Benefits, Risks of E-Filing this Tax Season It's tax season, and more and more Americans are filing their returns online. Alex Chadwick speaks with Day to Day personal-finance contributor Michelle Singletary about the safety, costs and benefits of e-filing your taxes.
NPR logo

Benefits, Risks of E-Filing this Tax Season

  • Download
  • <iframe src="https://www.npr.org/player/embed/5323074/5323075" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
  • Transcript
Benefits, Risks of E-Filing this Tax Season

Benefits, Risks of E-Filing this Tax Season

Benefits, Risks of E-Filing this Tax Season

  • Download
  • <iframe src="https://www.npr.org/player/embed/5323074/5323075" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
  • Transcript

It's tax season, and more and more Americans are filing their returns online. Alex Chadwick speaks with Day to Day personal-finance contributor Michelle Singletary about the safety, costs and benefits of e-filing your taxes.

ALEX CHADWICK, host:

It's DAY TO DAY, from NPR News. The deadline for filing you income tax is not very far away. If you are a last minute filer, and you don't want to wait in that midnight line at the post office this year, you can try e-filing. This electronic method of submitting tax returns is getting more popular. But still, is it right for you?

Joining us to talk about e-filing is our regular personal finance contributor, Michelle Singletary. Michelle, welcome back to the program, and are you e-filing this year?

MICHELLE SINGLETARY reporting:

E-filing this year, as I did last year, as I did the year before that.

CHADWICK: And what are the advantages?

SINGLETARY: The biggest advantage is it reduces the number of errors. In fact, paper returns have an error rate of about 18 percent compared to e-file, which is like one-half of one percent, because when you e-file it goes through a sort of checkpoint to make sure common errors are not there, like missing social security numbers, or they're transposed, or the kind of normal things we get wrong. It checks for that, so that's one of the biggest advantages.

CHADWICK: I'll bet that the disadvantage would be, people would think, well, if I'm going on the IRS account to file this thing, they're not going to try to save me money. I might be leaving some money that I could get back somehow.

SINGLETARY: Well, you know, when you e-file, you're going to be going through some sort of tax software or tax preparer, so hopefully, if you choose the right software and the right preparer, they're going to help you find all the deductions and things that will help reduce your taxes.

CHADWICK: What about other negative aspects?

SINGLETARY: I think the biggest negative for lots of folks is you have to pay to e-file if you have income over $50,000, and that's going to run you anywhere from, you know, 10 to $25. So, for lots of folks, that's a big turnoff. That's a big disadvantage, and it was for me when they first introduced it, but when I looked at the error rate and the fact that I can get my refund a lot faster, it was worth the money.

And if you make $50,000 or less, you should go to the IRS website and check out Free File. There's a little button on the homepage where you can go and look for preparers that will file your taxes for free.

CHADWICK: How about safety, Michelle? I mean, people worry about putting their data out on online forms.

SINGLETARY: You know, the data that's transmitted via the Internet for e-file is encrypted to protect your privacy and your data. You know, they want to make sure that lots of folks e-file, so I think it's probably one of the safest.

CHADWICK: Do you know, Michelle, how many of us have followed you into the e-filing realm? I mean, how popular is this, really?

SINGLETARY: It's very popular. Last year, about 52 percent of all tax returns were filed through e-file, and so far this year, more than 50 million returns have been filed through e-file. So it's becoming very popular. Listen, the IRS has an edict to have at least 80 percent of all federal tax and information returns filed electronically by 2007, so more and more people are getting on board.

And again, you know, I endorse it. Like I said, I didn't do it before because of the cost, but when you look at what is reduced, the errors are reduced. You get your return in half the time it would take if you filed a paper return, and even faster if you elect direct deposit to have your refund sent back to you.

CHADWICK: Michelle Singletary writes the syndicated column The Color of Money. She's our regular guest on Matters of Personal Finance. Michelle, thank you again.

SINGLETARY: Thank you.

CHADWICK: And if you, dear listeners, have money questions for Michelle, go to our website, NPR.org. On that site, you will find our contact us link. You can click on that and send a question to Michelle. Please put Michelle in the subject line.

Copyright © 2006 NPR. All rights reserved. Visit our website terms of use and permissions pages at www.npr.org for further information.

NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.