Electronic Filing (E-File) Definition, Options, Advantages

What Is Electronic Filing (E-File)?

Electronic filing is the process of submitting tax returns over the internet using tax preparation software that has been preapproved by the relevant tax authority, such as the U.S. Internal Revenue Service (IRS) or the Canada Revenue Agency.

The convenience and efficiency of e-filing have made it increasingly popular in recent years. The IRS says e-filing speeds up tax refunds and helps to avoid delays.

Electronic Filing (E-File) Options

Taxpayers can file their returns directly on the IRS website, submitting fillable forms using IRS Free File. Those with an adjusted gross income earned in 2021 of $73,000 or less can alternatively use the Free File site to access the free e-filing services of IRS software partners with guided tax preparation, including a Spanish-language option.

A taxpayer has the option of filing the return using any tax preparation software with e-filing functionality or hiring the services of tax professionals who use similar software. The IRS Free File site has a search feature to help taxpayers find an authorized e-filing provider in their area.

Advantages of Electronic Filing

E-filing saves the tax agency time and money because it transmits a return's data directly to its computers, significantly reducing input errors. Filing electronically with tax preparation software also helps to reduce taxpayer calculation errors and missing entries, the IRS says.

Most taxpayers who e-file and provide direct deposit information can expect to receive any due refund within 21 days if there are no issues with their tax return, according to the IRS.

Another benefit of e-filing is that the tax filer receives an acceptance or rejection notice within 48 hours—usually within 24 hours—of transmitting the tax return. Acceptance is proof that the documents have been received and are in the system, while a rejection alerts the taxpayer that the return has not been accepted by the IRS. The rejection notice will include information on what needs to be corrected on the return to make it so that it is acceptable. If you e-filed before the tax due date but are rejected after it, then there is a five-day grace period for correcting and resubmitting your return. After that, you must send in a corrected paper return.

Limitations on E-Filing

The IRS recommends only taxpayers comfortable doing their own taxes e-file without help from a professional or tax preparation software.

IRS Free File is only available for returns for the most recent tax year. Prior-year returns going back two years can still be filed electronically by registered tax preparers.

The IRS accepts e-filed returns for the most recent year until a November cutoff date typically announced in October, subject to the same timeliness rules as paper returns.

An electronic filing could be rejected over mistakes in entering a social security number or a payer's identification number, an omitted form, or a misspelled name. Returns can typically be e-filed again once such errors are fixed, the IRS says. If all else fails and the deadline looms, send in a paper return instead.