As a home-based or other small business opportunity or franchise owner, paying taxes is probably one of your least favorite and yet necessary tasks. The good news is that it’s never been easier to get the job done than it is today thanks to our computers.
The proof that we all agree is in the numbers. This past June marked a major milestone in the history of how Americans pay Uncle Sam. For the first time in history, according to the IRS, the number of tax returns filed electronically (or e-filed) hit one billion and counting.
In fact, more than 80% of tax filers are expected to take of advantage of the benefits of e-filing this year, and there’s little doubt as to why they would want to:
• Speed, convenience and accuracy―Filing your tax return electronically is quick, so if you’re one to procrastinate, having the option to take care of business virtually overnight is a real plus. And it’s convenient. As long as you can get to a computer, you can file your taxes in minutes. Many tax-filing software programs highlight mistakes so you can fix them or they even correct them for you. Furthermore, calculations made by these programs are oftentimes guaranteed to be accurate.
• Reduced risk of loss or tampering―One of the greatest concerns with using “snail mail” is that your return can get lost, and there’s really no easy way to confirm that the IRS received it at all, let alone on time. Not so when you file electronically. As for tampering, the likelihood of it happening also plummets when you e-file; however, security is a consideration for many. But more on that later.
• Refunds paid sooner―Filing electronically doesn’t just mean you can get your documentation out more quickly. It’s a two-way street in this regard. Your refund (should you qualify for one) will arrive much sooner than it would have filing the old-fashioned way, and you can even have it direct-deposited to your checking or savings account.
• Facilitates record-keeping―E-filing your taxes ensures you have a PDF file of your returns for your archives. When filing next year, your data will carry over to the current year’s forms.
Okay, so e-filing your taxes if you’re a small business or franchise owner sounds like a no-brainer, right? Sure, but there are some potential downsides, many of which can be mitigated by taking these simple steps:
• Guard your personal information closely―Scammers and hackers are all after the same thing― your identity. Unfortunately, these criminals often seem to be one step ahead when it comes to obtaining our all-too-personal information. Three key things to remember on this front: 1) Be careful that you don’t send sensitive information to your tax preparer or anyone else via e-mail. If you need to share your Social Security Number for instance, make a phone call; 2) Make sure your e-filed tax return is password-protected throughout the entire process; and 3) Be on guard against “phishermen.” The IRS will NEVER ask you for sensitive information via email!
• Secure your computer and its connection―Make sure you’re running the most current version of your security software before you e-file. File via a wired connection versus a wireless one if you can. If you can’t, check to see that your wireless network is locked and that you’re using a WPA2 connection.
• Beware of fake IRS websites―And there are a number of them, and they look really official too. You must look carefully at the URL of any site you visit when e-filing your taxes. Start with http://www.irs.gov/, and know that any subsequent pages you link to for e-filing should start with “https,” not just “http.” HTTPS stands for Hypertext Transfer Protocol Secure, which is a combination of Hypertext Transfer Protocol (HTTP) with SSL/TLS protocol and provides encrypted communication and secure identification of a network web server.
• Employ final safeguards―Make sure you transfer sensitive information from your hard drive to an external drive so you can store it safely and securely. Moreover, it might be a good idea to check your credit report two or three months after you e-file just to ensure nobody else is masquerading around pretending to be you.
These are some of the most important points you need to consider, positive and negative, before you decide to e-file your taxes this year or in the future. With the holidays upon us, the 2010 tax season deadline of April 17, 2012 is just around the corner, so you can’t start thinking about all of this too soon.