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 filing 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 requires the IRS longer to process refunds.
The Benefits of E-Filing
E-filing was initially 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 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 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 on your return, you’ll be given a rejection notice (usually within 24-48 hours), and the notice will typically indicate what triggered the actions and what you can do to fix your tax return.
E-filing is much more secure than paper filing, according to the IRS, because the return, with all of your sensitive data, 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 at its service center.
There’s a lower chance that the IRS will make a mistake when calculating your return because IRS employees do not have to manually enter your return line-by-line into its system.
You Don’t 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 are tax savvy, have a very simple situation, and are prepared to learn, 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 with one of the IRS’ many free-file affiliates.
The Disadvantages of E-Filing
E-filing comes with some potential headaches, too.
While there are tax prep 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 desire.
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 filing attempt.
Doesn’t Allow for Certain Filing Situations
Though e-filing supports most tax scenarios, there are certain situations it does not support. By way of example, you can not file a return for somebody 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 some specific scenarios that e-filing cannot accommodate.
You’ve Got a Rare Filing Situation
By way of instance, if you 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
Many online tax prep tools automate the filing process by asking you questions and using your answers to fill out forms without telling you which forms it is filing for your benefit.
You may fill out each form line-by-line and see first-hand all of the calculations and considerations your refund requires.
There are several drawbacks to paper filing which 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 get. As a result of this, it might lead to errors that you may have to fix via an amended return.
Overwhelming for Beginners
For filers who attempt 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 might lead to missing forms or mistakes.
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, resulting in even longer delays than what you’d normally expect with a paper return.
You can do a few things to streamline your yield entry when you file by paper:
- Make sure your name and Social Security number are on every page, both back and front.
This is where the IRS will send any notices, so it’s important that you don’t make a mistake.
Mail your return to the right IRS service center, since 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 that you can find the right address.
Get an automatic extension if you are mailing your return close to the official filing deadline of April 15, 2021. Bear in mind that you should make a payment with your extension if you believe you’ll owe anything. Otherwise, you could be subject to penalties and interest.
The IRS provides a list of acceptable filing options on its website, which include the following options:
- Hire a tax professional to prepare your return.
There are particular 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 situation and mail it in with Form 14039, the”Identity Theft Affidavit,” notifying the IRS of the matter.
- E-filing is fast 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 may be overwhelming.
- Alternatives to filing taxes in your include hiring a tax professional or engaging in filing assistance programs.