e-filing Your Tax

The advantages to e-filing include speedy tax refunds and increased accuracy. Last year was the first time more than half of all taxpayers e-filed, according to the Internal Revenue Service. That was an 11% jump. It's, therefore, fair to assume most Americans will file their taxes online this year. Of about 68 million e-filers of last year, 48 million had a tax professional do it and 17 million did it themselves using computer software, such as TurboTax or TaxACT. The rest used TeleFile, a method that isn't available this year.

The IRS has changed the rules a bit this year. What once was free now may cost you. Only taxpayers with an adjusted gross income of $50,000 or less are eligible to prepare their taxes and e-file free through the IRS Web site. But the software companies TurboTax, TaxCut and TaxACT are offering other deals. If you buy their software through their Web sites, you can e-file free. TaxACT is even offering a free version of its tax-preparation software. But restrictions may apply. These "e-file free" offers may be limited to people who live in specific states and have specific income levels. So, it might be better to go directly to the software company's Web site. Or it might be better to buy tax-preparation software through a link on the IRS Web site, www.irs.gov.

The main advantage of using such tax software is you don't have to type in the same information multiple times. Once your federal tax return is done, completing your state return will require answering only 5 or 6 more questions. There aren't a whole lot of worthy choices for tax-preparation software, but one isn't necessarily as good as another. Some programs are simpler than others to navigate. Many say TurboTax is the easiest, followed by TaxCut and TaxACT.

Then there're questions of integration, if you are using other softwares to manage your money matters. The integration can save you a lot of typing. TurboTax, for instance, can import data from Quicken's personal finance software. TaxCut, on the other hand, works with Microsoft Money.

For more information on e-filing, check out IRS's efile page.