Filing a Tax Return Online

What you need to know to file your tax returns onlineIRS e-file for the 2010 tax season will officially open for business on Jan. 14, 2011. Take note, however, that due to the last-minute tax deal in the form of the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010, tax season might start a little later for some taxpayers.

Taxpayers who intend to claim the state and local sales tax deduction, higher education tuition and fees deduction and educator expenses deduction -- and those taxpayers who itemize deductions on a federal form 1040 schedule A -- will need to wait until the IRS is ready to process those new returns; which the agency estimates will be in mid to late February.The IRS expects more than 95 million individual taxpayers to file their returns online in 2011 after steady increases in electronic filings for the past several years. The hundreds of millions of tax returns filed over the past three years mark a dramatic increase from the 25,000 tax returns filed online in 1986, the first year the IRS accepted online tax returns.

More than one-third of taxpayers who e-file will do so by personal computer; the rest will use a professional tax preparer or free file at an IRS site. No matter how you choose to e-file this year, here are some tips to make it as easy as possible:

Be prepared. Even though you won't be filing a paper return, you'll still need certain documents to get you started. Make sure you have the following information handy:
  • Identification information for yourself, your spouse and dependents. This includes Social Security numbers, full names and ages.
  • Prior year's tax return.
  • Forms W-2 from all employers for yourself and your spouse.
  • Forms 1099 for dividends, interest or investments.
  • Forms 1099 for retirement or any forms 1099 with income tax withholding.
  • Receipts and records for business expenses (Schedule C).
  • Records of purchases and sales of stocks, bonds and assets subject to capital gains (Schedule D).
  • Childcare expense receipts and the taxpayer ID number for your childcare provider.
  • Records for other expenses, deductions and credits.
  • Settlement sheet for a new home (first time home buyer's credit).
  • Bank account information (for direct deposit or to pay electronically).
If you itemize, you'll also want to include:
  • Medical expense documentation, including prescription and doctor's receipts.
  • Mileage logs for business, charitable and moving purposes.
  • Charitable deduction receipts.
  • Forms 1098 for student loans, mortgage and other interest paid.
  • List of taxes paid in 2010, including state and local taxes and real estate taxes.
Double check your return. If you elect to file using your own computer, run an error check. This important step really does increase your chances of filing an accurate return. The IRS claims that taxpayers who file online have a reduced error rate -- 1% compared to nearly 20% with a paper return.

Make a payment, if necessary. If you owe taxes, you can elect to pay electronically when you file or pay by mail. If you pay by mail, print out a voucher and mail your payment by April 15; you don't have pay on the same day you file. If you want to guarantee payment on a certain date, you can set up an automatic withdrawal from your bank or pay by credit card.

Collect your refund. If you're owed a refund, you can get your refund in as few as 10 days if you file online and use direct deposit. You have several options for direct deposit, including the option to designate up to three financial accounts in which to deposit your refund or use your refund to purchase U.S. Series I Savings Bonds.

Check for your acknowledgment. When you e-file, you (or your tax preparer) should receive an acknowledgment within 48 hours that the IRS has accepted or rejected the return; the IRS will explain any errors that caused a rejection and allow you to make corrections and resubmit your return. Traditional paper filers do not receive any acknowledgment, though they can send their tax return via U.S. certified mail to confirm receipt.

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