Should You File Electronically?

About 48 million people filed their taxes electronically last year, either by telephone or by computer. But is e-filing for you?

There are several reasons to file electronically:

1. It saves time. Experts estimate preparation of manual returns takes 10 to 12 hours. Online preparation takes one to two hours.

2. You get your refund faster.

3. It increases accuracy. Many Web sites and computer programs will catch and correct most errors.

Despite the advantages, you shouldn’t e-file if:

1. You worry about online security. When you file online, your Social Security number and your financial records for the past year must be saved in cyberspace. Although any reputable company should have a secure Web site, you shouldn’t file online if it makes you uncomfortable.

2. You don’t know very much about filing taxes. Although most programs provide help, they can’t completely guide you. If you know nothing about taxes, seek the help of a tax professional.

There are costs associated with e-filing. Software costs around $25. And most online sites charge a filing fee. The good news is these fees usually aren’t assessed until you file your return, so you can test each site to find which works best for you. In fact, you could completely prepare your return, then decide not to use the service, and you wouldn’t be charged. But watch out for hidden fees. The best way to avoid them is to use a site run by a well-known company.

Then again, you might be one of the 78 million taxpayers who qualify for free e-filing this year, thanks to a partnership between the IRS (Internal Revenue Service. www.irs.gov) and some online tax-filing services. Most of these services offer free e-filing to taxpayers with incomes of $28,000 or less. TaxBrain (www.taxbrain.com) offers free preparation and electronic filing to seniors (age 50 and older), while TaxSlayer (www.taxslayer.com) offers it to all active-duty military personnel.