Best Online Income Tax Software

Should You E-File or File Taxes by Mail?

Know the Pros and Cons of Digital and Paper Tax Returns

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

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

The Benefits of E-Filing

E-filing was first introduced in 1986, and it got off to a slow start. A scant number of tax professionals–five of them, according to the IRS–took advantage of the new technology at the time.  The new filing method eventually caught on though and, as of 2018, approximately 90% of taxpayers e-filed their yields.

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

If the IRS finds errors on your return, you’ll be given a rejection notice (usually within 24-48 hours), and the notice will typically indicate what triggered the action and what you can do to repair your tax return.

Safety

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

Faster Processing

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


There is a lower chance that the IRS will make a mistake when processing your return because IRS employees don’t need to manually put in your return line-by-line into its system.

You Do Not Have to Use a Tax Prep Program

You don’t have to use a costly tax preparation program to e-file your taxes–if you’re tax savvy, have a simple situation, and are prepared to learn, you can fill tax forms in directly with 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 may be better off using one of the IRS’ many free-file affiliates.

Fees

When there are tax prep tools which are free, many of the top 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 desire.

Vulnerable to Outages

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

Doesn’t Allow for Certain Filing Situations

Though e-filing supports most tax situations, there are certain scenarios it doesn’t support.  For instance, you can not file a return for someone who passed away, you can’t attach images 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 beneficial in certain scenarios that e-filing cannot accommodate.

You’ve Got a Rare Filing Situation

E-filing can only do so much. By way of example, if you will need to prepare a tax return for somebody who passed away, you have to file a paper return.  Also, paper filing allows you to print and submit pictures or PDFs to supplement your own tax return.

You Want to Build Your Tax Experience

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

If you would like to learn about, and better review, the details of your tax return, including all forms related to your tax situation, filing a paper return provides the transparency that you crave. You may fill out each form line-by-line and see first-hand all the calculations and considerations your refund requires.

There are lots of 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 enter taxpayer information for every paper return they get.  As a result of this, it could lead to errors that you may need to fix via 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 will not accept it.  Newbie paper filers often forget this fact, leading to even longer delays than what you’d normally expect with a paper return.

Tips for Paper Filing

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

  1. Make sure that your name and Social Security number are on each page, both back and front. 
  2. Double-check your address. 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 perfect IRS service center, as the address can change depending 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 correct address.

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

The IRS provides a list of acceptable filing options on its website, which include 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 one of these programs.

In the unlikely event that 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 have to file a paper tax return in this case and mail it in with Form 14039, the”Identity Theft Affidavit,” notifying the IRS of this issue.

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 may be overpowering. 
    4. Alternatives to filing taxes on your own include hiring a tax pro or participating in filing assistance programs.