E-filing decreases chance of error, expedites refund

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More and more Minnesotans are expected to file their taxes electronically this year - a move that will not only help them get their refund more quickly but also will reduce the likelihood of errors.

The 2009 tax season kicks off this month. Taxpayers could start filing electronically last Friday.

"More and more people are using this option," said Chris Kiecker, of Red Wing's certified public accounting firm Erickson, Rietmann, Roufs & Kiecker. "The IRS is making it a lot easier."

Especially in Minnesota, this option is "going very well," said Carrie Resch, a spokeswoman for the Internal Revenue Service in St. Paul.

Last year 69 percent of Minnesotans filed their federal tax returns electronically, Resch said. The goal set by Congress is to have 80 percent of all U.S. taxpayers go paperless.

Under the Free File program, taxpayers with an annual adjusted gross income of up to $56,000 may file their federal return free of charge.

"There are a lot of benefits to filing your taxes online," Kiecker said. "It's the way to go."

To make electronic filing more widely available, the IRS this year is also adding Free File fillable tax forms which will open up Free File to virtually everyone, regardless of income.

The fillable tax forms allow taxpayers to fill out their tax forms online just as they would on paper, and then file them electronically through IRS.gov. They'll be able to enter their tax data, perform basic math calculations, sign electronically, print and e-file their returns.

"That opens up electronic transactions to more people," Resch said.

The error rate is lower for tax returns that are prepared electronically - less than 1 percent, compared to a 20 percent error rate for tax returns filed on paper.

"With the computers, it cuts way back on any mathematical errors plus the IRS verifies they received your information," Kiecker said.

Software programs used by IRS vendors contain prompts and reminders on credits, deductions and other qualifying items that might help lower someone's overall tax bill.

"If you're not aware of them, you could miss them. It helps ensure that you get everything you're entitled to," Resch said.

This year, for instance, first-time homebuyers can qualify for a credit of up to $7,500. Some taxpayers might qualify for a recovery rebate credit that will be issued with their refund.

Taxpayers who don't itemize can now claim an additional standard deduction based on the state or local real estate taxes they paid in 2008. And mortgage workouts and foreclosures are now tax-free for most homeowners.

As an additional carrot to encourage more people to file their federal taxes electronically, refunds will arrive more quickly, especially for taxpayers who also opt for direct-deposit refunds. The time difference: 10 days for e-filers, versus six weeks for those who file a paper return.

E-filers will also receive almost-immediate confirmation the IRS has received the tax information.

What if you've recently lost your job or are in the process of going through bankruptcy or foreclosure proceedings?

Many taxpayers are likely to face struggles paying what they owe, Resch said. "It's hard to speculate on how many people will be in that position."

Their best bet is to contact the IRS so that a solution can be worked out, she said. "Give us a call and we can work with you."

Kiecker said most people assume if they file electronically and owe money they must pay immediately.

That's not the case.

Money owed to the IRS is not due until April 15, not when your return is filed online.

The IRS Web site, www.irs.gov, also has added a list of "What if?" scenarios that deal with payment and other financial problems. These scenarios, in question-and-answer format, provide information on specific actions taxpayers can take.

Republican Eagle reporter Jen Cullen contributed to this story. The Willmar West Central Tribune and the R-E are both owned by Forum Communications Co.

Tags: news, efile, minnesota, taxes