The electronic filing software puts your federal and state return data in separate packets when you use this program. The separate packets are then simultaneously submitted to the Internal Revenue Service (IRS). The IRS acts as a virtual post office for the participating state, which retrieves the state returns from the IRS and processes them.
How to Use Federal/State E-File
Taxpayers can utilize the Federal/State e-file system through paid tax preparers, such as certified public accountants (CPAs) or enrolled agents, provided that they’ve been accepted as e-file providers by both the IRS and their state. You can also use tax preparation software, such as TurboTax, H&R Block, or Tax Slayer. Most reputable software providers are equipped to file state and federal returns. You can’t participate in Federal/State e-file if you prepare your own tax return manually using the IRS forms that are also free and available online at Free File. The IRS makes these forms available to those who don’t meet the income limit, but they must prepare their returns themselves. You’ll be able to e-file if you use these forms, but usually only your federal tax return. You can check with your state’s Department of Taxation to make sure that it participates in the MeF program. Most do, and some may offer their own type of free e-filing for state residents. For example, Massachusetts offers free federal and state e-filing through the 1040NOW website.
Benefits of Filing Simultaneously
The main benefit of electronically filing your federal and state return together is convenience. Other benefits include:
Faster processing: The IRS and participating states can process e-file returns much more quickly than paper returns.Faster refunds: Faster processing means you’ll receive your refund more quickly, particularly if you request direct deposit.Improved accuracy: Tax preparation software helps to eliminate errors, and the e-file system also has some built-in error detection.Proof of filing: You’ll receive a notification when your federal and state returns have been received and accepted.
Drawbacks to Using Federal/State E-File
The Federal/State e-File program can create some complexities if you have to pay both federal taxes and state taxes with your returns. Some states may not allow the Federal/State e-File system to be used for nonresident or part-year resident tax returns, but these drawbacks are really just minor annoyances. The advantages of e-filing significantly outweigh any disadvantages in most cases.
Is E-Filing Safe?
Some people might worry about the security of their personal information when they’re e-filing. The IRS employs many security features, such as multiple firewalls, anti-virus features, and encryption to ensure the safety of your personal information when you transmit it. This doesn’t guarantee that you won’t become a victim of identity theft on your end of the process, however. The IRS offers assistance if you think you’ve personally suffered a data breach. You can file Form 14039, the “Identity Theft Affidavit,” with the IRS to alert them. In fact, you might learn about the breach in the first place when you receive a notice from the IRS indicating that someone else has used your Social Security number on a filed tax return.
