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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 filing have their pros and cons.  E-filing is safe, faster, and generally 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

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 though and, as of 2018, roughly 90% of taxpayers e-filed their yields.

Immediate Confirmation

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’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, since the return, with all of your sensitive data, is transmitted directly to the IRS computer system.

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


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

You Don’t 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 are tax savvy, have a very simple situation, and are willing 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 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.

Fees

When there are tax preparation 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 simple filing.  Fees can exceed $100, depending on which sort of features you want.

Vulnerable to Outages

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 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 doesn’t 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 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. By way of example, 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 pictures or PDFs to supplement your 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 fill out forms without ever telling you which forms it is filing on your behalf.

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

Disadvantages of Paper Filing

There are lots of drawbacks to paper filing that make the process riskier and more taxing than e-filing.

Increases Odds of Errors

Data transcribers at the IRS must manually enter taxpayer information for every paper return they receive.  Because of this, it might result in errors that you may need to fix through an amended return.

For filers who attempt paper filing after years of electronic filing, collecting all of 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 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.

You can do a few things to streamline your return entry when you file :

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

  4. Get an automatic extension if you’re mailing your return near 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 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’re eligible. There are particular 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 information, 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 the matter.

Key Takeaways

    1. E-filing is quickly 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 engaging in filing aid programs.