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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 filing 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

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

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 in your return, you will be given a rejection notice (usually within 24-48 hours), and the notice will typically indicate what triggered the action and what you can do to repair your tax return.

Safety

E-filing is 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 faster because e-filing means the IRS doesn’t have to sort or transcribe your tax return in its service center.

Less Human Error


There’s a lower chance that the IRS will make a mistake when calculating your return because IRS employees don’t need to manually put in your return line-by-line to its system.

You Don’t Have to Use a Tax Prep Program

You don’t have to use a costly tax preparation program to e-file your taxes–if you are tax savvy, have a simple situation, and are willing to learn, 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 guidance is provided.  And if your adjusted gross income (AGI) is less than $72,000, you may 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 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 sort of features you desire.

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 online service provider may face outages that could hamper your submitting effort.

Doesn’t Allow for Certain Filing Situations

Though e-filing supports most tax situations, there are certain situations it doesn’t support.  For instance, you can’t file a return for someone who passed away, you can not attach images or PDFs to your return, nor can you record 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 cannot accommodate.

You’ve Got a Rare Filing Situation

E-filing can only do so much. By way of 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 own 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 answers to fill out forms without ever telling you which forms it is filing for your benefit.

You may fill out each form line-by-line and see first-hand all the calculations and considerations your refund requires.

There are several 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 input taxpayer information for every paper return they get.  Because of this, it could lead to errors that you might need to fix via an amended return.

Overwhelming for Beginners

For filers who try paper filing after years of electronic filing, gathering 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 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.

Tips for Paper Filing

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

  1. Make sure 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, since 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 you can find the right 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 believe you’ll owe anything.  Otherwise, you could be subject to penalties and interest.

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. 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 if 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 copy.  You have to file a paper tax return in this situation and mail it in with Form 14039, the”Identity Theft Affidavit,” notifying the IRS of this issue.

Key Takeaways

    1. E-filing is fast 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 may be overwhelming. 
    4. Alternatives to filing taxes in your include hiring a tax pro or engaging in filing aid programs.