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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 filing your return with the Internal Revenue Service (IRS): electronically or by mail.

Both methods of submitting have their pros and cons.  E-filing is safe, faster, and more convenient than paper filing, but filing by email can be cheaper, though 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 the new technology at the time.  The new filing method eventually caught on though 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 will 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 your sensitive data, is transmitted directly to the IRS computer system.

Faster Processing

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

Less Human Error


There is a lower 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 into its own system.

You Don’t Have to Use a Tax Prep Program

You don’t need 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 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 might be better off using one of the IRS’ many free-file affiliates.

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 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 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 attempt.

Does Not Allow for Certain Filing Situations

Though e-filing supports most tax scenarios, there are certain situations it doesn’t support.  For example, you can’t file a return for somebody who passed away, you can not attach pictures or PDFs to your return, nor will you record before the IRS opens e-filing for the year.

Benefits of Paper Filing

Filing a paper return can be very beneficial in some specific scenarios that e-filing can’t 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 allows you to print and submit pictures or PDFs to supplement your own 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 answers to fill out forms without telling you which forms it is filing on your behalf.

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

Disadvantages of Paper Filing

There are lots of drawbacks to paper filing which 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 each paper return they get.  Because of this, it might lead to errors that you might need to fix via an amended return.

For filers who try paper filing after years of electronic filing, gathering 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, resulting in even longer delays than what you’d normally expect with a paper return.

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

  1. Make sure your name and Social Security number are on every 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’re including payment with your return.  The IRS provides a state-by-state list online so that 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, which include the following options:

  1.             Hire a tax professional to prepare your return. 
  2. There are specific requirements for e-filing or paper filing if you use these programs.

In the unlikely event that 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 matter.

Key Takeaways

    1. E-filing is fast 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 can be overwhelming. 
    4. Alternatives to filing taxes on your own include hiring a tax professional or participating in filing aid programs.