Why E-file?
Sep 25 '00
It's my opinion that, at the present time, you should not E-file. To demonstrate that, let me go over the most common reasons given why you should E-file, and present rebuttals.
1. Your return is checked for errors
There are two kinds of errors in tax returns: calculation errors, and "name" errors (the SSN doesn't match the name; two ex-spouses both claim the same dependent, wrong EIN for a partnership, etc.) Calculation errors would be caught by any tax preparation program. Name errors, on the other hand, do not prevent paper returns from being processed normally. Hence, if you make a name error, you may be better off filing on paper and having it processed, than having it caught and having to refile. At the present time, the only "name" error checked on paper returns that will block processing, is using an improper SSN for a dependent child if you claim the Earned Income Credit (EIC) -- and that's only because all EIC returns (including E-filed returns) are held for detailed processing.
A common "name" "error", reported by many tax practitioners on misc.taxes.moderated, is both ex-spouses claiming the same child as a dependent. If the return received later is E-filed, that return is not accepted. OTOH, if that return is filed on paper, both are accepted, and further processing (audits) are later done on both returns.
2. Your refund is deposited faster.
True; but, effective 1998, you could have your refund direct deposited on paper-filed returns. This year, I filed my paper return on March 17, and my refund was deposited by April 23. If you figure a month delay (it's usually closer to 2 weeks, according to IRS figures), an E-file cost of $10, and an interest rate of 12% (to make the calculations simple), then the refund which would make E-filing financially preferable is $1000. If you have a refund that high, you have other problems.
3. If you owe money, you can schedule a direct debit from your account to be taken on April 15.
True. However, if you owe money on a paper return, you can delay payment until April 15, by sending a separate mailing with form 1099-V and a check, even if you choose to file early.
4. You have confirmation your return is accepted.
True. However, if the IRS later loses the return, that confirmation is NOT accepted by the IRS, or by the courts, as proof of filing. At the present time, only certified mail receipts, and their equivalent from other authorized mailing services (such as FedEx and UPS), are accepted as proof of filing. (This may change, but it apparently requires a change in the tax law.)
5. You make life easier for the IRS.
Why should YOU pay to make life easier for the IRS? If the IRS wants you to E-file, they should give you a tax credit for the E-filing fee.
6. You can be sure that the numbers you generate are correctly transcribed into the IRS database.
This would be a good reason to E-file; but if the IRS doesn't get it right, the worst that could happen is an audit. OTOH, at least one correspondent posting in this topic said that her E-filed return didn't resemble the copy she had kept.
7. E-filed returns cannot be intercepted in transit, as they use encryption.
Even if you accept this, mailed returns are unlikely to be intercepted in transit. This is, at best, neutral.
Any more reasons?
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Arthur.Rubin
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Member: Arthur Rubin
Location: Brea, CA, USA
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About Me:
Expert in mathematics, computers, income tax, with a wide variety of interests.
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