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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 pros and cons.  E-filing is safe, faster, and more convenient than paper filing, but filing by mail can be cheaper, although it requires the IRS longer to process refunds.

The Benefits of E-Filing

A scant number of tax professionals–five of them, according to the IRS–took advantage of this 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.

Immediate Confirmation

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 will receive a rejection notice (usually within 24-48 hours), and the note will typically indicate what triggered the actions and what you can do to fix your tax return.

Safety

E-filing is 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.

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 in its service center.

Less Human Error


There is a lower chance that the IRS will make a mistake when processing your return because IRS employees don’t have 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 need 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 understand, you can fill tax forms in directly with IRS free fillable forms.  Be aware that you need to 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 preparation tools which are free, many of the top tax prep companies 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 type of features you want.

Vulnerable to Outages

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

Doesn’t Allow for Certain Filing Situations

Though e-filing supports most tax scenarios, there are certain situations it doesn’t 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 will you file before the IRS opens e-filing for the year.

Benefits of Paper Filing

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

You’ve Got a Rare Filing Situation

For instance, 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 images or PDFs to supplement your own tax return.

You Want to Build Your Tax Expertise

Several online tax prep tools automate the filing process by asking you questions and using your replies to fill out forms without telling you which forms it’s filing for your benefit.

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

Disadvantages of Paper Filing

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

Increases Chances of Errors

Data transcribers at the IRS must manually input taxpayer information for each paper return they receive.  Because of this, it could lead to errors that you might have to fix through an amended return.

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

You Will 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, resulting in 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 front and back. 
  2. Double-check your address. This is where the IRS will send any notices, so it is important 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’re in, and whether you are including payment with your return.  The IRS provides a state-by-state list online so that you can find the correct address.

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

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

  1.             Hire a tax professional to prepare your own return. 
  2. Use the Volunteer Income Tax Assistance Program, or the Tax Counseling for the Elderly program, if you’re eligible. There are specific requirements for e-filing or paper filing should you use 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 copy.  You must file a paper tax return in this case and mail it in with Form 14039, the”Identity Theft Affidavit,” notifying the IRS of this matter.

Key Takeaways

    1. E-filing is quickly and provides several free options
    2. Internet 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 engaging in filing assistance programs.