Each year, more and more taxpayers are filing with eFile. Are you one of them? There are many advantages to eFiling:
- It’s faster,
- You save on postage,
- Most states now accept eFiling as well, and
- Faster refunds.
There is one potential challenge with eFiling though. I’ve been a CPA for almost 30 years now and in that time, there is one thing I can tell you with absolute certainty about the IRS: They lose returns.
I always tell my clients to mail their returns with the green return receipt requested card. When the IRS receive the mail, they sign for it, and that receipt is sent back to you. That allows you to prove to the IRS that you filed the return and that you did it on time. I can’t stress this enough. Chances are at some point in your life, you will need to prove to the IRS that you filed a return or responded to a notice on time. If you don’t have the proof, you can face significant penalties and interest. With the proof, you’re in the driver’s seat.
I would estimate that about 5% of everything that I mail to the IRS gets lost and I have to prove that it has been mailed. Keep track of all mailings to the IRS or any state agency for that matter with the return receipt card. And make sure you hang on to the cards for at least 10 years.
With eFiling, there is no mail and so no proof of mail with return receipt.
The IRS will acknowledge that they have received your eFile within 48 hours. Make sure you keep that receipt! If you change computers or your email software automatically erases emails after a certain period of time (weekly, monthly, etc), you could lose that proof. And just like with the regular paper filing, it could be a year or more until you hear from the IRS or your state that there is a problem. If you don’t have that proof that it was accepted, you’re going to be facing penalties and interest.
eFiling of income tax returns can be a benefit, as long as you keep track of your acknowledgement and have a plan to keep the copy for years.