Electronic Income Tax Filing
By: Connie Holt, E.A.
The Henssler Financial Group Position Paper

Interested in filing your tax return accurately, safely and efficiently? IRS e-file is a way to file a tax return electronically to the IRS using an authorized IRS e-file provider. You don't have to worry about your return being lost or delayed in the mail. Upon receipt of the return information, the IRS quickly and automatically checks for errors or other missing information (the error rate for electronic returns is less than one percent compared to the error rate for paper returns which remains steady between 20 and 21 percent). Within 48 hours of electronic transmission, the IRS will acknowledge acceptance of the return. Only IRS e-file options provide this assurance.

Best of all, IRS e-file means fast refunds — in half the time as when filing on paper — even faster with direct deposit! IRS e-file...Click. Zip. Fast round trip!

To assist you in your decision on this method being right for you, the following questions and answers provide you with information on how the process works.

How does IRS e-file work?

You, or your tax professional, prepare your tax return. In many cases, the tax professional is also the Electronic Return Originator (ERO) who is authorized to file your return electronically to the IRS. Ask your tax professional to file your return through IRS e-file.

You sign your electronic tax return by either using a self-select PIN (Personal Identification Number) for e-file for a completely paperless return, or by signing Form 8453.

After you sign the return using a self-select PIN or Form 8453, the ERO transmits the return to the IRS or to a third-party transmitter who then forwards the entire electronic record to the IRS for processing. Once received at the IRS, the return is automatically checked by computers for errors and missing information. If it cannot be processed, it is sent back to the originating transmitter (usually the ERO) to clarify any necessary information. After correction, the transmitter retransmits the return to the IRS. Within 48 hours (two workdays) of transmission, the IRS sends an acknowledgment to the transmitter stating the return is accepted for processing. This is your proof of filing and assurance that the IRS has your return information. The authorized IRS e-file provider then sends Form 8453 to the IRS.

If you are due a refund, you can expect to receive it in approximately three weeks from the acknowledgment date — even faster with direct deposit (half the time as when filed on paper).

What if I owe money?

Your tax professional can file your return electronically any time during the filing season; however, sending the payment for a balance due by April 15 is still your responsibility. You may file electronically as soon as you are ready and will receive a confirmation from the IRS within 48 hours of receipt of your return. You may then pay your balance due to the IRS by check, direct debit (automatic withdrawal) directly from your bank, or by credit card. All balance due payments, regardless of method of payment, must be authorized or sent to the IRS by the April deadline to avoid late payment penalties or interest charges.

To pay by check, make your check payable to the United States Treasury and mail it, along with the IRS payment voucher (Form 1040-V), to the address indicated on the voucher. For direct debit (automatic withdrawal), include your bank routing information and account number on the Form 1040 when you file electronically. You can designate the exact date (up to and including the April deadline date) that you want the payment to be withdrawn (by the Department of Treasury financial agents) from either your checking or savings account at your bank. Credit card payments are available for filers who file through an authorized IRS e-file provider, through commercial tax preparation software or through TeleFile. Your authorized IRS e-file provider can provide additional details on any of these payment methods.

Can I e-file my state return with my Federal return at the same time?

Yes. Federal/State e-file, an extension of IRS e-file, is offered in a large number of states and the District of Columbia. However, not all authorized IRS e-file providers provide this service. Your authorized IRS e-file provider can tell you if they participate in the Federal/State e-file program.

Is there a fee for IRS e-file?

The IRS does not charge a fee for electronic filing. Some Authorized IRS e-file Providers (EROs) charge a fee for providing this service to their clients while others may offer it free of charge. However, this fee cannot be based on any figure from the tax return. Fees vary depending upon the tax professional you choose and the specific services you request.

Who offers IRS e-file services?

Many tax professionals offer IRS e-file to their clients. To find a tax professional to file your return electronically, search the Authorized IRS e-file Provider Database or look in your local telephone directory under "Tax Return Preparation" for an "Authorized IRS e-file Provider" that meets your needs.

What is the self-select PIN?

The self-select PIN is any five numbers that you choose to enter as your electronic signature. A PIN is needed for each taxpayer if filing a joint return, and each can choose any five numbers (except all zeros). You can use your PIN whether you do your own taxes using a personal computer or have a tax professional prepare them for you.

Where do I get my self-select PIN?

You create any number you want to use as your PIN. You do not register the PIN with IRS before filing or need to contact IRS to get it. When you use one of the commercially available tax software packages that supports the self-select PIN option, you will be guided through the process of entering your own PIN. If you use a tax professional, the preparer will help you.

Who is eligible to use the PIN to sign their return?

Any individual who filed Form 1040, 1040A, 1040EZ or used TeleFile the previous year or individuals who did not file a tax return in the previous year and are 16 or older by December 31 are eligible.

Can I use the PIN if I want a tax professional to prepare my return?

Yes. You should bring a copy of your previous year's tax return with you or have the adjusted gross income and total tax amounts. These two pieces of information, along with your date of birth, are required to use the PIN. Your tax professional will ask you to enter your PIN when it is time to sign your return. If you cannot be present, you can still use the PIN. Your tax professional will give you an IRS e-file signature authorization to sign.

How will the IRS know who I am if I use the self-select PIN?

The amounts you provided for adjusted gross income and total tax, along with your date of birth will be verified by the IRS. The acknowledgment you receive when your return has been accepted will tell you that the IRS received your PIN.

Are any taxpayers not eligible to use the PIN?

The following taxpayers cannot use the PIN:

Does my spouse need a PIN?

Yes, each of you must sign using a PIN, whether filing separately or jointly. Both you and your spouse can choose any five numbers (except all zeros). The choice is yours.

What happens if two taxpayers select or use the same PIN?

Your personal information includes your Social Security Number, date of birth and two pieces of information from your previous year's tax return along with your PIN. This is what the IRS will use to verify your return and have the PIN as your electronic signature.

Can I enter a PIN for my spouse?

No. The IRS e-file signature authorization should only be used to authorize your tax professional to enter the PIN in the absence of the taxpayer.

What is an IRS e-file signature authorization?

This form allows you to authorize your tax professional to input your PIN. It is provided as a convenience for taxpayers who are unavailable to personally enter their PINs.

Do both spouses filing a joint return have to authorize the tax professional to input their PINs?

Only if a person is not present when the return is ready to be signed would a signature authorization be given to the preparer to enter the PIN. If neither spouse is present to sign a joint return, each can authorize the preparer to enter his/her respective PIN. But, a spouse who is present would enter his/her own PIN, even if the preparer was authorized to enter the other spouse's PIN.

If I have not filed a return before or did not need to file a tax return for the previous tax year, what amount do I enter for the adjusted gross income and total tax?

Enter zero (0) for both amounts.

What do I do if my filing status has changed from last year?

If you changed to married filing jointly, then you each use your individual adjusted gross income and total tax from your last year's tax return.

If your status changed from married filing jointly, then you both use the adjusted gross income and total tax from your prior year's joint return.

If I don't want to use the PIN, can I still file electronically?

Yes. You will need to sign Form 8453, U.S. Individual Income Tax Declaration for e-file Return, and your tax preparer will need to mail it to the IRS. If you file electronically using your personal computer, then you will need to sign Form 8453-OL, U.S. Individual Income Tax Declaration for an IRS e-file Online Return, and mail it to the IRS.

If I use the self-select PIN and owe taxes may I pay by direct debit or by credit card?

Yes. Even if you use the PIN and owe taxes, you may pay by direct debit or by credit card.

If I use a PIN this year, will I have to use the same one next year?

No. You are free to use any 5 numbers.

I again received a postcard from the IRS encouraging me to e-file, but unlike past years, it did not contain an e-file Customer Number (ECN) — Why not?

The IRS will no longer issue the ECN or e-file Customer Number. Now, with the self-select PIN you can use any 5 numbers (except all zeros).

If I participated in the PIN Pilot program last year, may I use the same PIN?

Yes, you may use it as your self-select PIN or choose a new PIN.

The Henssler Financial Group offers electronic filing and would be happy to provide you with any further information you might need or in your tax preparation. You may also access this information at the IRS web site, www.irs.gov.

If you would like further information regarding this topic or any other tax related issue, please contact The Henssler Financial Group Tax & Accounting Division at 770-428-4025.