How Do I eFile My Taxes and Manage Federal and State Returns?

Filing taxes electronically, or e-filing, has become the standard method for submitting federal and state tax returns. It is faster, more secure, and reduces errors compared to paper filing. Many taxpayers also receive refunds more quickly when they file electronically.

To e-file successfully, it’s important to understand the requirements, gather the necessary documents, and be aware of key deadlines.

Eligibility Requirements

Not everyone can e-file, as the IRS and state tax agencies impose restrictions based on income, filing status, and return complexity. The IRS Free File program allows taxpayers with an adjusted gross income (AGI) of $79,000 or less in 2024 to use free tax preparation software. Those exceeding this threshold must use commercial tax software or a tax professional. Some states also offer free e-filing, but eligibility varies.

Certain tax situations require paper filing. Returns that include uncommon forms, such as Form 2555 for foreign earned income exclusion, or rare credits like the credit for prior year minimum tax, may not be eligible for e-filing. Additionally, individuals filing multiple state returns may find that not all states support e-filing through the same platform, requiring a mix of electronic and paper submissions.

Identity verification is another factor. First-time filers or those who have experienced identity theft may need to authenticate their identity using an IRS-issued PIN or their prior year’s AGI. If the information does not match IRS records, the return may be rejected, requiring additional steps before it can be processed electronically.

Gathering Documentation

Having the necessary documents ready before e-filing ensures accuracy and prevents delays. Income statements are essential, with the most common being Form W-2 for employees and various 1099 forms for independent contractors, freelancers, and those with investment or miscellaneous income. These documents report earnings, tax withholdings, and other financial details that impact tax liability.

Records of deductible expenses and tax credits also affect the final tax bill or refund. Mortgage interest statements (Form 1098), student loan interest payments, and medical expenses exceeding 7.5% of AGI may be deductible if itemizing instead of taking the standard deduction. Contributions to retirement accounts, such as traditional IRAs or Health Savings Accounts (HSAs), can provide tax advantages. In 2024, contribution limits are $7,000 for IRAs and $4,150 for HSAs for those under 50. Keeping receipts, bank statements, and official tax forms documenting these amounts ensures eligibility for deductions and credits.

Taxpayers with investments must gather records related to capital gains, dividends, and interest income. Brokerages issue Form 1099-B for stock sales, detailing purchase and sale prices used to calculate capital gains taxes. Those receiving dividends or interest will receive Form 1099-DIV or 1099-INT. Failing to report investment income accurately can result in IRS notices, as financial institutions also submit these records directly to the government.

For self-employed individuals, maintaining detailed records of business expenses is necessary to claim deductions. Receipts for office supplies, travel expenses, and home office deductions must be retained, as the IRS may request supporting documentation in the event of an audit. Self-employed individuals must also account for estimated tax payments made throughout the year to avoid underpayment penalties.

Filing Federal and State Returns

Submitting tax returns electronically requires selecting the appropriate method. The IRS provides multiple options, including Free File for eligible taxpayers and commercial tax software for those needing additional features. Popular platforms like TurboTax, H&R Block, and TaxAct integrate federal and state filing. Some states mandate e-filing for certain filers, while others allow paper submissions.

Entering tax data accurately is essential to avoid processing delays or audits. Tax software typically imports information directly from financial institutions or previous returns, reducing manual entry errors. Taxpayers must review pre-filled amounts carefully, as incorrect figures can lead to IRS adjustments or penalties. Deductions and credits should be selected based on eligibility, with software often prompting users to claim commonly overlooked benefits such as the Saver’s Credit for retirement contributions or the Residential Energy Credit for qualifying home improvements.

State returns often differ from federal filings, with unique deductions, credits, and tax rates affecting the final amount owed. Some states, like Texas and Florida, do not impose an income tax, simplifying the process for residents. Others, such as California and New York, have complex tax codes that require additional documentation or adjustments to federal figures. Many states also offer their own e-filing portals, which may be a cost-effective alternative to third-party software.

Deadlines

Meeting tax deadlines is necessary to avoid penalties and interest charges. The standard filing deadline for individual federal tax returns is April 15, unless that date falls on a weekend or holiday, in which case it shifts to the next business day. Taxpayers needing additional time can file Form 4868 for an automatic six-month extension, moving the due date to October 15. However, an extension only applies to filing the return—any taxes owed must still be paid by the original April deadline to prevent late payment penalties, which accrue at 0.5% per month on unpaid balances, capped at 25%.

State tax deadlines often align with the federal schedule, but some jurisdictions set their own due dates. For example, Delaware and Iowa historically required filings by April 30, while residents of Maine and Massachusetts benefit from an automatic extension due to Patriots’ Day, a state holiday. Late filing penalties vary by state, with some imposing flat fees and others calculating charges based on a percentage of unpaid tax.

Record Retention

After e-filing federal and state tax returns, maintaining proper records is necessary for future reference, audits, or amendments. The IRS generally recommends keeping tax documents for at least three years, as this is the standard period during which the agency can initiate an audit. However, if a taxpayer underreports income by more than 25%, the IRS extends the audit window to six years. In cases of fraudulent returns or unfiled taxes, there is no statute of limitations, meaning records should be retained indefinitely.

State retention requirements vary, with some jurisdictions advising taxpayers to hold onto documents longer. For example, California recommends keeping records for at least four years, while Montana extends the period to five. Taxpayers who claim deductions for depreciable assets, such as rental properties or business equipment, should retain supporting documentation for as long as the asset is in use, plus several years after it is fully depreciated. Digital storage solutions, such as encrypted cloud services or external hard drives, provide a secure way to preserve records without the risk of physical loss or damage.