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 submitting have their pros and cons. E-filing is safe, faster, and 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
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 however and, as of 2018, roughly 90% of taxpayers e-filed their returns.
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 receive a rejection notice (usually within 24-48 hours), and the note 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, together with all of your sensitive information, is transmitted directly to the IRS computer system.
Your refund is 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 is a lesser chance that the IRS will make a error when processing your return because IRS employees don’t have to manually enter your return line-by-line into 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’re tax savvy, have a simple situation, and are prepared to understand, you can fill tax forms in directly with IRS free fillable forms. Be aware that you should 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
E-filing comes with some potential headaches, too.
While there are tax preparation tools that 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.
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 situations it doesn’t support. By way of 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.
Benefits of Paper Filing
Filing a paper return can be very helpful in certain scenarios that e-filing cannot accommodate.
You’ve Got a Rare Filing Situation
E-filing can only do so much. For instance, if you need to prepare a tax return for someone who passed away, you have to 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 Expertise
Several online tax prep tools automate the filing process by asking you questions and using your replies to complete forms without telling you which forms it is filing for your benefit.
You can fill out every form line-by-line and see firsthand all of the calculations and considerations your refund requires.
There are lots of 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 input taxpayer information for every paper return they get. As a result of this, it could result in errors that you may need to fix through an amended return.
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 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, leading to 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 each page, both front and back.
Double-check your address. This is where the IRS will send any notices, so it’s vital that you don’t make a mistake.
Mail your return to the perfect IRS service center, as 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 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. Bear in mind that you ought to make a payment with your extension if you believe you’ll owe anything. Otherwise, you might be subject to penalties and interest.
The IRS provides a list of acceptable filing options on its own website, which include the following options:
- Hire a tax professional to prepare your 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 these programs.
In the unlikely event that 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 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.
- E-filing is quickly and provides several free options
- Internet 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 participating in filing assistance programs.