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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 filing have their advantages and disadvantages.  E-filing is safe, faster, and more convenient than paper filing, but filing by email can be cheaper, though it requires the IRS longer to process refunds.

The Benefits 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, approximately 90% of taxpayers e-filed their returns.

Immediate Confirmation

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’ll be given a rejection notice (usually within 24-48 hours), and the note 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, because the return, with all of your sensitive data, is transmitted directly to the IRS computer system.

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


There’s 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 have to use an expensive tax preparation program to e-file your taxes–if you’re tax savvy, have a very simple situation, and are prepared to learn, 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 guidance 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

When there are tax prep tools which 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 type of features you want.

Vulnerable to Outages

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 internet service provider may face outages that could hamper your submitting attempt.

Doesn’t Allow for Certain Filing Situations

Though e-filing supports most tax scenarios, there are certain scenarios it doesn’t support.  For instance, you can’t file a return for somebody who passed away, you can’t attach images or PDFs to your return, nor can you record 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 Have a Rare Filing Situation

By way of example, 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 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 replies to fill out forms without 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 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 receive.  Because of this, it might result in errors that you might need to fix via an amended return.

Overwhelming for Beginners

For filers who attempt 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 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 will not 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 yield entry when you file by paper:

  1. Make sure your name and Social Security number are on each page, both back and front. 
  2. Double-check your address. 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 perfect IRS service center, as the address can change based on which state you’re in, and whether you are 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 are mailing your return near 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 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 own return. 
  2. There are specific requirements for e-filing or paper filing should you use 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 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 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 may be overpowering. 
    4. Alternatives to filing taxes in your include hiring a tax pro or engaging in filing aid programs.