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Electronic
Tax Filing
Here
is the IRS's list of information needed by a
taxpayer before e-filing either from home or
via a professional tax preparer:
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Social Security numbers for yourself, your
spouse, and any dependents;
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W-2 forms from all employers are required
for yourself and your spouse;
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1099 forms for Dividends, Retirement, or other
income, or any 1099 forms with Income Tax
Withholding;
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Receipts for expenses for Itemized Deductions
(Schedule A);
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Receipts and records for other income or expenses;
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Bank Account numbers (for a fast refund, or
to pay electronically);
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Complete information on what records you need,
and how long to keep your records;
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Prior year Adjusted Gross Income amount if
using a Self-Select PIN as your signature;
Filing
software is available from very many commercial
firms. Taxpayers with an Adjusted Gross Income
of $50,000 or less can use Free File, a free
service provided by a number of larger commercial
firms approved by the IRS.
In
May 2007, it emerged that the recently completed
2007 tax filing season had seen over 76 million
electronically-filed individual tax returns
and more than 140 million visits to the Internal
Revenue Service website.
“E-file
and our other electronic services helped us
deliver a strong filing season for the nation’s
taxpayers,” stated IRS Acting Commissioner
Kevin M. Brown. “Again this year, millions
of additional taxpayers gave up paper tax returns
to file electronically. E-file and IRS.gov were
among several factors that helped us overcome
one of the most challenging filing seasons ever
for the IRS.”
The
year’s tax season saw a surge in electronic
filing among last-minute filers, a group that
has traditionally sent in paper returns. During
the week that included the tax-filing deadline
(April 14 to 20) alone, the number of electronically-filed
returns received by the IRS jumped 35% over
the same week last year, even though the overall
number of returns (paper and electronic) received
during the same week only rose 12%.
New
records were also set for the number of returns
e-filed by home computer users, the number of
balance-due returns filed electronically and
the number and amount of direct-deposit refunds.
The
over 76.7 million e-filed returns accepted through
May 4 topped the more than 73.2 million electronically-filed
returns received for all of 2006. It also showed
an 8.9% increase over last year at this time,
with most of the increase coming in March and
April. Based on current trends, the agency expects
around 58% of all returns to be e-filed this
year. Taxpayers who filed for extensions can
use e-file until Oct. 15.
A
record 22 million taxpayers e-filed from a home
computer, up 11% over the same time last year
and eclipsing 2006’s year-long total of
20.3 million.
This
filing season, visits to IRS.gov, the agency’s
website, climbed almost 10% to more than 140
million.
The
average refund this year was $2,255, a 2.5%
increase over last year at this time. More than
59 million refunds, a new record, were deposited
directly into savings, checking and brokerage
accounts, representing more than 61% of all
refunds issued. Those who choose direct deposit
get their refunds at least a week sooner. Nearly
$158 billion have been directly deposited so
far this year, an 11% jump over last year at
this time. This surpasses the 2006 year-end
total of $149.2 billion.
The
number of balance-due returns filed electronically
surged 14.2% to a record 9.4 million. For all
of last year, almost 8.9 million balance-due
returns were filed electronically.
However,
in July 2007, Senate Finance Committee Chairman
Max Baucus (D-Mont.) and Ranking Republican
Member Chuck Grassley (R-Iowa) expressed serious
concerns over an audit finding computing errors
in the commercial tax software currently provided
through the Internal Revenue Service’s
Free File program.
The
audit by the Office of the Treasury Inspector
General for Tax Administration (TIGTA) identified
multiple calculation errors made by the commercial
software of Free File Alliance firms, and recommended
that the IRS test the software for tax law accuracy.
Free
File directs low-to-middle income taxpayers
from the IRS website to online tax preparation
firms for tax assistance.
While
admitting that it does not conduct such tests,
the IRS disagreed with TIGTA’s recommendation,
arguing that testing commercial software for
tax code compliance would be all but impossible.
Furthermore, the IRS acknowledged that it has
no contractual authority to require Alliance
members to correct identified errors.
“When
the IRS refers taxpayers to an online filing
service, those taxpayers have a right to expect
accurate tax preparation. If the IRS really
doesn’t have the authority to require
its Free File partners to get the software right,
then they’ve got a bad agreement with
these companies that doesn’t protect taxpayers
as it should,” observed Baucus. “At
a minimum, the IRS needs to provide better assurance
that Free File tax software can handle the most
basic tax scenarios. But this report underscores
the need for a direct filing portal on the IRS
website, where the agency makes certain that
the tools supplied to taxpayers comply with
the tax code.”
Grassley
added: “This is frustrating for Congress
and taxpayers alike. We’re in the digital
age. We have cameras on our cell phones. We
have Blackberries. But we can’t get a
free electronic filing option for taxpayers
to work right. Some of these software programs
can’t properly compute a tax return using
common basic scenarios. Reliability and accuracy
are a problem. Taxpayers have every reason to
question whether they’d be better off
with a pencil and an abacus than using the current
free file program. That has to change. Taxpayers
should have the option of a free, accurate way
to file their taxes electronically. Congress
and the IRS need to ride herd over the software
companies, ensure corrections of flagrant problems,
and make this program work.”
Current
tax software is held to a minimum standard,
and TIGTA agreed that testing all software for
compliance with all laws is not feasible. However,
TIGTA concluded that the IRS could easily test
software used as part of the Free File Alliance
for common tax scenarios, just as TIGTA (with
limited resources) had done during the audit.
TIGTA
also found that the IRS does not sufficiently
promote its Free File program. Many American
taxpayers with incomes of less than $50,000
per year are eligible to use the service, but
few take advantage. The IRS agreed to develop
a comprehensive Free File marketing program.
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