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Know the Pros and Cons of Digital and Paper Tax Returns

When you file your taxes, you have two options for filing 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 generally more convenient than paper filing, but filing by mail can be cheaper, although 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 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.

Immediate Confirmation

The biggest advantage 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, together 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 does not need to sort or transcribe your tax return at its service center.


There’s a lower chance that the IRS will make a error when calculating your return because IRS employees do not need to manually enter your return line-by-line into 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 prepared to learn, 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 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

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

Vulnerable to Outages

Glitches are always possible when you’re using the net.  In 2020, TurboTax’s site experienced at least seven outages between April 15 and April 17.  Additionally, your internet service provider may face outages that could hamper your submitting effort.

Does Not Allow for Certain Filing Situations

Though e-filing supports most tax situations, there are certain scenarios it doesn’t support.  For example, you can’t file a return for somebody 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 beneficial in some specific scenarios that e-filing cannot accommodate.

You’ve Got a Rare Filing Situation

For instance, if you will 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 Expertise

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

If you want to learn 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 that you crave. You can fill out each form line-by-line and see firsthand all the calculations and factors your refund requires.

Disadvantages of Paper Filing

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

Increases Chances of Errors

Data transcribers in the IRS must manually input taxpayer information for every paper return they receive.  Because of this, it might lead to errors that you may have to fix via an amended return.

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 might result in 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, resulting in even longer delays than what you’d normally expect with a paper return.

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 each page, both front and back. 
  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 perfect IRS service center, since the address can change depending on which state you are in, and whether you are 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 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 own website, which include the following options:

  1.             Hire a tax professional to prepare your own return. 
  2. There are particular 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 data, your e-filed return will be rejected by the IRS as a duplicate.  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 issue.

Key Takeaways

    1. E-filing is quickly and provides several free options
    2. Web or website outages can cause frustrating delays for e-filers. 
    3. Paper filing requires more time than e-filing and can be overwhelming. 
    4. Alternatives to filing taxes in your include hiring a tax professional or engaging in filing aid programs.