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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 email can be cheaper, although it takes the IRS longer to process refunds.

The Advantages 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 though and, as of 2018, approximately 90% of taxpayers e-filed their returns.

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’ll receive a rejection notice (usually within 24-48 hours), and the note will typically indicate what triggered the action 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 information, 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 have to sort or transcribe your tax return at its service center.


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

You Don’t 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 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 guidance is provided.  And if your adjusted gross income (AGI) is less than $72,000, you might be better off with one of the IRS’ many free-file affiliates.

The Disadvantages of E-Filing

E-filing comes with some potential headaches, too.

Fees

While 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 type 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 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 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 beneficial in certain scenarios that e-filing cannot accommodate.

You’ve Got a Rare Filing Situation

For example, if you will need to prepare a tax return for someone who passed away, you must file a paper return.  Also, paper filing allows you to print and submit images or PDFs to supplement your own 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 replies to fill out forms without telling you which forms it’s filing on your behalf.

You may fill out every form line-by-line and see first-hand all of the calculations and factors your refund requires.

There are several 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 need to fix via an amended return.

Overwhelming for Beginners

For filers who try 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 mistakes.

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, 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 submission when you file :

  1. Make sure 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 perfect IRS service center, as the address can change depending 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 close to 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 might be subject to penalties and interest.

The IRS provides a list of acceptable filing options on its website, Including the following options:

  1.             Hire a tax professional to prepare your return. 
  2. Use the Volunteer Income Tax Assistance Program, or the Tax Counseling for the Elderly program, if you are eligible. There are particular requirements for e-filing or paper filing if 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 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 this issue.

Key Takeaways

    1. E-filing is fast and provides several free options
    2. Internet 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 professional or engaging in filing aid programs.