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MANY SPEEDY RETURNS
IT'S EASIER THAN EVER THIS YEAR TO FILE INCOME TAXES ELECTRONICALLY

It's getting easier to file your taxes electronically.

For the first time, you can file federal income taxes without having to mail in a signed, one-page form verifying that the return you submitted electronically was complete and accurate.

This year, the IRS will consider your return complete if you select a five-digit personal identification number that will serve as your electronic signature, allowing for truly paperless filing.

What's more, the IRS has added 23 new forms and schedules, ranging from unreimbursed employee business expenses to investment and welfare-to-work credits, to its list that can be filed electronically, which means that virtually every taxpayer now can use the e-filing system.

That means virtually all taxpayers now have an option that can deliver their refunds faster and help eliminate errors from their tax returns.

For taxpayers who truly go paperless and have their refunds deposited directly into their bank account, e-filing can cut the time it takes to get a refund in half. Taxpayers who e-file and have their refunds direct deposited will get their money in an average of 14 days, compared with three weeks for e-filers who have their refunds mailed, the IRS says. Paper returns can take four to eight weeks.

"People are becoming more comfortable with the Internet and they're realizing they can get their returns back a heck of a lot faster by filing electronically," says Laurie J. Ruffino, an IRS spokesman in Buffalo.

Even if you owe the IRS money, you can still e-file and have the amount you owe charged to a major credit card or a debit card. The only major exception is Visa, which has backed off because the IRS wanted the processing fee, which runs 2 percent to 4 percent of the amount owed, to be paid by the customer, rather than the IRS.

With more Americans gaining access to computers and the Internet, the rate of e-filing has been steadily growing. Last year, about 35 million returns were filed electronically and the IRS expects that figure to rise to about 42 million this year.

The government likes e-filing because the returns tend to be more accurate, since math errors - one of the most common tax return mistakes - are caught automatically. And because the electronic returns don't require the same bureaucracy, e-filing can save the government money, which is why Congress has set a goal to have 80 percent of all returns filed electronically by 2007.

That may not be an easy goal to reach, however. Just 27 percent of all returns were e-filed last year, and the IRS forecasts that the total will reach 32 percent this year. Upstate taxpayers are e-filing at a rate that matches the national average, with 867,600 returns being filed electronically last year, Ruffino says.

So far this tax season, e-filing is up about 5.5 percent, based on returns received through Feb. 15, Ruffino says. But the biggest jump - 35 percent nationally and 42 percent in upstate New York - is in the number of individuals who are preparing their own returns and then filing them electronically.

"More people are doing it themselves this year," Ruffino says.

The early returns this year also show that 69 percent of the taxpayers receiving refunds are choosing the direct deposit option, up from 62 percent at the same time last year.

"It's a safety thing and a speed thing," Ruffino says.

The IRS hopes the faster refunds will be the big lure to get taxpayers to go electronic. To confirm a taxpayer's identity, e-filers also will be asked to include their adjusted gross income and tax amounts from last year's returns. Taxpayers who e-file will receive an electronic confirmation that their return was received.

But the system still has some drawbacks.

The biggest is that filing electronically, for the most part, isn't free. The IRS dropped plans to offer Internet filing itself a few years ago, because of security and technical concerns.

So taxpayers now have to use an intermediary, such as tax software or a professional tax preparer, to e-file - and that usually costs a few bucks. Congress last year had considered granting a $10 credit to offset electronic filing fees, but that initiative didn't pass.

Instead, taxpayers who want to e-file could end up paying $6.95 to $24.95 for the privilege. And at that price, the extra interest a taxpayer will earn by getting a refund a couple weeks early won't come close to offsetting the extra cost to e-file.

But there are ways to e-file for free. H.D. Vest, a Texas financial services company, allows you to prepare and e-file your federal return for free through its Web site, www.hdvest.com. The company says it won't share your personal information with anyone else, but you will see targeted ads about other Vest financial services and products while you're at the site.

You also can use prepare and file your taxes electronically for free using Intuit's TurboTax program if your adjusted gross income doesn't exceed $25,000. UDS ElectroTax www.udstax.com offers free Internet tax preparation and e-filing for students.

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