

    3. Capability: Researching software providers in advance will prevent paying extra for unnecessary software, or purchasing a package that does not support your filing

    needs.

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    State Statistics Map

    David insert map with e-file stats

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    e-file vs. paper

    Paper filing vs. IRS e-file:

  • Paper processing
  • Electronic processing
    • efilepaper
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    Individual Filers

    IRS e-file is part of the electronic process that enables taxpayers and tax preparers to file tax returns electronically more accurately, quickly and efficiently than on paper. Getting started with e-file is easy - 99 percent of forms are available online and more than 150,000 tax preparers nationwide are authorized to e-file taxes on behalf of their clients.

    IRS e-file provides taxpayers with faster refunds and the option to schedule electronic payment withdrawals for as late as April 15. It also gives filers peace of mind by providing a proof of receipt and quickly identifying errors, which allows the taxpayer or tax preparer to correct mistakes before the form is filed. In addition, more than 60 percent of Americans are eligible for Free File, allowing them to electronically prepare and file their taxes for free. To determine eligibility, visit www.irs.gov.

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    Facts

    Quick Facts

  • This year the IRS expects that for the first time, more than 50 percent of federal tax forms will be e-filed.
  • In 2004, IRS e-file usage grew by a record 15.4 percent.
  • In 2004, individual taxpayers accounted for 30 percent of e-filed returns, an increase of 22 percent over the previous year.
  • Ninety-nine percent of IRS individual income tax forms and schedules - including the majority of forms for the self-employed - are available through IRS e-file.
  • IRS e-file is 99 percent accurate.
  • More than 150,000 tax preparers nationwide are authorized to e-file taxes on behalf of their clients.
  • Research shows that more than 80 percent of taxpayers who have tried e-file are "very satisfied" with e-file's benefits.
  • Research shows that 83 percent of individual taxpayers who use IRS e-file remained loyal and e-filed the following year.
  • In 2004, 61 million individual tax returns were e-filed. That's a 15.8 percent increase over the previous year.
  • Authorized providers filed 43 million returns in 2004, up 17 percent from the previous year.
  • In 2004, tax preparers accounted for 70 percent of all e-filed returns, an increase of 15.8 percent over the previous year.
  • More than 60 percent of individual filers - or 78 million people - are eligible for Free File, which allows qualified Americans to prepare and electronically file their taxes for free.

  • Electronic Payments

  • Individuals may e-file their taxes early in the tax season and schedule an electronic funds withdrawal from their bank account or credit card for as late as April 15.

    • Refunds

  • On average, taxpayers who use IRS e-file receive their refunds in half the time of paper filers and in as few as 10 days with Direct Deposit.
  • In 2004, 48,956,000 taxpayers used Direct Deposit to receive their refund, a 10.8 percent increase over the previous year.

    • Refund Tracking

  • Through the Where's My Refund feature on www.irs.gov, taxpayers can track the status of their refund online at anytime. To do so, they will need to enter the following personal identification information as shown on their return:

    • 1. Social Security Number (or IRS Individual Taxpayer Identification Number)

    2. Filing Status

    3. The exact refund amount - dollars and cents

  • The personal identification information is used only for the purpose of tracking the refund.

    • More Facts and Information

  • For additional information, visit www.irs.gov.
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    Free File

    Overview

  • Introduced in 2003, Free File allows qualified taxpayers to prepare and e-file their own tax returns for free using commercially available tax preparation software.
  • Last year, 3.5 million Americans took advantage of Free File.

    • Who is Eligible?

  • More than 60 percent of American taxpayers - or 78 million people - are eligible to use Free File.
  • Taxpayers can review tax software provider offerings and determine if they are eligible by visiting the Free File page of www.irs.gov.

    • More Information

  • For additional information, visit www.irs.gov.
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    Available Forms

    Ninety-nine percent of IRS individual income tax forms and schedules are eligible for IRS e-file, including:

  • Form 1040 - U.S. Individual Income Tax Return
  • Form 1040 (Schedule A & B) - Itemized Deductions and Interest & Dividend Income
  • Form 1040 (Schedule C) - Profit or Loss from Business (Sole Proprietorship)
  • Form 1040 (Schedule C-EZ) - Net Profit from Business (Sole Proprietorship)
  • Form 1040 (Schedule D) - Capital Gains and Losses
  • Form 1040 (Schedule E) - Supplemental Income and Loss
  • Form 1040 (Schedule EIC) - Earned Income Credit
  • Form 1040 (Schedule F) - Profit or Loss From Farming
  • Form 1040 (Schedule H) - Household Employment Taxes
  • Form 1040 (Schedule J) - Farm Income Averaging
  • Form 1040 (Schedule R) - Credit for the Elderly or the Disabled
  • Form 1040 (Schedule SE) - Self-Employment Tax
  • Form 1040A - U.S. Individual Income Tax Return
  • Form 1040A (Schedule 1) - Interest and Ordinary Dividends for Form 1040A Filers
  • Form 1040A (Schedule 2) - Child and Dependent Care Expenses for Form 1040A Filers
  • Form 1040A (Schedule 3) - Credit for the Elderly or the Disabled for Form 1040A Filers
  • Form 1040EZ - Income Tax Return for Single and Joint Filers With No Dependents
  • Form 1099-G - Certain Government and Qualified State Tuition Program Payments
  • Form 1099-R - Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.
  • Form W-2 - Wage and Tax Statement
  • Form W-2G - Certain Gambling Winnings
  • Form W-2GU - Guam Wage and Tax Statement
  • Form 56 - Notice Concerning Fiduciary Relationship
  • Form 970 - Application to Use Lifo Inventory Method
  • Form 982 - Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment)
  • Form 1116 - Foreign Tax Credit (Individual, Estate, or Trust)
  • Form 1310 - Statement of Person Claiming Refund Due a Deceased Taxpayer
  • Form 2106 - Employee Business Expenses
  • Form 2106-EZ - Unreimbursed Employee Business Expenses
  • Form 2120 - Multiple Support Declaration
  • Form 2210 - Underpayment of Estimated Tax by Individuals, Estates and Trusts
  • Form 2210F - Underpayment of Estimated Tax By Farmers and Fishermen
  • Form 2350 - Application for Extension of Time to File U.S. Individual Income Tax Return
  • Form 2439 - Notice to Shareholder of Undistributed Long-Term Capital Gains
  • Form 2441 - Child and Dependent Care Expenses
  • Form 2555 - Foreign Earned Income
  • Form 2555EZ - Foreign Earned Income Exclusion
  • Form 2688 - Application for Additional Extension of Time To File U.S. Individual Income Tax Return
  • Form 3468 - Investment Credit
  • Form 3800 - General Business Credit
  • Form 3903 - Moving Expenses
  • Form 4136 - Credit for Federal Tax Paid on Fuels
  • Form 4137 - Social Security and Medicare Tax on Unreported Tips
  • Form 4255 - Recapture of Investment Credit
  • Form 4562 - Depreciation and Amortization
  • Form 4563 - Exclusion of Income for Bona Fide Residents of American Samoa
  • Form 4684 - Casualties and Thefts
  • Form 4797 - Sales of Business Property
  • Form 4835 - Farm Rental Income and Expenses
  • Form 4868 - Application for Automatic Extension of Time to File U.S. Individual Income Tax Return
  • Form 4952 - Investment Interest Expense Deduction
  • Form 4970 - Tax on Accumulation Distribution of Trusts
  • Form 4972 - Tax on Lump-Sum Distributions
  • Form 5074 - Allocation of Individual Income Tax to Guam or the Commonwealth of the Northern Mariana Islands (CNMI)
  • Form 5329 - Additional Taxes on Qualified Plans (including IRAs) and Other Tax Favored Accounts
  • Form 5471 - Information Return of U.S. Persons With Respect To Certain Foreign Corporations
  • Form 5471 (Schedule J) - Accumulated Earnings and Profits (E and P) of Controlled Foreign Corporation
  • Form 5471 (Schedule M) - Transactions Between Controlled Foreign Corporation and Shareholders or Other Related Persons
  • Form 5471 (Schedule N) - Return of Officers, Directors, and 10 Percent or More Shareholders of a Foreign Personal Holding Company
  • Form 5471 (Schedule O) - Organization or Reorganization of Foreign Corporation, and Acquisitions and Dispositions of Its Stock
  • Form 5713 - International Boycott Report
  • Form 5713 (Schedule A) - International Boycott Factor (Section 999(c)(1))
  • Form 5713 (Schedule B) - Specifically Attributable Taxes and Income (Section 999(c)(2))
  • Form 5713 (Schedule C) - Tax Effect of the International Boycott Provisions
  • Form 5884 - Work Opportunity Credit
  • Form 6198 - At-Risk Limitations
  • Form 6251 - Alternative Minimum Tax - Individuals
  • Form 6252 - Installment Sale Income
  • Form 6478 - Credit for Alcohol Used as Fuel
  • Form 6765 - Credit for Increasing Research Activities
  • Form 6781 - Gains and Losses From Section 1256 Contracts and Straddles
  • Form 8082 - Notice of Inconsistent Treatment or Amended Return
  • Form 8271 - Investor Reporting of Tax Shelter Registration Number
  • Form 8275 - Disclosure Statement
  • Form 8275-R - Regulation Disclosure Statement
  • Form 8283 - Noncash Charitable Contributions
  • Form 8379 - Injured Spouse Claim and Allocation
  • Form 8396 - Mortgage Interest Credit
  • Form 8582 - Passive Activity Loss Limitations
  • Form 8582-CR - Passive Activity Credit Limitations
  • Form 8586 - Low-Income Housing Credit
  • Form 8594 - Asset Acquisition Statement
  • Form 8606 - Nondeductible IRAs and Coverdell ESAs
  • Form 8609 - Low-Income Housing Credit Allocation Certification
  • Schedule A - Annual Statement
  • Form 8611 - Recapture of Low-Income Housing Credit
  • Form 8615 - Tax for Children Under Age 14 Who Have Investment Income of More Than $1,400
  • Form 8621 - Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund
  • Form 8689 - Allocation of Individual Income Tax to the Virgin Islands
  • Form 8697 - Interest Computation Under the Look-Back Method for Completed Long-Term Contracts
  • Form 8801 - Credit for Prior Year Minimum Tax - Individuals, Estates, and Trusts
  • Form 8812 - Additional Child Tax Credit
  • Form 8814 - Parent's Election to Report Child's Interest and Dividends
  • Form 8815 - Exclusion of Interest From Series EE and I U.S. Savings Bonds Issued After 1989
  • Form 8820 - Orphan Drug Credit
  • Form 8824 - Like-Kind Exchanges
  • Form 8826 - Disabled Access Credit
  • Form 8828 - Recapture of Federal Mortgage Subsidy
  • Form 8829 - Expenses for Business Use of Your Home
  • Form 8830 - Enhanced Oil Recovery Credit
  • Form 8834 - Qualified Electric Vehicle Credit
  • Form 8835 - Renewable Electricity Production Credit
  • Form 8839 - Qualified Adoption Expenses
  • Form 8844 - Empowerment Zone Employment Credit
  • Form 8845 - Indian Employment Credit
  • Form 8846 - Credit for Employer Social Security and Medicare Taxes Paid on Certain Employee Tips
  • Form 8847 - Credit for Contributions to Selected Community Development Corporation
  • Form 8853 - Archer MSAs and Long-Term Care Insurance Contracts
  • Form 8859 - District of Columbia First-Time Homebuyer Credit
  • Form 8860 - Qualified Zone Academy Bond Credit
  • Form 8861 - Welfare-to-Work Credit
  • Form 8862 - Information To Claim Earned Income Credit After Disallowance
  • Form 8863 - Education Credits (Hope and Lifetime Learning Credits)
  • Form 8865 - Return of U.S. Persons With Respect to Certain Foreign Partnerships
  • Form 8865 (Schedule K-1) - Partner's Share of Income, Credits. Deductions, etc.
  • Form 8865 (Schedule O) - Transfer of Property to a Foreign Partnership
  • Form 8865 (Schedule P) - Acquisitions, Dispositions, and Changes of Interests in a Foreign Partnership
  • Form 8866 - Interest Computation Under the Look-Back Method for Property Depreciated Under the Income Forecast Method
  • Form 8873 - Extraterritorial Income Exclusion
  • Form 8874 - New Markets Credit
  • Form 8880 - Credit for Qualified Retirement Savings Contributions
  • Form 8881 - Credits for Small Employer Pension Plan Startup Costs
  • Form 8882 - Credit for Employer-Provided Child Care Facilities and Services
  • Form 8884 - New York Liberty Zone Business Employee Credit
  • Form 8885 - Health Insurance Credit for Eligible Recipients
  • Form 9465 - Installment Agreement Request
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    Federal/State

    Overview

  • Currently, 37 states and the District of Columbia participate in the federal/state e-file program, through which taxpayers can electronically file federal and state income tax returns together. Tax software automatically transfers relevant data from the federal return to the State return as the information is entered.

    • How it Works

  • The electronic filing software places federal and state return data in separate packets. These packets are then transmitted to the IRS in one electronic "envelope." The IRS functions as an electronic post office for the participating state, which processes the electronic state return.
  • Although federal and state returns are filed simultaneously, federal and state tax payments, if required, are not combined. Federal tax payments can be made via electronic withdrawal, credit card or EFTPS. Some participating states accept electronic withdrawal or credit cards payments directly.

    • Participating States

  • View the list of participating states on www.irs.gov to see where federal/state e-file is available.

    • More Information

  • For additional information, visit www.irs.gov.
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    File Your Own Taxes

    Research shows that 80 percent of taxpayers who have tried IRS e-file are "very satisfied" with its benefits. It's easy to e-file your personal income tax return using the following guidelines.

    1. Gather the necessary materials needed to e-file your individual tax return. (Note, the

    following list is simply a guideline to help you prepare, and is not meant to be all-inclusive.)

  • Social Security Numbers for yourself, your spouse and any dependents
  • Copy of last year's tax return
  • Form W2, Wage and Tax statement from all employers for you, your spouse and any dependents
  • Bank account numbers (for Direct Deposit or to pay electronically)
  • Unemployment compensation Forms 1099-G
  • Income receipts from rental real estate, royalties, partnerships, S corporations, S trusts
  • Social Security benefits
  • Other income
  • Form 1098 for home mortgage interest and points
  • 1099 forms for dividends, retirement, or other income, or any 1099 forms with income tax withholding
  • Casualty and theft losses
  • Job expenses
  • Medical and dental expenses
  • All receipts pertaining to your small business
  • Receipts for charitable contributions and gifts
  • Receipts from taxes you paid, such as state and local taxes, real estate taxes and personal property taxes

    • 2. Learn more about Free File and determine if you are eligible.

  • Free File is online tax preparation and electronic filing through a partnership agreement between the IRS and the Free File Alliance.
  • More than 60 percent of taxpayers - 78 million people - are eligible for Free File.
  • You must be a U.S. citizen or resident alien to be eligible for Free File.
  • Log on to www.irs.gov to determine your eligibility (be aware that even if you qualify for free federal filing, you may have to pay to file your state return).
  • Review the listing on www.irs.gov of commercial companies providing Free File.
  • Determine your eligibility for each commercial company by reading the short description of their eligibility requirements.

    • 3. Select a filing company.

  • If you are eligible for Free File, link to the Free File company service of your choice from www.irs.gov (by going directly to a company's web site, you may not get the free offer).
  • If you are not eligible for Free File, you can still electronically file your taxes with the company of your choice, either online or by downloading software to your personal computer.
  • If you are having trouble deciding which company to use, try the interactive help tool, "Guide Me To a Service," to narrow down the possible companies offering tax preparation services.

    • 4. Prepare and file your federal income tax return.

  • Through proprietary software, the company you've chosen to file your taxes converts the file you send to a format that meets IRS specifications and transmits it to the IRS.
  • The IRS then checks the return and notifies the transmitter (who then informs you) whether the return has been accepted or rejected. This electronic return verification is a unique benefit of IRS e-file. If the return was not accepted, the electronic return transmitter, as part of their customer service, will assist you in the correction process.
  • If you choose not to use the Self-Select PIN as your signature, or you have certain paper documents to submit, you will need to mail in a paper signature document. Send the completed Form 8453-OL, U.S. Individual Income Tax Declaration for an IRS e-file Online Return, to the appropriate IRS service center when the electronic return is accepted. Signing this document indicates you have verified and agree with the return information.
  • Refunds should be in your savings or checking account within two weeks if you choose Direct Deposit and in about three weeks if you choose a paper check.
  • If you owe money, you can make payment by authorizing an electronic funds withdrawal from a checking or savings account, by credit card or by mailing a check or money order (made out to the United States Treasury) using Form 1040-V, Payment Voucher.
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    Working with a Tax Professional

    More than 150,000 tax preparers nationwide are authorized to e-file taxes on behalf of their clients. Last filing season alone, 43.1 million individual returns were e-filed by tax professionals. Here's how it works:

    1. Make sure your tax preparer is an authorized IRS e-file provider.

  • Tax preparers who are accepted into the IRS electronic filing program are called "Authorized IRS e-file Providers," or Electronic Return Originators (EROs).
  • If you need help locating a tax preparer, visit www.irs.gov.
  • The IRS does not charge a fee for electronic filing. Some EROs charge a fee for providing this service to their clients while others may offer it free of charge. However, this fee cannot be based on any figure from the tax return. Fees vary depending upon the tax preparer you choose and the specific services you request.

    • 2. Gather the necessary materials to take to your tax appointment. (Note: the following list is

    simply a guideline to help you prepare, and is not meant to be all-inclusive.)

  • Personal identification - Driver's license or state I.D.
  • Social security cards for yourself, your spouse and any dependents
  • Copy of last year's tax return
  • Form W2, Wage and Tax statement from all employers for you, your spouse and any dependents
  • Bank account numbers (for Direct Deposit or to pay electronically)
  • Unemployment compensation Forms 1099-G
  • Income receipts from rental real estate, royalties, partnerships, S corporation, S trusts
  • Social Security benefits
  • Other income
  • Form 1098 for home mortgage interest and points
  • 1099 forms for dividends, retirement, or other income, or any 1099 forms with income tax withholding
  • Casualty and theft losses
  • Job expenses
  • Medical and dental expenses
  • All receipts pertaining to your small business
  • Receipts for charitable contributions and gifts
  • Receipts from taxes you paid, such as state and local taxes, real estate taxes and personal property taxes

    • 3. Meet with your tax preparer and finalize your tax return.

  • Taxpayers sign electronic tax returns by either using a Self-Select PIN for e-file for a completely paperless return, or by signing Form 8453.
  • After the return is signed using a Self-Select PIN or Form 8453, the ERO will transmit the return to the IRS or to a third-party transmitter who then forwards the entire electronic record to the IRS for processing.
  • Once received at the IRS, computers automatically check the return for errors and missing information.
  • If it cannot be processed, it is sent back to the ERO to clarify the necessary information.
  • Within 48 hours of electronically sending your flawless return to IRS, the IRS sends an acknowledgment to the transmitter stating the return is accepted for processing.
  • This is your proof of filing and assurance that the IRS has your return information. The Authorized IRS e-file Provider then sends Form 8453 to the IRS.
  • Refunds should be in your savings or checking account within two weeks if you choose Direct Deposit and in about three weeks if you choose a paper check.
  • If you owe money, you can make payment by authorizing an electronic funds withdrawal from a checking or savings account, by credit card or by mailing a check or money order (made out to the United States Treasury) using Form 1040-V, Payment Voucher.
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    Tax Professionals

    The IRS is making it easier than ever for tax professionals to take care of their clients' needs. Tax professionals now can do things better, faster and cheaper using numerous electronic resources, including:

  • Electronically filed tax returns through IRS e-file, which is expanding and improving every year and now includes individual, business, corporate and tax-exempt forms and schedules.
  • The new IRS e-services suite of web-based tools, which enables tax professionals to do business online with the IRS 24 hours a day, seven days a week.
  • The new W-2 Online Service through the Social Security Administration.
  • Online Employer Identification Numbers (EINs).
  • Several electronic payment options, including the Electronic Federal Tax Payment System (EFTPS), electronic funds withdrawal and credit cards.
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    Facts

  • The number of tax professionals using IRS e-file increased 17 percent between 2003 and 2004.
  • Tax professionals e-filed 43 million returns in 2004, a 17 percent increase from last year.
  • According to a 2004 study of tax professionals:

    • - 80 percent said e-file increases their revenues

    - 76 percent said it brings in new customers

    - 70 percent said it reduces their overhead costs

  • Tax professional participation in the IRS corporate e-file program, which began in 2004, has outpaced the adoption rate of any other new product in the history of electronic filing. In its first two months of operation, more than 3,000 tax professionals submitted corporate returns.
  • Ninety-three percent of tax professionals using IRS e-file would not consider going back to paper filing, and if they had to do it over again, 96 percent said they would be "extremely" or "very" likely to start using e-file.
  • Sixty-eight percent of tax professionals who use tax preparation software to process returns, but then print and mail them rather than electronically file (v-coders), say access to the new e-services suite of tools would make them switch to e-file.
  • Tax professionals report positive experiences with IRS e-file. For example, 98 percent of preparers e-filing form 1065 (partnership return) say they're satisfied with 1065 e-file; and virtually all tax professionals who e-file would recommend IRS e-file to their peers.

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    Electronic Return Originators (EROs)

  • To e-file on behalf of clients, a tax preparer must be an Electronic Return Originator (ERO) - a tax firm or tax preparer authorized by the IRS to transmit income tax returns to the IRS electronically.
  • To become an ERO, preparers must complete and submit Form 8633, Application to Participate in the IRS e-file program, which is available on www.irs.gov. Applications should be made 45 days prior to the date preparers wish to begin e-filing on behalf of their clients.
  • The IRS conducts a background check on all firm principals to determine their suitability to become an ERO.
  • After the application is processed and the background check is passed, each ERO will receive an acceptance letter along with promotional materials identifying them as an "Authorized IRS e-file Provider."
  • EROs are eligible to use the new IRS e-services suite of web-based products, which allows tax professionals to do business with the IRS electronically. Visit www.irs.gov for more information.
  • There is no fee associated with becoming an ERO.
  • More than 146,000 tax professionals nationwide are EROs.
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    e-Services

    e-Services is a new suite of web-based products that allows tax professionals to do business with the IRS online, 24 hours a day, seven days a week.

    The following core e-services products are available to tax professionals who are Authorized IRS e-file Providers:

  • e-Services Registration: Register to become a user of the e-services Web site. The registration process involves collecting personal and taxpayer data for the sole purpose of authenticating your identity.
  • Preparer Tax Identification Number (PTIN) Application: Apply for and receive a PTIN online or look up a forgotten PTIN.
  • Interactive Taxpayer Identification Number (TIN) Matching: Authorized payers can match up to 25 payee TIN and name combinations against IRS records prior to submitting an information return.
  • Bulk Taxpayer Identification Number Matching: Payers and/or authorized agents filing any of the six information returns can match up to 100,000 TIN and name combinations online.
  • Online Application to Participate in IRS e-file (Form 8633)

    • The following premium services are available to tax professionals who e-file 100 or more of their clients' accepted individual tax returns in a season:

  • Disclosure Authorization: Submit Power of Attorney or Taxpayer Information Authorization forms online. The IRS acknowledges each accepted submission within seconds so you can begin acting on behalf of clients right away.
  • Electronic Account Resolution: Correspond electronically with the IRS to ask about client account problems, refunds, installment agreements, notices or missing payments. IRS response is delivered to a secure electronic mailbox within three business days, eliminating the wait for telephone and written responses.
  • Transcript Delivery System: Request and receive account transcripts, wage and income documents, tax return transcripts, and verification of non-filing letters quickly in a secure, online session. Tax professionals must have a Power of Attorney authorization on file with the IRS before accessing a client's account (or use Disclosure Authorization to file an authorization on a new client and obtain TDS information immediately).

    • For more information or to sign up for e-services, click here.

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    Electronic Payments

  • Electronic payment options help ensure on-time receipt of payments and reduced errors.
  • Electronic payment options include Electronic Federal Tax Payment System (EFTPS), electronic funds withdrawal and credit cards.

    • - EFTPS is a free service that enables taxpayers to make their federal tax payments

    electronically online, 24 hours a day, seven days a week through the Internet or by

    phone.

    - Through the EFTPS Batch Provider software, all business or individual payments

    can be made for clients electronically. More information on this free service is

    available at www.eftps.gov.

    - With EFTPS, payments can be scheduled up to 365 days in advance for individuals

    or 120 days in advance for businesses.

    - Electronic funds withdrawal allows tax professionals to file on behalf of their clients early in the tax season and schedule a payment for as late as the return due date.

    - Individuals also can pay taxes electronically by credit card.

    More Information

  • For additional information, visit www.irs.gov.
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    Testimonials

    For first-hand accounts of IRS e-file in action, visit www.erospotlight.com. The bi-monthly series features tax professionals who are leveraging IRS e-file and other electronic offerings to better serve their clients.

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    Business Filers

    IRS e-file allows businesses to spend less time on taxes. It also helps them avoid and quickly resolve problems with returns. Electronic payment options and electronic signatures give businesses greater cash-management control and reduce paperwork.

    More businesses than ever can realize the benefits of IRS e-file and e-pay, because the program has expanded to include Forms 1120 and 1120S. The most commonly used business forms and schedules are now available through IRS e-file, including:

  • Employment taxes (Forms 940 and 941)
  • Partnership (Form 1065)
  • Estates & Trusts (Form 1041)
  • Corporate (Forms 1120 and 1120S)
  • Information Returns (1099, 1098, 1042-S. 5498, 8027, W-2G and QWF-4 (Questionable Forms W-4)

    • Business taxpayers can find a complete listing of companies who offer Approved IRS e-file for Business products and services.

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    Facts

    Electronically Filed Forms

    7.1 million business forms and schedules were filed electronically in 2004.

  • 10.8 million self-employed filers used IRS e-file last year.
  • 6.7 million small business filers used IRS e-file last year.
  • More than 50,000 corporations electronically filed using 1120 and 1120S forms.

    • Businesses Using Tax Preparers

  • More than 80 percent of small businesses use a tax preparer.
  • More than 85 percent of partnerships use a tax preparer.

    • Electronic Payments

  • Businesses that have balances due can use IRS e-file Forms 940 and 941 and, at the same time, authorize electronic funds withdrawals from their bank account.
  • Taxpayers also can e-file form 1041 and authorize an electronic funds withdrawal to pay the balance.
  • Businesses also can enroll in the free Electronic Federal Tax Payment System (EFTPS). Once a taxpayer or business is enrolled, payments can be made online, using software, over the phone or through payroll processors. For more information, visit www.irs.gov.

    • EFTPS Express Enrollment

  • New businesses that request a new Employee Identification Number (EIN) and have a tax balance due will automatically be enrolled in EFTPS Express Enrollment. This allows them to begin making their payments more quickly, rather than waiting for coupons to arrive in the mail.
  • For more information on e-payments, or to learn about the Electronic Federal Tax Payments System (EFTPS), visit www.eftps.gov.

    • Definition of Terms

  • Self-employed individual:

    • - Someone who is in business independently, carries on a trade or a business as a

    sole proprietor, or an independent contractor.

    - Approximate number: 33.9 million

  • Small business:

    • - An organization with assets of $10 million or less.

    - Approximate number: 7 million

  • Large or mid-sized business:

    • - An organization classified as a corporation, subchapter S corporation, or

    partnership with assets greater than $10 million.

    - Approximate number: 150,000

  • Partnership:

    • - An unincorporated organization with two or more members who carry on a trade,

    business, or financial operation or venture and divide its profits.

    - Approximate number: 2.25 million

  • Corporation:

    • - An organization classified as a corporation, subchapter S corporation, or

    partnership with assets greater than $10 million.

    - Approximate number: 7 million

    User Satisfaction Statistics for Commonly Used Business Forms and Schedules

    Partnership (Form 1065)

  • 98 percent of users are satisfied with 1065 e-file.
  • Virtually all users would recommend 1065 e-file to others.

    • Corporate (Forms 1120 and 1120S)

  • 97 percent of businesses that electronically filed Form 1120 last year would recommend it to others.
  • Users enjoy the speed, reduction of paperwork, and ease of use with IRS e-file.
  • Users enjoy the easy-to-use electronic signature option available.

    • More Information

  • For more information, visit www.irs.gov.
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    Available Forms

    In 2004, IRS e-file expanded to include corporate returns. Now, more businesses than ever can streamline their tax return process and prevent costly errors. Corporate returns newly available through IRS e-file include:

  • 1120-U.S. Corporation Income Tax Return
  • 1120S-U.S. Income Tax Return for an S Corporation

    • A complete list of the 96 commonly related forms and schedules associated with the 1120/1120S series is available on the IRS Web site.

    These returns join the other IRS e-file forms and schedules already available through IRS e-file for businesses and self-employed individuals:

  • 940-Employer's Annual Federal Unemployment Tax Return
  • 941-Employer's Quarterly Federal Tax Return

    • Additional forms in the 940/941 Series available to file electronically include:

  • Form 941PR-Puerto Rico
  • Form 941SS-Virgin Island, Guam, American Samoa
  • Form 941C-Statement to Correct Information
  • Schedule B-Employer's Record of Federal Tax Liability
  • Anexo B-Puerto Rico
  • Form 940PR-Puerto Rico

    • Other forms available through e-file include:

  • 1040-U.S. Individual Income Tax Return
  • 1040 (Schedule C)-Profit or Loss from Business (Sole Proprietorship)
  • 1040 (Schedule C-EZ)-Net Profit from Business (Sole Proprietorship)
  • 1040 (Schedule E)-Supplemental Income & Loss from Rental Real Estate & Royalties
  • 1040 (Schedule F)-Profit or Loss from Farming
  • 1040 (Schedule H)-Household Employment Taxes
  • 1040 (Schedule J)-Farm Income Averaging
  • 1040 (Schedule SE)-Self-Employment Tax
  • 1041-U.S. Income Tax Return for Estates and Trusts
  • 1042S-Foreign Person's U.S. Source Income Subject to Withholding
  • 1065-U.S. Return of Partnership Income
  • 1098-Mortgage Interest Statement
  • 1099A-Acquisition or Abandonment of Secured Property
  • 1099B-Proceeds from Broker and Barter Exchange Transactions
  • 1099C-Cancellation of Debt
  • 1099DIV-Dividends and Distributions
  • 1099G-Certain Government and Qualified State Tuition Program Payments
  • 1099INT-Interest Income
  • 1099LTC-Long Term Care and Accelerated Death Benefits
  • 1099MISC-Miscellaneous Income
  • 1099MSA-Distributions From an MSA or Medicare Choice MSA
  • 1099OID-Original Issue Discount
  • 1099PATR-Taxable Distributions Received From Cooperatives
  • 1099Q-Qualified Tuition Program Payments (Under Section 529)
  • 1099R-Distributions From Pensions, Annuities, Retirement or Profit--Sharing Plans, IRAs, Insurance Contracts, etc.
  • 1099S-Proceeds from Real Estate Transactions
  • 2106-Employee Business Expense
  • 4562-Depreciation and Amortization Schedule
  • 5498-IRA Contribution Information
  • 8027-Employer's Annual Information Return of Tip Income and Allocated Tips
  • QWF-Questionable Forms W-4
  • W-2G-Certain Gambling Winnings
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    Tax-Exempt Filers

    IRS e-file provides the capability for charities and non-profits to file their annual information and tax returns electronically using the Internet. For 2004, this program included the Forms 990, 990-EZ, 1120-POL, and the extension Form 8868. New in early 2005, tax-exempt organizations can e-file Form 990 PF (Return of Private Foundation, or Section 4947 (a)(1) Trust Treated as a Private Foundation) and other related forms. The standard 990 provides disclosure of releasable data to the public as provided by law.

    IRS e-file makes it easier for organizations to file 990s while increasing accuracy and ensuring faster processing of this important information. The Approved IRS e-file Providers listing contains links to companies who offer 990 e-file, including the option for free e-filing of the Form 990EZ.

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    Facts

    Exempt organization returns are unique for several reasons. The primary purpose of these returns is not to pay income taxes, but to verify that these organizations are operating in accordance with their stated tax-exempt purpose. Tax-exempt organizations are required to make their returns widely available for public inspection. Nearly 40 states accept the Form 990/990-EZ to meet state filing requirements.

    Quick Facts

  • Approximately 80 percent of Forms 990 are prepared by tax professionals
  • 86 percent of those professionals use software to prepare the returns
  • The majority of tax professionals who prepare exempt organization returns also prepare individual and business returns
  • 40 percent of filers request an extension
  • More than 35 percent of paper returns require error correction

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    Available Forms

    The following informational forms and tax forms for tax-exempt organizations are now available through IRS e-file. The Form 990-T and 990 PF will be added later.

  • Form 990 - Return of Organization Exempt From Income Tax
  • Form 990 EZ - Short Form Return of Organization Exempt From Income Tax
  • Form 1120 POL - U.S. Income Tax Return for Certain Political Organizations
  • Form 8868 - Application for Extension of Time to File an Exempt Organization

    • More Information

  • For more information, visit www.irs.gov.
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    Current IRS news releases relating to IRS e-file will be posted here throughout the filing season.

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    Open 24/7. Welcome to the IRS.

    Now more than ever, citizens rely on the Internet to interact with the federal government. In an effort to serve an increasingly wired public, the federal government is implementing web-based technology to streamline the way citizens, businesses and tax-exempt organizations interact electronically with all government agencies. This initiative began with the E-Government Act of 2002, which expanded the use of computer resources to deliver government services. In record numbers, tax professionals are filing and paying their taxes electronically.

    Responding to customer demand for a faster, more accurate tax filing process, the Internal Revenue Service has enhanced and improved the capabilities of IRS e-file. IRS e-file is part of the electronic process that gets taxes done more accurately, quickly and efficiently. Electronic filing of tax returns is available for individuals, businesses, tax professionals and tax-exempt organizations.

    IRS e-file is only the beginning. Individuals, businesses, tax-exempt organizations and tax professionals can interact electronically with the IRS in other ways that complement e-filing. Three different electronic payment options for individuals and businesses allow taxpayers to make balance-due payments with their credit card, authorize an electronic funds withdrawal from their bank account or enroll in the Electronic Federal Tax Payment System (EFTPS). The newest electronic offering from the IRS is e-services, a suite of web-based products for tax professionals and payers who electronically file returns. The products make working electronically with the IRS even easier.

    Coming in 2005: An e-Milestone Reached

    IRS e-file grows significantly each year - so much, in fact, that the IRS expects to reach an important milestone in the 2005 filing season. For the first time, more than 50 percent of all individual returns will be filed electronically, surpassing the number of returns filed on paper.

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