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Should You E-File or File Taxes by Mail?

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 mail can be cheaper, though it takes the IRS longer to process refunds.

The Benefits of E-Filing

E-filing was initially 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, roughly 90% of taxpayers e-filed their returns.

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 repair your tax return.

Safety

E-filing is much more secure than paper filing, according to the IRS, because the return, with all your sensitive information, is transmitted directly to the IRS computer system.

Your refund is very likely to be processed quicker because e-filing means the IRS does not 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 mistake when processing your return because IRS employees do not need to manually enter your return line-by-line to its own 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 simple situation, and are willing to understand, you can fill tax forms in directly using 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 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 that 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 basic filing.  Fees can exceed $100, depending on which type of features you desire.

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 filing attempt.

Doesn’t Allow for Certain Filing Situations

Though e-filing supports most tax situations, there are certain situations it does not 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 will you file before the IRS opens e-filing for the year.

Advantages of Paper Filing

Filing a paper return can be very beneficial 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

Many online tax prep tools automate the filing process by asking you questions and using your answers to fill out forms without telling you which forms it’s filing on your behalf.

You can fill out every form line-by-line and see firsthand all the calculations and factors your refund requires.

Disadvantages of Paper Filing

There are several drawbacks to paper filing that make the procedure 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 receive.  Because of this, it could result in errors that you may have to fix via 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 could 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, resulting in even longer delays than what you’d normally expect with a paper return.

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

  1. Make sure that your name and Social Security number are on every 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, since the address can change based 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 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, Including the following options:

  1.             Hire a tax professional to prepare your own 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 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 duplicate.  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.

Key Takeaways

    1. E-filing is fast and provides several free options
    2. Web or site outages can cause frustrating delays for e-filers. 
    3. Paper filing requires more time than e-filing and may be overwhelming. 
    4. Alternatives to filing taxes on your own include hiring a tax pro or participating in filing aid programs.