Tax e-filing: the pros outweigh the cons

by Sandy Cosser

Despite months of warning, many people conveniently forget about filing their taxes until the last minute. It’s part of a self-defence mechanism, if we forget about it, then perhaps this year will pass us by. Unfortunately governments aren’t into forgiving forgetfulness, which means that households are turned upside-down in a panicked search for errant receipts.

E-filing has the potential to make tax time less frenetic and easier on the nerves for everyone. It’s a quick and simple process and, as it’s filed automatically, you needn’t worry about your tax return being lost in the post, or tampered with by outside parties. Some systems, like TurboTax in the US, highlight mistakes that need correction, and even correct some calculation based mistakes. The system guarantees the accuracy of all calculations it makes.

Another system, Free File, offers free assistance to all those earning less than $52,000 per year, which gives them the confidence to file their returns without having to pay for expensive, professional advice.

Proponents of e-filing believe that the process allows for greater accuracy and so minimises your chances of falling to prey to a dreaded audit. Scott Estill, a former IRS trial attorney and author of “Tax This! An Insider’s Guide to Standing Up to the IRS”, says that e-filing is 20% more accurate than manual filing. One reason for this is that it cuts out on mistakes made by tax officials as they transfer your data from paper to machine. It also negates mistakes made by illegible handwriting.

Those who oppose the process claim that the instant analysis of taxes filed electronically means that they are more likely to be audited than paper returns that sit on the shelf. They argue that their simplicity makes them more attractive auditing options because there aren’t reams of paperwork to wade through.

Audits are undeniably troublesome and inconvenient, but my question is this: if you haven’t done anything wrong, and you have nothing to hide, why be all that concerned about being audited? All an audit will prove is that you’re an honest taxpaying citizen. Besides, Estill says that it’s only possible for 1 to 1.5% of all tax returns to be audited, which means that regardless of how you submit your return, you have a 99% chance of remaining audit free. Don’t you think that governments would rather optimise their limited auditing capabilities and go after the really dodgy guys, instead of randomly picking on an average Joe for the sake of convenience?

Another advantage of e-filing is that any refunds that are due to you, are paid much sooner than those who file their returns the old fashioned way. That’s one way the tax system actually works for you, not against you.

Tax professionals might be divided on the pros and cons of e-filing, but the general public is not. In the space of one year, the submission of electronic tax returns in the US increased from 73.3 million to 135.7 million. Tax systems, it seems, are tired of being seen as outdated and archaic and are finally making an effort to keep up with the times. Increased convenience, however, doesn’t translate into increased enjoyment. The public would like to make it clear to all governments that nothing will ever make us like paying taxes.

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About the Author
Sandra wrote this article for the online marketers Capital Tax Consulting offshore tax specialists leaders in the field of offshore tax, tax management and tax consulting, they aim to optimise your tax options and make your life simpler at the same time.