What Is Electronic Filing?

Electronic filing is the process of submitting tax returns over the Internet using tax preparation
software that has been pre-approved by the relevant tax authority, such as the IRS or the Canada
Revenue Agency. E-filing has manifold benefits which have made this system of tax preparation
increasingly popular in recent years; the taxpayer can file a tax return from the comfort of his or
her home, at any convenient time, once the tax agency begins accepting returns.

Understanding Electronic Filing (E-File)

Electronic filing, or e-filing, saves the tax agency time and money because the tax data is
transmitted directly into the agency's computers, significantly reducing the possibility of keying
and input errors. Taxpayers can file their returns directly on the Internal Revenue Service (IRS)
website, using IRS Free File, if their adjusted gross income for the tax year is $66,000 or less.
While the IRS has partnered with many companies to provide electronic filing to individuals and
businesses, it does not endorse or approve any particular software for IRS e-file.

A taxpayer also has the option of filing the return himself using tax preparation software with e-
filing properties or can hire the services of tax professionals who also use the software to file an
individual’s or business’ tax. A benefit of e-filing is that the tax filer receives a confirmation or
rejection notice within 24 hours of transmitting the electronic documents. The confirmation is
proof that the documents have been received and is in the process, while the rejection is notice to
the taxpayer that his or her return has not been accepted by the IRS. The rejection notice will
include information on what needs to be corrected on the return so that it is acceptable. In
addition to the prompt confirmation notice, since e-filed returns can be processed much faster
than paper returns, the taxpayer can generally expect a faster tax refund, if applicable.

The IRS recommends that the taxpayer e-file their taxes themselves only if they are comfortable
doing their own taxes. Electronic filing is not for everyone though; taxpayers who have not been
approved to use this system must file their tax returns by paper. Examples of people who are not
eligible for e-filing include individuals who are: