Federal/State e-file allows the electronic filing of both Federal and state income tax returns at the same time. The electronic filing software places your Federal and state return data in separate packets. These packets are transmitted to the IRS in one taxpayer "envelope." The IRS functions as an electronic post office for the participant state, who receives and processes the state electronic return.  

Fast Refund - Your tax return is processed quickly which means at the IRS, and in most states, you can have your refund direct deposited into your checking or savings account.

Fast Processing - Your refund is received twice as fast. The IRS and participating states can process your e-file returns much more quickly than those that are filed on paper.

More Accurate - Tax preparation software eliminates errors you may make, and e-file processing of the Federal and state return eliminates most errors.

Proof of Filing - You can meet your Federal and state tax obligation at the same time. The IRS and state agency will let you know that your return has been received and accepted.

Convenience - At IRS and in most states you can file early and pay any balance due by April 15.

Electronic filing involves the transmission of a tax return to the IRS from the computer of a tax preparer.  To file electronically, you must use a service; you can not do it directly.  You may use a free service provided by the IRS but you can not do it yourself.  Electronic filing offers a faster refund, as quick as a week, with a direct deposit to your specified bank account.  You must provide the routing transit number of the bank as well as the account number.  There are also provisions for splitting up the refund among several accounts.  There is also provision for payment of any balance due on the return by providing the banking information.  The account is not charged until April 15^th.  If you choose this payment method, make sure that there are funds in the account because there are severe penalties for not sufficient funds. 

Electronic filing has almost reached the mandatory level so those who have not yet electronically filed, your days are numbered.  Under the Worker, Homeownership and Business Assistance Act of 2009, effective 1/1/2011 (this would be the 2010 tax season), returns prepared by most tax return preparers would be required to be filed electronically.

The process of submission requires some extra coding and good software.  Your information is protected with information sensitive to you and your preparer.  Once electronically prepared and submitted, the approval process for both the federal and NY returns usually takes 1-2 days.  After approval, a hard copy of your returns along with an acceptance letter is sent for your files.

There are still exceptions to mandatory e-filing and those who wish not to participate, just drop me a note and I can explain the exceptions.  Otherwise, for the upcoming tax season, most returns will be e-filed.

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