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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 pros and cons.  E-filing is safe, faster, and generally more convenient than paper filing, but filing by email can be cheaper, though it requires 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, 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 note will typically indicate what triggered the action and what you can do to fix your tax return.

Safety

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

Your refund is 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.

Less Human Error


There is a lesser chance that the IRS will make a mistake when calculating your return because IRS employees do not have to manually put in your return line-by-line into its own 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 simple situation, and are prepared to learn, 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 guidance 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

Fees

When there are tax prep tools that 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 simple filing.  Fees can exceed $100, depending on which type of features you desire.

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

Does Not Allow for Certain Filing Situations

Though e-filing supports most tax situations, there are certain situations it doesn’t support.  By way of example, you can not file a return for someone who passed away, you can not 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 beneficial in certain scenarios that e-filing can’t 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 lets you print and submit pictures or PDFs to supplement your tax return.

You Need to Build Your Tax Expertise

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’s filing on your behalf.

You can 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 several drawbacks to paper filing which make the procedure riskier and more taxing than e-filing.

Increases Odds of Errors

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

Overwhelming for Beginners

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 might 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 yield entry when you file :

  1. Make sure that 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 important that you don’t make a mistake.

  3. Mail your return to the perfect IRS service center, since the address can change depending on which state you are 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.

  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 should make a payment with your extension if you think you’ll owe anything.  Otherwise, you could be subject to interest and penalties.

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 return. 
  2. There are particular requirements for e-filing or paper filing if 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 have to file a paper tax return in this situation and mail it in with Form 14039, the”Identity Theft Affidavit,” notifying the IRS of this issue.

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 may be overwhelming. 
    4. Alternatives to filing taxes in your include hiring a tax pro or participating in filing aid programs.