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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 submitting your return with the Internal Revenue Service (IRS): electronically or by mail.

Both methods of submitting have their advantages and disadvantages.  E-filing is safe, faster, and more convenient than paper filing, but filing by email can be cheaper, although it requires 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 this new technology at the time.  The new filing method eventually caught on though and, as of 2018, roughly 90% of taxpayers e-filed their returns.

Immediate Confirmation

The biggest advantage 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’ll 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 your sensitive information, 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 need 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 processing your return because IRS employees don’t need to manually enter your return line-by-line to its own 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 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 guidance 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

Fees

While there are tax prep tools that are free, many of the top 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 when you’re using the net.  In 2020, TurboTax’s website experienced at least seven outages between April 15 and April 17.  Additionally, your internet service provider may face outages that could hamper your filing attempt.

Does Not Allow for Certain Filing Situations

Though e-filing supports most tax scenarios, 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 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 some specific scenarios that e-filing can’t accommodate.

You Have a Rare Filing Situation

For instance, if you need to prepare a tax return for someone who passed away, you must file a paper return.  Also, paper filing lets you print and submit pictures or PDFs to supplement your own 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 replies to complete forms without ever telling you which forms it’s filing for your benefit.

You can fill out each 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 Chances of Errors

Data transcribers at the IRS must manually input taxpayer information for each paper return they get.  As a result of this, it could result in errors that you may need to fix through an amended return.

Overwhelming for Beginners

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 might 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, 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 by paper:

  1. Make sure that your name and Social Security number are on every page, both front and back. 
  2. Double-check your address. This is where the IRS will send any notices, so it is vital 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 that you can find the correct address.

  4. Get an automatic extension if you’re mailing your return near the official filing deadline of April 15, 2021.  Keep in mind that you ought to make a payment with your extension if you think you’ll owe anything.  Otherwise, you could be subject to interest and penalties.

The IRS provides a list of acceptable filing options on its 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 should you use one of these programs.

In the unlikely event that 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 case and mail it in with Form 14039, the”Identity Theft Affidavit,” notifying the IRS of the issue.

Key Takeaways

    1. E-filing is fast 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 participating in filing aid programs.