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E-filing returns: Should you take the plunge?

by on
in Small Business Tax,Small Business Tax Deduction Strategies

If you’ve been filing a paper tax return for years or you simply let your accountant handle the whole thing, you may be intrigued by the possibility of completing your entire tax return on your computer and then filing online.

Should you do it?

Our advice: While do-it-yourself online filing offers some obvious advantages, it’s not for everyone.

Business owners with complex returns may need more hands-on tax-planning advice than tax software can offer. A good tax adviser should find enough hidden tax breaks to more than pay for his or her fee.

Starting point: Go to the IRS site (www.irs.gov) and click on the e-file icon in the left column. The following page offers online filing advice for everyone from individuals to small business owners.

You can’t e-file directly using the IRS site. The IRS has contracted with several private companies to provide online filing through their sites, such as TurboTax, H&R Block and other lesser-known vendors. Many offer free filing for certain income or age groups, but others charge a filing fee.

To file your return, just key in the information requested from your W-2s, 1099s and other tax reports. Your tax return will be automatically calculated for you. You submit the final product online.

What are the major considerations for business owners? Here’s a quick comparison: Pros: convenience and accuracy
  • Convenience and portability. You can start your return on your office computer and finish on your home PC. The program saves the information as you go, so you can access the password-protected return wherever and whenever you log on. 
  • Accuracy. E-filing ensures that the return includes all necessary forms and information. If it doesn’t or if the data is obviously incorrect, the software will flag your error.
  • Speed. E-filing is especially appealing if you’re expecting a refund. As opposed to a six-to-eight week wait with a paper return, you can expect your refund check in about two weeks. The IRS will even deposit the funds directly into a designated account. If you owe Uncle Sam, the IRS will accept payment from your bank account or credit card.
  • Cost. Online filing services are relatively cheap. You don’t have to pay until the end of the process, when you’re satisfied.

Cons: little advice and privacy concerns
  • Lack of advice. Some online tax-prep sites will prompt you to see if you’re entitled to various deductions, but they don’t offer personalized tax planning.
  • Privacy concerns. You may be bothered by a perceived lack of privacy. While most IRS-approved sites are password-protected, you may not like the idea of your financial secrets floating in cyberspace.
  • Hidden fees. It’s rare, but you might end up paying a lot more than you originally expected (say, $200 instead of the $30 originally quoted).

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