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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 filing 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 this new technology at the moment.  The new filing method eventually caught on however and, as of 2018, approximately 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 in your return, you will be given a rejection notice (usually within 24-48 hours), and the note will typically indicate what triggered the actions and what you can do to fix your tax return.

Safety

E-filing is much 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.

Faster Processing

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.

Less Human Error


There is a lesser chance that the IRS will make a error when processing your return because IRS employees do not have to manually put in your return line-by-line into its system.

You Do Not Have to Use a Tax Prep Program

You don’t need to use a costly tax preparation program to e-file your taxes–if you’re tax savvy, have a very simple situation, and are willing 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 guidance 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

Fees

When there are tax preparation tools that are free, many of the top tax prep firms 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 type 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 submitting effort.

Doesn’t Allow for Certain Filing Situations

Though e-filing supports most tax scenarios, there are certain scenarios it doesn’t 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 will 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 can’t accommodate.

You Have a Rare Filing Situation

E-filing can only do so much. By way of instance, if you need to prepare a tax return for somebody who passed away, you must 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 Experience

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 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 first-hand all the calculations and considerations 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 in the IRS must manually enter taxpayer information for each paper return they get.  Because of this, it could lead to errors that you might need to fix via an amended return.

Overwhelming for Beginners

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 mistakes.

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, leading to 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 submission when you file :

  1. Make sure your name and Social Security number are on every 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 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 correct 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 ought to 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 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 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 site 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 in your include hiring a tax professional or participating in filing aid programs.