Did you know that free online tax filing is available through the IRS website? Free File, available through the IRS, provides taxpayers the ability to prepare and e-file their federal taxes for free. Free File is managed and operated by a consortium of private tax preparation companies. Free File offers two free tax filing options: Free File Software or Free File Fillable Forms. More than 30,000,000 taxpayers have used this free tax filing online service since its inception in 2003.

Which Free Tax Filing Option Should I Use?
Lower-income taxpayers, those with Adjusted Gross Income (AGI) of $58,000 or less, can use the Free File Software option to use name-brand tax preparation software to prepare and file tax forms for free. The other Free File option, Free File Fillable Forms, is available to all taxpayers, including taxpayers whose incomes are greater than $58,000. Both tax filing options are free!

Can I file my State tax return using Free File?
Some states have formed their own agreement with some Free File Alliance members to provide free state tax filing, but they are separate from the national agreement.

Free state tax filing, using Free File, is available to taxpayers in the following states: Alabama, Arizona, Arkansas, Georgia, Idaho, Iowa, Kentucky, Michigan, Minnesota, Mississippi, Missouri, New York, North Carolina, North Dakota, Oklahoma, Oregon, Rhode Island, South Carolina, Vermont, Virginia and West Virginia.

How do I use the free online tax filing service?
Free tax filing is easy, just follow these simple steps:

Prepare for your free federal tax filing
• Gather your tax information
• Determine your Adjusted Gross Income (AGI). Check your last year’s tax return for a quick estimate of your AGI.

Choose a Free File Option
• If your AGI is $58,000 or less, use Free File Tax Software from a Free File company or choose one of your own.
• If your AGI is greater than $58,000, use Free File Fillable Forms.

e-file your tax filing free
• e-file with Free File
• Use direct deposit to get your tax refund quickly and safely and to track the status of your tax refund.
• Pay electronically. Get more information about free tax filing electronic payment options.

Taxpayers should take advantage of this free online tax filing program.

source: irs.gov

It’s hard to believe that in just twenty five years, the Internal Revenue Service’s online income tax filing, efile, has grown from processing 25,000 individual income tax returns annually to over 100 million.

The IRS efile has surpassed a landmark of 1 billion individual Form 1040 tax returns received and processed safely and securely. The electronic tax filing is arguably the most successful modernization program ever undertaken by the federal government.

In the 1980s, processing tax returns became increasing ineffective because of the complex, time-consuming and error-prone process of converting hard copy tax returns into a form that could be processed by machine. In addition, the IRS was facing a growing problem of increased cost and space to house the reams of paper forms and tax documents. And so the age of electronic tax filing was born.

The initial IRS efiling process was initiated by a tax preparer using a machine called a Mitron, which was a tape reader with a modem. The tax preparer would insert the tape into the Mitron to transfer the tax data. At the IRS, an employee would transfer the tape into a super mini-computer called Zilog.  Zilog would read the data and convert it to a format that the IRS’s Unisys system could process.

In 1986, the IRS launched it’s electronic tax filing pilot program. Five tax preparers in 3 cities participated, efiling 25,000 tax returns. Although the program could only accept simple returns that were due a refund, it was deemed a success and the pilot was expanded.

In 1987, 66 tax preparers used the online income tax filing system, filing 78,000 tax returns. That year, functionality was added to allow electronic Direct Deposit to put tax refunds directly in the bank accounts.

The following year, a technological update by the IRS to an IBM Series I processing system, eliminated the need for an IRS resource to plug the phone into a modem. Tax preparer interest in electronic tax filing exploded. 583,000 tax returns from 16 IRS districts were filed in 1988.

The efile program was expanded nationwide in 1990. 4.2 million returns were filed electronically.

In 1998, Congress passes a provision setting a goal of an 80% efile rate for all federal tax returns. The following year, efile functionality is added that allows electronic payments through credit cards and direct debit.

Efile becomes entirely paperless in 2002, when the IRS allows taxpayers to sign their tax returns electronically using a Personal Identification Number (PIN).

By 2007, more than 50% of all individual income tax returns were filed electronically (79.9 million).  And in 2010, that percentage jumped to 72% (93.4 million).

In 2011, Efiled returns cross the 100 million threshold in one filing season; cumulative total exceeded 1 billion returns. Approximately three out of every four individual tax returns were filed electronically.

source: irs.gov

The New Year is upon us once again. That means the income tax season has begun and important tax documents should be arriving in the mail. Even though your tax return isn’t due until April 2011, why not begin the year off right and start filing your tax return early. Here are the top tax tips for 2011.

1. Gather all your tax related documents Pull together the documents and forms you’ll need when filing your taxes. You’ll need W-2 forms, 1098 forms to document the interest you pay on your mortgage, receipts for your charitable donations, documentation of property taxes you pay, trade information to calculate taxes due on capital gains and dividends, canceled checks, and other documents related to income or deductions you’re claiming on your return. Organizing your tax paperwork is definitely the top tax tip for 2011.
2. Keep an eye on the mail W-2s and 1099s will be coming soon; you must have these to file your tax return. Another great tax tip is to know that your tax documents come from different sources: employers provide W-2s, financial institutions send tax documents related to interest, dividends, broker transactions and retirement plans, lenders provide the tax data for mortgage interest and real estate transactions, and taxing authorities cover property tax and income-tax refunds.
3. Use Free File Let Free File do the hard work for you with brand-name tax software or online fillable forms. It’s available exclusively at http://www.irs.gov. There is an option to prepare your tax return and e-file it for free for tax season 2011.
4. Try IRS e-file IRS e-file is the most common way to file a tax return. Starting in the 2011 tax year, many tax preparers will be required to use e-file and will explain your filing options to you. Combine e-file with direct deposit and you can get your tax refund in as few as 10 days.
5. Consider other tax filing options You can prepare it yourself or have a tax preparer file your tax return. You may even be eligible for free face-to-face help with an IRS office or tax volunteer. If you have outstanding tax issues or owe back taxes, consider visiting a tax attorney before preparing your tax return.
6. Direct Deposit Get your tax refund deposited directly into you bank account. It’s faster and safer than waiting for a check from your postman.
7. Double check your return Believe it or not, the most common tax return errors are the Social Security Number and math calculations. Take your time and double check everything. Mistakes will slow down the processing of your tax return and may even increase your chance of being audited.

Following these top tax tips will make your 2011 tax season the smoothest ever.

source: irs.gov