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Last year, over 69 million Americans used electronic filing, also known as e-file, to file their income tax returns. Many of these individual persons also chose to use an on line tax filing service, or the IRS Free File program. In actual fact, the IRS estimates that in 2007, millions of Americans will take advantage of this option. Yet, while this number only represents a small percent of those filing a federal tax return, the number increases each year as more & more taxpayers discover the convenience & ease of using an on line tax filing service.

There is still, how ever, a significant number of consumers who are skeptical about filing their taxes online. Many of these individual persons do not trust Internet security, & will tell anyone who cares to listen that they would ‘never buy anything online, let alone pay their taxes on an Internet web site.’ What these people do not understand, how ever, is the high level of security that is mandated by the IRS for any company that establishes an IRS e-file on line tax filing system. In addition, most on line tax filing sites will allow you to deduct their fee directly from your refund, thereby eliminating the use of a credit card.

In order to use on line tax return preparation software, a tax preparation vendor must apply for & receive third party privacy & security certification. They must also be in complete compliance with federal regulations regarding the privacy of taxpayer information for all customers. Additionally, these companies may not use any information gathered in the process of preparing a return for any other reason than that which has been authorized by the taxpayer.

All sites that are connected on the IRS e-filing network must meet with certain security guidelines. The site must support 128-bit encryption, a feature that causes the data that you enter on the screen to be scrambled before it’s sent to its ultimate destination. The encrypted code is then unscrambled on the receiving end, thus preventing hackers from accessing your personal information.

Secure sites will display a web address of ‘https’ as opposed to ‘http’ on non-secure sites. Additionally, there might be a padlock icon in one of your toolbars also indicating that the site is secure. You can also check the level of the site’s encryption by either right clicking in the body of the text or clicking on the ‘file’ tab at the top of the screen, & then selecting ‘Properties.’ Either way, a window will be displayed indicating whether or not the page is encrypted, as well as the level of encryption applied. Be safe, not sorry!

However, do not allow concern over security as an excuse to not file your taxes online. If you stop & think about it, you’re probably less secure going to an income tax preparation service office & dealing with a stranger to whom you’re giving access to all of your personal information. Can you be absolutely certain that your most confidential information is secure, & will not actually be divulged to any outside party? Probably not!

Gust A. Lenglet is an accomplished author & financial advisor in the field of personal finance & taxation. He is President & CEO of the HBS Financial Group, Ltd. & offers online tax filing as well as timely articles & free information to assist you in tax planning.

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