Know the Pros and Cons of Digital and Paper Tax Returns
When you file your taxes, you’ve got 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 mail can be cheaper, although it requires 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 though and, as of 2018, roughly 90% of taxpayers e-filed their yields.
The biggest benefit of electronic filing is that you will 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 note will typically indicate what triggered the actions and what you can do to repair your tax return.
E-filing is much more secure than paper filing, according to the IRS, since the return, with all 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 doesn’t have to sort or transcribe your tax return in its service center.
There is a lower chance that the IRS will make a mistake when processing your return because IRS employees do not have to manually enter your return line-by-line to its own 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 using 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.
The Disadvantages of E-Filing
E-filing comes with some potential headaches, too.
When there are tax preparation tools which are free, many of the leading 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 sort of features you want.
Vulnerable to Outages
Glitches are always possible when you’re using the net. In 2020, TurboTax’s site experienced at least seven outages between April 15 and April 17. Additionally, your online service provider may face outages that could hamper your filing effort.
Does Not Allow for Certain Filing Situations
Though e-filing supports most tax situations, there are certain situations it doesn’t support. For example, you can’t file a return for somebody who passed away, you can’t attach images or PDFs to your return, nor will you record 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 Have a Rare Filing Situation
E-filing can only do so much. For instance, if you need to prepare a tax return for someone 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 Need 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 is filing on your behalf.
If you would like to know 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 you crave. You may fill out each form line-by-line and see first-hand all of the calculations and factors your refund requires.
Disadvantages of Paper Filing
There are lots of drawbacks to paper filing that make the process riskier and more taxing than e-filing.
Increases Odds of Errors
Data transcribers at the IRS must manually enter taxpayer information for every paper return they receive. Because of this, it could 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 of the forms necessary for things like student loan interest, mortgage interest, capital gains, and business deductions can be intimidating, and it could lead to 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 yield entry when you file by paper:
- Make sure that your name and Social Security number are on every page, both front and back.
This is where the IRS will send any notices, so it’s vital that you don’t make a mistake.
Mail your return to the perfect IRS service center, as the address can change depending on which state you’re in, and whether you’re including payment with your return. The IRS provides a state-by-state list online so you can find the correct address.
Get an automatic extension if you’re mailing your return close to 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 might be subject to interest and penalties.
The IRS provides a list of acceptable filing options on its website, Including the following options:
- Hire a tax professional to prepare your return.
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 one of these programs.
In the unlikely event that your identity is stolen and the thief files a tax return with your data, your e-filed return will be rejected by the IRS as a duplicate. 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.
- E-filing is quickly and provides several free options
- Web or site outages can cause frustrating delays for e-filers.
- Paper filing requires more time than e-filing and can be overwhelming.
- Alternatives to filing taxes on your own include hiring a tax pro or participating in filing aid programs.