Business Taxes Done Online

Should You E-File or File Taxes by Mail?

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 filing have their pros and cons.  E-filing is safe, faster, and generally more convenient than paper filing, but filing by mail can be cheaper, although it takes 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 the new technology at the time.  The new filing method eventually caught on however and, as of 2018, approximately 90% of taxpayers e-filed their returns.

Immediate Confirmation

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 will 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 repair your tax return.

Safety

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

Faster Processing

Your refund is very 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’s a lower chance that the IRS will make a error when calculating your return because IRS employees do not need to manually enter your return line-by-line to its system.

You Don’t Have to Use a Tax Prep Program

You don’t have to use an expensive tax preparation program to e-file your taxes–if you are tax savvy, have a simple situation, and are willing 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 might 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.

Fees

When 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 want.

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 online service provider may face outages that could hamper your submitting effort.

Does Not Allow for Certain Filing Situations

Though e-filing supports most tax situations, there are certain scenarios it does not support.  For example, you can not file a return for somebody 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 helpful in certain scenarios that e-filing cannot accommodate.

You Have a Rare Filing Situation

E-filing can only do so much. For example, if you need to prepare a tax return for someone who passed away, you have to file a paper return.  Also, paper filing lets you print and submit images 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 ever telling you which forms it’s filing on your behalf.

If you want 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 can fill out each form line-by-line and see firsthand all of the calculations and considerations your refund requires.

Disadvantages of Paper Filing

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

Increases Chances of Errors

Data transcribers in the IRS must manually enter 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.

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 could lead to missing forms or errors.

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 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 by paper:

  1. Make sure 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 right IRS service center, since the address can change based 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.

  4. 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 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 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 are eligible. There are specific requirements for e-filing or paper filing if you use one of these programs.

In the unlikely event 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 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 the issue.

Key Takeaways

    1. E-filing is quickly and provides several free options
    2. Internet or website 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.