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 filing have their pros and cons. E-filing is safe, faster, and 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 this new technology at the time. 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’ll receive almost immediate confirmation that the IRS has received your tax return.
If the IRS finds errors on your return, you’ll receive a rejection notice (usually within 24-48 hours), and the notice will typically indicate what triggered the actions and what you can do to repair your tax return.
E-filing is more secure than paper filing, according to the IRS, since 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 in its service center.
Less Human Error
There is a lower chance that the IRS will make a mistake when calculating your return because IRS employees do not need to manually enter your return line-by-line into its own system.
You Do Not 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 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 might be better off using one of the IRS’ many free-file affiliates.
The Disadvantages of E-Filing
When there are tax prep tools which are free, many of the leading tax prep firms 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 sort of features you desire.
Vulnerable to Outages
Glitches are always possible once 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 submitting effort.
Does Not Allow for Certain Filing Situations
Though e-filing supports most tax situations, there are certain scenarios it doesn’t support. For instance, you can not file a return for somebody who passed away, you can not attach pictures or PDFs to your return, nor can 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 Have a Rare Filing Situation
E-filing can only do so much. For 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 images or PDFs to supplement your tax return.
You Need to Build Your Tax Experience
Several 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 for your benefit.
If you would like to learn 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 every form line-by-line and see first-hand all the calculations and factors your refund requires.
There are several drawbacks to paper filing that 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 might lead to errors that you may 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 could 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 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 entry when you file :
- Make sure your name and Social Security number are on every page, both front and back.
Double-check your address. This is where the IRS will send any notices, so it is vital that you don’t make a mistake.
Mail your return to the perfect 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.
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 could be subject to penalties and interest.
The IRS provides a list of acceptable filing options on its own website, Including the following options:
- Hire a tax professional to prepare your own return.
Use the Volunteer Income Tax Assistance Program, or the Tax Counseling for the Elderly program, if you’re eligible. There are particular 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 information, your e-filed return will be rejected by the IRS as a copy. You have to file a paper tax return in this case 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 website outages can cause frustrating delays for e-filers.
- Paper filing requires more time than e-filing and may be overwhelming.
- Alternatives to filing taxes on your own include hiring a tax pro or engaging in filing assistance programs.