Best Free Online Tax Preparation

When you file your taxes, you have two options for filing your return with the Internal Revenue Service (IRS): electronically or by mail.

Both methods of submitting have their pros and cons.  E-filing is safe, faster, and generally more convenient than paper filing, but filing by email can be cheaper, though it takes the IRS longer to process refunds.

The Advantages of E-Filing

A scant number of tax professionals–five of them, according to the IRS–took advantage of this new technology at the moment.  The new filing method eventually caught on however and, as of 2018, roughly 90% of taxpayers e-filed their returns.

The biggest advantage of electronic filing is that you’ll receive almost immediate confirmation that the IRS has received your tax return.

If the IRS finds errors in your return, you will receive a rejection notice (usually within 24-48 hours), and the notice will typically indicate what triggered the actions and what you can do to repair your tax return.

Safety

E-filing is much more secure than paper filing, according to the IRS, since the return, together with all your sensitive data, is transmitted directly to the IRS computer system.

Your refund is very likely to be processed faster because e-filing means the IRS does not have to sort or transcribe your tax return at its service center.


There’s a lesser chance that the IRS will make a error when calculating your return because IRS employees do not need to manually put in your return line-by-line into its system.

You Don’t Have to Use a Tax Prep Program

You don’t need to use an expensive tax preparation program to e-file your taxes–if you are tax savvy, have a simple situation, and are willing to learn, you can fill tax forms in directly using IRS free fillable forms.  Be aware that you should be comfortable completing basic tax forms to use the service as no advice is provided.  And if your adjusted gross income (AGI) is less than $72,000, you might be better off with one of the IRS’ many free-file affiliates.

Fees

While there are tax preparation tools which are free, many of the leading tax prep firms like TurboTax, TaxSlayer, and H&R Block charge fees for tax returns that go beyond a basic filing.  Fees can exceed $100, depending on which sort of features you want.

Vulnerable to Outages

Glitches are always possible when you’re using the internet.  In 2020, TurboTax’s website experienced at least seven outages between April 15 and April 17.  Additionally, your internet service provider may face outages that could hamper your submitting attempt.

Doesn’t Allow for Certain Filing Situations

Though e-filing supports most tax situations, there are certain situations it does not support.  By way of example, you can’t file a return for someone who passed away, you can’t attach pictures or PDFs to your return, nor can you file before the IRS opens e-filing for the year.

Advantages of Paper Filing

Filing a paper return can be very helpful in certain scenarios that e-filing cannot accommodate.

You Have a Rare Filing Situation

E-filing can only do so much. For example, if you need to prepare a tax return for somebody who passed away, you must file a paper return.  Also, paper filing allows you to print and submit images or PDFs to supplement your tax return.

You Need to Build Your Tax Experience

Several online tax prep tools automate the filing process by asking you questions and using your answers to complete forms without ever telling you which forms it is filing for your benefit.

You may fill out every form line-by-line and see firsthand all of the calculations and factors your refund requires.

There are several drawbacks to paper filing that make the process riskier and more taxing than e-filing.

Increases Chances of Errors

Data transcribers at the IRS must manually input taxpayer information for every paper return they receive.  Because of this, it might result in errors that you may need to fix through an amended return.

For filers who try paper filing after years of electronic filing, gathering all the forms necessary for things like student loan interest, mortgage interest, capital gains, and business deductions can be intimidating, and it could result in missing forms or errors.

You Need to Remember to Sign the Return

Veteran paper filers realize that you have to manually sign the paper return you submit, or the IRS won’t accept it.  Newbie paper filers often forget this fact, resulting in even longer delays than what you’d normally expect with a paper return.

You can do a few things to streamline your return entry when you file by paper:

  1. Make sure your name and Social Security number are on every page, both back and front. 
  2. This is where the IRS will send any notices, so it’s vital that you don’t make a mistake.

  3. Mail your return to the right IRS service center, as the address can change based on which state you are in, and whether you are including payment with your return.  The IRS provides a state-by-state list online so you can find the right address.

  4. Get an automatic extension if you are mailing your return near the official filing deadline of April 15, 2021.  Bear in mind that you ought to make a payment with your extension if you think you’ll owe anything.  Otherwise, you could be subject to penalties and interest.

The IRS provides a list of acceptable filing options on its own website, Including the following options:

  1.             Hire a tax professional to prepare your return. 
  2. There are specific requirements for e-filing or paper filing should you use these programs.

In the unlikely event your identity is stolen and the thief files a tax return with your information, your e-filed return will be rejected by the IRS as a duplicate.  You must file a paper tax return in this situation and mail it in with Form 14039, the”Identity Theft Affidavit,” notifying the IRS of this matter.

Key Takeaways

    1. E-filing is fast and provides several free options
    2. Web or site outages can cause frustrating delays for e-filers. 
    3. Paper filing requires more time than e-filing and can be overpowering. 
    4. Alternatives to filing taxes in your include hiring a tax professional or participating in filing assistance programs.