Tax Season: E-Filing Becomes the New Normal
An overwhelming amount of taxpayers in recent years has been turning to the Internet to e-file taxes before Tax Day rolls around on Friday, April 15. (The deadline this year has been extended to Monday, April 18). The numbers are so large that the days of paper filing are quickly becoming a thing of the past.
A whopping 99 million people – or about 70 percent of all taxpayers – used the government's e-file service to file taxes in 2010, according to the IRS. Although the IRS does not track by demographics, the amount of tax returns filed electronically suggests that young people are not the only ones who have taken a liking to this platform.
"E-filing is becoming the traditional way to pay taxes ," a spokesman for the IRS told TechNewsDaily. “We have processed one billion e-file returns since 1990 when it first started to take off."
However, hard copy filing is certainly not extinct. About 43 million people filed their taxes by mail last year. According to Deborah H. Schenk, a tax professor at the New York University (NYU) School of Law, that minority will shrink further as e-filing adoption continues to soar in coming years.
"People are still filing taxes the traditional way, but the trend towards electronic filing is unmistakable," Schenk said. "Many suspect that, over time, the IRS could even require taxpayers to file online."
As of now, the government is only making e-filing mandatory for certain return preparers. Congress recently passed legislation stating that e-filing is required for those preparing 100 or more returns, which would likely be someone who is paid to prepare returns, such as a certified public accountant.
A tap and an app away
As Americans get more comfortable with the anytime, anywhere accessibility of the Web via smartphones and tablets such as the iPad , tax filing software companies such as TurboTax have made it easier for people to file taxes on the go.
TurboTax launched a first-of-its-kind app this season called SnapTax, which allows users to file taxes via an iPhone or an Android mobile device. Taxpayers can snap a photo of their W-2 form with their smartphone and then the data from the form is quickly transferred to the tax return's fields as shown in the app. The user then has to answer a few questions before submitting the finished return.
Although the app is free to download, a payment of $14.99 is required during the federal (1040EZ) and state preparation process.
TurboTax declined to share the number of customers currently using SnapTax, but it noted that there were more than 350,000 downloads in just the first few weeks after the app debuted in January 2011.
"The response from users has been great so far; the app has received a 5-star customer rating in the Apple App store," said TurboTax spokeswoman Colleen Gatlin. "People have a great interest in the idea of filing taxes from a phone. Some who have tried it with the app have filed their taxes in just five to 10 minutes. It's quick and easy."
Schenk of NYU said that although there may be some public interest in filing taxes on a smartphone, large-scale adoption won’t occur until some changes to mobile devices are made.
"Until the keyboards are better, the trend is not likely to really take off," Schenk said, adding that not everyone wants to access such important documents on so small a screen.
Helpfully to some, TurboTax has also recently launched an app for the iPad, which with its bigger mobile screen might entice users to file electronically who might otherwise have passed on doing so via a smartphone.
Tax season security
The IRS states that e-filing is not only an accurate, but a safe way to file taxes.
"It's the most secure way to transmit your return to the IRS and it’s far more accurate, so you are less likely to hear from us,” the IRS spokesman said.
But Internet security firms are advising people to take a few extra steps to ensure protection during tax season.
For example, according to Webroot, those preparing or filing taxes on computers connected to the Internet should make sure they are running updated versions of antispyware and antivirus software.
It is also advised that tax filers scan their entire system at least once a week during this time.
"Updates and scans are even more important right before preparing or filing taxes online,” said Andrew Brandt, Webroot Lead Threat Research Analyst.
For federal electronic filings and document lookups, the firm recommends people click on search engine results that directly link to the IRS.gov site or a state’s official homepage. When finished filing taxes, taxpayers should manually erase or use privacy software to delete important data from their systems, Brandt added.
People should also be wary of spam email inquiries asking about sensitive information. Computer viruses – which often have names tied to pop-culture trends and current events – tend to heat up especially during tax season, according to McAfee, an Internet security software company.
"We always expect a lot of spam during tax season that involve fake tax documents and viruses ," said Dave Marcus, director of security research and communications for McAfee Labs. "The end goal for cybercriminals is to make money and people giving out sensitive information over the Internet makes it easy to do so."