How To Use the IRS' Free E-Filing System

For those in a hurry to get their hands on their federal tax refund, but who don't want to incur the expense of a refund anticipation loan (RAL), the Internal Revenue Services' (IRS) e-file system offers a free alternative. And it's just about as fast.

But how exactly do you use the e-file system, you ask? If you have a computer with an Internet connection, it's simple. If you don't, ask your tax preparer to e-file. It might end up saving you money.

First, before going to the IRS website, take the time to get all your tax information together -- you'll save time and won't have to stop in the middle of preparing your current year tax return to find a missing document.

What you need

Here's what you'll need:

• Social Security numbers for yourself, your spouse, and any dependents.

• Forms W-2 from all employers are required for yourself and your spouse.

• Forms 1099 for Dividends, Retirement, or other income, or any Forms 1099 with Income Tax Withholding.

• Receipts for expenses for Itemized Deductions (Schedule A).

• Receipts and records for other income or expenses.

• Bank Account numbers (for a fast refund, or to pay electronically).

• Prior year Adjusted Gross Income amount or prior year PIN if using a Self-Select PIN as your signature.

Three options

You have three options for using e-file. You can use a computer connected to the Internet, use the IRS's Free File service, or have a tax professional e-file the return for you.

If using a tax preparer, be sure to take all your information with you, and don't forget to ask for IRS e-file. That way you'll get your refund faster and the tax preparer is less likely to make mistakes.

If you're filing the return yourself online, just answer the simple questions in your tax preparation software, and the software will do the rest for you. For faster refunds, or to pay when you want to, have your bank account number handy.

If you're using the Free File service, visit the IRS web page by clicking here.

State returns?

Okay, now that your federal return is filed, what about your state return? Depending on where you live, the IRS e-file system might work for that too.

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, which receives and processes the state electronic return.

Which states participate? According to the IRS, 38 of the 50 states are taking part this year. You'll find a complete list here.

Using e-file to file both federal and state returns is not just easier, it puts money in your hands faster. 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. 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.

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