What's New in E-Filing Your Tax Returns

This year, pay both your state and federal taxes online -- and do it free or for a small fee.

E-filing can limit the errors you make in your own filing and get your returns back to you sooner. Checks are built into the software, helping to reduce the possibility of costing yourself deserved money or a call from the IRS, while direct deposit can be set up to get you your money back in as little as 10 days.

Those filers with an adjusted gross income of less than $54,000 can take advantage of IRS Free File. According to the IRS, 70% of taxpayers this year can use Free File.

More Americans are already using this service this year. Three million had filed via Free File by the end of February, as compared with 2.6 million to the same period last year, the IRS says.

Meanwhile, visits to irs.gov are up 13% through mid-March as compared with 2007. Those who prepared their own returns online are up 16% from the year before, as more options and easier-to-use software increase the number of Americans choosing to save money on paying an accountant.

So far, e-filing is paying dividends -- the total dollar amount in direct deposit refunds is up nearly $10 billion from last year.

For those who are not eligible to use Free File, there are plenty of other e-filing programs, both that you can perform on your own or have done by a tax professional. If you opt to use a tax professional or buy tax software at your local office-supply store, you might want to verify that either one is approved by the IRS.

The IRS lists more than two dozen companies as "authorized," meaning the agency has entered into a partnership agreement with the group, agreeing to provide links to their services in exchange for appropriate product and service descriptions. There are a variety of options listed, ranging from free in price to more expensive plans that include advice from tax professionals.

Below are a few offerings to get you started. Be sure to pay close attention to the Web sites you use, as not all of them may provide full services should you need to make more obscure deductions.

A note: File as soon as you can and apply for direct deposit, even if you owe money this year, so that you can take advantage of the Economic Stimulus Plan. Economic stimulus payments will begin being disbursed starting May 2, and initial payments will be made in the form of direct deposit.

• If you're eligible for the IRS' Free File, go here to take advantage.
• TaxAct.com offers 1040, 1040A, and 1040EZ filing for free, while its ultimate online service at $16.95 will work to file both state and federal taxes. Tax Act offers tax tips on topics ranging from reporting your child's income on your tax form to selling ISO stock in order to avoid AMT adjustment.
• MonsterTax charges $19.95 to file your taxes, and is upfront about its limitations, offering a point and click on what lines on what forms are not supported by the site. If your taxes are relatively straightforward, MonsterTax may work for you.
• For those who wish to have a bit more guidance, H&R Block offers both do-it-yourself programs ranging from $14.95 to $59.95 for premium federal and one state return, to "do it with me" services that allow you to get full service tax preparation without leaving the home, starting at $99.95.
• If you just need to make a payment for this year or for past years' taxes, you can go to Official Payments Corporation, which provides a venue for paying both individual and business income tax returns in many states. You can also pay fees to thousands of local municipalities across the country. Official Payments also offers a 15% discount on software from its partner TurboTax so you can figure out on your own what you might owe. Fees vary with the type of payment being made.
• One more thing to think about this tax season, while you're online filing your 2007 return: The IRS says that it has about $1.2 billion for 1.3 million people who failed to file their federal income-tax return back in 2004. So if you forgot, or merely "neglected" to file then, go here to download PDFs of the appropriate forms.

But -- do hurry! After April 15, the money for that year will be gone for good.

Nate Herpich is a freelance writer and editor living in Brooklyn, N.Y. He has also written for the Wall Street Journal, the Christian Science Monitor and Sports Illustrated.com.