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Know the Pros and Cons of Digital and Paper Tax Returns

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 pros and cons.  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

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 moment.  The new filing method eventually caught on though and, as of 2018, approximately 90% of taxpayers e-filed their yields.

Immediate Confirmation

The biggest advantage 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 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 of your sensitive data, is transmitted directly to the IRS computer system.

Faster Processing

Your refund is very likely to be processed quicker because e-filing means the IRS does not need to sort or transcribe your tax return at its service center.


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 to its system.

You Do Not Have to Use a Tax Prep Program

You don’t need 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 understand, 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

Fees

While 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 want.

Glitches are always possible once you’re using the net.  In 2020, TurboTax’s site experienced at least seven outages between April 15 and April 17.  Also, your internet 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 does not support.  For example, you can’t file a return for someone who passed away, you can not attach images or PDFs to your return, nor can you record before the IRS opens e-filing for the year.

Advantages of Paper Filing

Filing a paper return can be very beneficial in some specific scenarios that e-filing cannot accommodate.

You’ve Got a Rare Filing Situation

For instance, if you will need to prepare a tax return for someone who passed away, you must file a paper return.  Also, paper filing allows you to print and submit images or PDFs to supplement your own tax return.

You Want 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 is 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 every form line-by-line and see firsthand all 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 every paper return they get.  Because of this, it could lead to errors that you may need to fix through an amended return.

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 could result in 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.

Tips for Paper Filing

You can do a few things to streamline your yield entry when you file by paper:

  1. Make sure that your name and Social Security number are on each page, both back and front. 
  2. This is where the IRS will send any notices, so it is important that you don’t make a mistake.

  3. Mail your return to the right IRS service center, as 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 you can find the right address.

  4. 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, 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 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 must 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 website outages can cause frustrating delays for e-filers. 
    3. Paper filing requires more time than e-filing and can be overpowering. 
    4. Alternatives to filing taxes on your own include hiring a tax professional or engaging in filing aid programs.