Thinking about filing your tax returns electronically this year?  It's a fast growing trend.  Last year 68.5 million returns were e-filed!  The total number of individual e-filed tax returns in 2006 is expected to grow to nearly 135 million!

• Social Security numbers for yourself, your spouse, and any dependents.
• W-2 forms from all employers are required for yourself and your spouse.
• 1099 forms for Dividends, Retirement, or other income, or any 1099 forms with Income Tax Withholding.
• Receipts for expenses for Itemized Deductions (Schedule A).
• Receipts and records for other income or expenses.
• Bank Account numbers (for a fast refund, or to pay electronically).
• Complete information on what records you need, and how long to keep your records.
• Prior year Adjusted Gross Income amount if using a Self-Select PIN as your signature.

If you owe money, you can make your payment in one of three convenient ways:

       1. By authorizing an electronic funds withdrawal from a checking or savings account
       2. By credit card (Discover Card®, American Express Card®, VISA® or MasterCard® card), or
       3. By mailing a check or money order (made out to the United States Treasury) using Form 1040-V, Payment Voucher.

One of the advantages of the first two options is that you receive an immediate acknowledgement when your payment is accepted by IRS.

After your e-file return is transmitted, the electronic return transmitter informs you whether the return has been accepted or rejected by the IRS. This electronic return verification is a unique benefit of IRS e-file. If the return was not accepted, the electronic return transmitter, as part of their customer service, will assist you in the correction process.

There are a number of different options for e-filing...

• Purchase software - The most popular way of e-filing for citizens who do their own taxes is to purchase a software program that is installed on their computer. These program have Federal as well as State computations and forms available. There are numerous programs available for purchase.
   
• File online - It's not necessary to purchase a tax software program and install it on your computer. You can actually go to any number of websites and complete your entire tax return online. There will be a charge for the online service, but it's generally less than purchasing software.
   
• Professional tax preparer - Even if you don't do your taxes yourself, many professional tax preparers file their customers tax returns electronically. Last year there were 48 millions returns e-filed by professional tax preparers. If you choose a Tax Professional to prepare your return, be sure to say "I want to e-file".  Be sure that they file both federal and state returns electronically. To find a Tax Professional that offers e-file in you area, use the Authorized IRS e-file Provider Locator Service at http://www.irs.gov/efile/article/0,,id=118449,00.html - or look for the IRS e-file logo displayed at your tax preparer's business location.

E-filing costs - If you prefer to prepare your own return using either software you purchased at a store or downloaded from an Internet site, you will typically be charged for the state preparation package separately from the federal. Prices for purchasing this software vary from product to product. If you use software residing on the vendor’s web site, you will be charged a fee for its use. Some individuals are eligible for discounted e-filing when using this online option. You can compare different e-file programs by using the IRS listing of e-file Partners for Taxpayers at http://www.irs.gov/efile/lists/0,,id=101223,00.html.

You may be able to e-file your federal income tax return for free. Millions of taxpayers with an Adjusted Gross Income of $50,000 or less are eligible to use Free File. Free File is online tax preparation and electronic filing through a partnership agreement between the IRS and the Free File Alliance, LLC. To see if you are eligible and to learn more about these free online company services, please visit the IRS's Free File page at http://www.irs.gov/efile/article/0,,id=118986,00.html.

If you decide to use a paid tax preparer, the fee you are charged will vary. Some preparers charge extra for electronically transmitting your return, and others include the transmission fee in with a preparation fee.

You'll need your W-2 - Taxpayers filing electronic returns using a personal computer enter the data from the W-2 forms into the electronic filing software themselves. This is similar to the attachment of Forms W-2, W-2G, and 1099-R to the face of paper tax returns.

When a professional tax preparers e-files your return, you must provide Forms W-2, W-2G, and 1099-R to the Authorized IRS e-file Provider before the Provider sends the electronic return to the IRS. Providers are prohibited from submitting electronic returns to the IRS prior to receipt of all Forms W-2, W-2G, and 1099-R from the taxpayer.

E-file signature - You can choose to file a completely paperless tax return by using a Self-Select PIN (Personal Identification Number) as your signature. The Self-Select PIN method allows taxpayers to electronically sign their e-filed return by using a five-digit PIN as their signature. The five-digit PIN can be any five numbers except all zeros. It eliminates the requirement for Form 8453, U.S. Individual Income Tax Declaration for an IRS e-file Return or Form 8453-OL, U.S. Individual Income Tax Declaration for an IRS e-file Online Return. When an electronic signature is chosen, no signature documents are required to be filed with the IRS. You can use your PIN whether you do your own taxes using a personal computer or have tax professional prepare them for you.

You have the option to create your own PIN. You do not register the PIN with IRS before filing or need to contact IRS to get it. When you use one of the commercially available tax software packages that support the Self-Select PIN option, you will be guided through the process of entering your own PIN. If you use a tax professional, the preparer will help you. If filing a joint return, a PIN is needed for each taxpayer.

IRS TeleFile - In prior years, some taxpayers have filed certain forms by telephone with the IRS TeleFile program. This program is no longer available. Decline in use for most forms, coupled with increasing costs to maintain the system and the growth of other electronic filing options, led to the decision to end the program on August 16, 2005.

State Taxes - In 37 states and in the District of Columbia you can simultaneously e-file your Federal and state tax returns. Federal/State e-file allows the electronic filing of both Federal and state income tax returns at the same time. The electronic filing software places your Federal and state return data in separate packets. These packets are transmitted to the IRS in one taxpayer "envelope." The IRS functions as an electronic post office for the participant state, who receives and processes the state electronic return.