Question: What is IRS efile at all?
Answer: IRS e-file is an electronic tax-filing service available to individuals. It is the fastest way to file taxes - and get a tax refund in half of the usual time.

Question: What do tax payers gain by using IRS efile?
Answer: Let’s say it this way: Fast electronic filing, means a fast proof of acceptance which equals in fast tax refunds. The tax payer gains Peace of mind and a lot of security. Your tax preparer of choice transmits your tax return through their computers to the IRS gateway. Your tax return is submitted and within 48 hours the IRS sends proof that it has been accepted. Only IRS e-file offers this advantage. No other service is currently available to do the same.

Question: How accurate is IRS efile?
Answer: It is literally error-proof. In matter of fact - IRS e-file is so accurate that it greatly reduces the chance that you’ll get audited by the IRS.

Question: What about my signature?
Answer: With e-file, the IRS still requires proof legally that the return is submitted by the taxpayer. You can sign with a Self-Select (electronic signature so to speak) PIN and AGI or mail/fax in a Form 8453-OL/8453 with your signature that declares you have e-filed your tax return.

Question: Do I really get my refund faster if I efile my tax return?
Answer: With IRS e-file, you’ll get it as soon as 10 days after filing or on average in half the usual time it would take if you file a paper tax return. It’s even faster if you have your refund directly deposited to your bank account.

Question: What If I owe a balance due? Why should I want the speed of efile?
Answer: You can file now, and actually pay the amount due later, and still beat the last-minute rush. No matter when you e-file your tax return, you don’t have to pay what you owe until April 15. In the meantime, you have a fast, electronic proof of acceptance from the IRS and can let your money work in a (as an example) in a money market account.

Question: Where else can I get additional information about IRS efile?
Answer: Visit the IRS website at www.irs.gov or in your tax booklet that you should receive some time in January.

Question: Is there a fee for IRS efile?
Answer: The IRS does not charge a fee for e-filing, but most tax service providers charge a gateway fee (up to $100 from what we have seen). Rest assured that the services recommended through the Smarttaxadvice.com website do NOT charge these outrageous fees, but rather a small fee. You should not spend your hard earned money on unreasonably high submission fees.

Question: Can I efile my state tax return with a Federal return?
Answer: In most cases, yes. Ask your tax preparer about this service or visit your state’s home page.

Question: How do I pay my outstanding taxes when I choose IRS efile for my tax return?
Answer: You have several choices this year. You can authorize a direct transfer from your checking or savings account as part of your return. With this option you can delay when the money comes out of your account until later-as late as April 15. You can also pay by phone using a credit card by dialing 1-888-2-PAY-TAX and entering a jurisdiction code of 1040. You can still pay by check or money order.

Question: If I choose the direct transfer option and delay payment, can I be sure the money won’t be withdrawn sooner?
Answer: Money will not be withdrawn from your account before the exact date you specify. However, if you designate a weekend or bank holiday, the payment will not be withdrawn until the next business day because the U.S. Treasury can settle payments only on business days.

Question: What confirmation of payment will I receive?
Answer: Your confirmation will be your bank statement and your copy of your electronically filed tax return which includes your direct transfer authorization.

Question: Can I make my payment on or after April 15?
Answer: You can designate the payment to be made up to and including April 15, but not after that date. Your payment will be considered timely if your electronic tax return is transmitted and accepted on or before April 15. Note: some transactions may take a day or two longer, due to circumstances beyond the control of the IRS. Therefore, we suggest that all payments be scheduled for transaction at least two business days before April 15.

Question: What if later I want to cancel or change my designated payment date?
Answer: Once you efile your tax return and it is accepted by the IRS, you cannot change your designated payment date. If you need to change the date, your only option is to cancel the transaction and send a check for the correct amount. You may cancel a payment ONLY if Treasury receives cancellation instructions by the morning of the business day prior to the day that you designated as your payment date. The cancellation must be authorized by you or by a person with access to your Taxpayer identification Number (TIN), payment amount, and bank account number. Please call 1-888353-4537 toll-free if you need to cancel a payment.

Question: Can I make partial payments?
Answer: You can make a payment for less than the balance due amount on your tax return. However, you are responsible for paying the remaining balance due by April 15 or you will be subject to late payment penalties and interest. If you cannot pay in full by April 15, you should file form 9465, Installment Agreement Request. An approved Installment Agreement allows you to make a predetermined series of partial payments after April 15 and includes interest charges since these payments are considered late.

Question: If I do not choose to pay electronically when I file my electronic tax return, can my tax preparer initiate an electronic payment for me at a later date?
Answer: No. An electronic payment is initiated only at the time an electronic tax return is filed.

Question: If I give the IRS access to my bank account number, what else can they do with it?
Answer: Nothing at all. The IRS will use your direct transfer authorization ONLY for this one tax payment to deduct the amount you designated at the time that you filed your electronic tax return. Rest assured that your bank account is safe from the greedy hands of the IRS.

We hope that these questions and answers will help you to make an informed decision in regards to how to file your taxes online. As always Smarttaxadvice.com recommends to consult with a tax professional if you do not feel comfortable filing your taxes yourself or have questions that do require more attention.

The second tax hurdle is much higher than the first, but there are four ways to get around it.

The first way is if your home office is your principal work place of business. This means that you do most of the work there. This is usually no problem at all for people that do work 100% self-employed with no income from any other sources (as employees that is). The home office also qualifies as your principal place of business (meaning it’s deductible) if you use it for administrative and management activities, but do actual customer facing work at the customer’s office. So, if you run your business from home, but do actual work at customer locations you are safe to deduct your office. A third exemption applies if you use the home office to meet with clients at your home office location.

And last but not least there is a 4th option to deduct expenses of your home office. If your home office is in a building that is separate from your home, it qualifies. That means setting up your home office in a detached garage or outbuilding will help you to qualify for this big tax deduction. But keep in mind that you must use your home office exclusively for your business, and you must do so regularly.

What is a Home Office worth when it comes to tax deducations?
Let’s assume you pass all the former scenarios. Now you want to know what the home office can do for you in regards to tax deductions. For sole proprietors, this can be estimated through Form 8829 (Expenses for Business Use of Your Home).

You can deduct 100% of expenses that are directly related to the home-office space — for example, painting, cleaning and the insurance premium for a home-office on your homeowner’s insurance policy (you did not forget about this one, didn’t you). The same applies for your office telephone line and utilities, if you have separate hookups for the home office.  You are also allowed to deduct a percentage of indirect expenses that relate to your entire residence. These deductions include parts of the mortgage interest, your property taxes, home owner association fees, or parts of your rent if you don’t own your home, depreciation if you do (depreciation over 39 years), utilities (water, gas, electricity), home security monitoring, or even things like the garbage pickup, general house maintenance and house repairs, insurance and so forth. You get the idea.

So, now that you know what you can deduct you need to figure out how much of your indirect expenses you can write off. IRS Form 8829 makes you believe you must use square footage, and most people do so. Count only living space in figuring the percentage (not your garage, unfinished basement or covered patio). Also, if you have a bathroom adjoining your office that’s never used otherwise, treat the square footage as part of your office.

Despite what the form says, you can also use any other “reasonable method” to compute the business use for your indirect business related expenses. The easiest method is to count the number of rooms in your house and divide the totals accordingly. If you have a total 10 rooms (we do not count in bedrooms for that purpose, but actual rooms), you can deduct 10% of your indirect expenses. But this calculation assumes your rooms are generally the same size. So if your 10×10 office is one of five rooms in your 3,000-square-foot house, deducting 20% for office use obviously won’t fly if you get audited. So, to be safe you should work with actual square footage numbers to be able to survive an audit.

Important to note: One limitation on home-office deductions is that these deducations cannot put your business in the red (meaning your business makes a loss for the tax year). But that doesn’t mean the deductions are fully wasted. Any amount that puts you below the break-even point gets carried over to the following tax year. And (!!) this limitation doesn’t apply to the partial mortgage interest and property taxes, which are generally fully deductible no matter how much money your business loses.

An important note on home-office deductions. To defend yourself in case of an audit, take pictures of your home office (with absolutely no personal items visible) to back up your claim that the space is used only for business. Keep the photos handy and eventually attach them to your very first tax return when you use it.

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One important thing to keep in mind is that if you use a home equity line of credit to consolidate your debt, make sure you apply the savings towards the loan principal. After all you are dealing with your house, the place where you live. You do not want to end up losing your house due to excessive spending on your credit cards for non-essential items.

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