Tip Sheet: How to E-File

There's no job quite like having to process 130 million tax returns, and that's the big reason why the IRS wants you to e-file. Since 1986, the first year the Revenue folks experimented with e-filing, more than 250 million tax returns have been filed electronically. Last year 46.9 million returns were e-filed, representing 36 percent of the total. It makes their job a lot easier, sure, but e-file can make tax returns less painful for the rest of us as well.

The best place to start your e-file is at the IRS' website, www.irs.gov. The site includes FAQs about e-file, a list of free e-file providers and a helpful free file wizard. Once you've picked out a filing service, click over to the website and begin the process.

E-filing isn't technically done through the IRS, but through outside vendors. "It's like banking online," says Anthony Burke, an IRS spokesperson. E-filers go to sites like H&R Block for tax forms, then transmit the information over a secure phone line to the IRS database. Burke says that to the IRS' knowledge, the security of electronic returns has never been compromised.

For some people, your e-filing may be free. Different vendors of online returns have different qualifications for free filing. Some, like FreeTaxUSA.com or H&R Block, have a maximum income limit, usually around $35,000. Others, such as eSmartTax.com and FileYourTaxes.com, offer free filing to residents of certain states. The IRS' free file wizard will pinpoint the free filing opportunities based on income, age and filing status. Even if you aren't eligible for free filing, most vendors offer e-filing for between $8 and $35.

When you've chosen your free tax filer and gone to an outside site, you can being filing. To work with a vendor site, you'll need to create a unique username and password, as this will function as your electronic signature on your return. The same username and password can be used in different years. Each site will ask for your personal information, your social security number and other relevant info. After that, you can begin the form, which in most cases consists of a number of easy-to-understand radio buttons and text boxes that make the cumbersome paper 1040 into a brief and easy survey. Downloads are not generally required, as most sites use their own software to work with Web forms and get your return ready. In addition, you simply enter values into the forms and the site does the calculation for you.

Should you get stuck, there are a wealth of sites to help. While the sites in the IRS's list all offer FAQs and e-mail contacts, more general tax help can be found at other sites. TurboTax, part of Quicken offers software and tax planning guides for taxpayers, and 1040.com has news, more software and efile guides. If you're looking for a more general overview of tax-preparation sites, try PC World's Financial Sites page. Once you're finished with the return, if you're getting a refund and chose direct deposit, you can receive the case in as little as 10 days.