Income Tax Basics: Filing a Tax Return Online

The IRS encourages taxpayers to file their tax returns electronically using its e-file system. The online service is free, fast and reliable.

The IRS said more than 53 million taxpayers used e-file to file their returns for tax year 2003, surpassing the 45 million e-filers who used the system for their year-earlier returns. In addition, more than 105,000 originators -- tax-preparation services and the like -- signed up for e-file in 2003, an increase of more than 15% from a year earlier.

According to the IRS, e-file also expedites tax refunds, shaving a week off the average time of three weeks to process a return. Thirty-seven states and the District of Columbia participate in IRS e-file's filing program so that you may file a state tax return together with your federal tax return.

Additional features of IRS e-file include:

• Security. Choose a five-digit, self-selected personal identification number (PIN) to substitute as an electronic signature. You can also elect to sign IRS Form 8453, which authenticates your electronic signature and authorizes electronic payments and tax refunds between you and the IRS.
• Accuracy. The IRS claims an error rate of under 1% with e-file, well below an historical rate of about 20% for paper returns.
• Verification. The IRS sends an electronic verification within two working days to the authorized tax professional, or electronic return originator that submits your return. (Note: Before the originator can submit your tax return with e-file, you will need to give it W-2 forms for the tax year.)

Instead of using an electronic return originator, you can also download free software from an IRS-designated Web site to send your return directly. Of the 60 million taxpayers who have used e-file through the seven months of the 2004 tax return season, 42.3 million returns were submitted by originators and 14.4 million submitted by individuals.

As part of its e-file program, the IRS also offers a touch-tone phone-based system for filing a tax return called Tele-file. An additional 4.1 million taxpayers had filed with Tele-file.

A link to e-file is prominently listed in several places at the IRS Web site.

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