How To Calculate All Online Purchases For Taxes

Should You E-File or File Taxes by Mail?

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 filing have their pros and cons.  E-filing is safe, faster, and more convenient than paper filing, but filing by mail 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 however and, as of 2018, approximately 90% of taxpayers e-filed their returns.

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 fix your tax return.

Safety

E-filing is much more secure than paper filing, according to the IRS, since the return, together with all your sensitive data, is transmitted directly to the IRS computer system.

Faster Processing

Your refund is very likely to be processed quicker because e-filing means the IRS doesn’t have 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 system.

You Do Not 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’re 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 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

While there are tax preparation 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.

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 submitting attempt.

Does Not Allow for Certain Filing Situations

Though e-filing supports most tax situations, there are certain situations it doesn’t support.  For instance, you can not file a return for someone 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 some specific scenarios that e-filing can’t accommodate.

You Have a Rare Filing Situation

E-filing can only do so much. 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 lets you print and submit images or PDFs to supplement your tax return.

You Want to Build Your Tax Expertise

Several 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’s filing on your behalf.

If you would like 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 you crave. You may fill out each form line-by-line and see firsthand all the calculations and considerations 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 at the IRS must manually enter taxpayer information for each paper return they get.  Because of this, it could result in errors that you might have to fix via an amended return.

For filers who try 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 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.

Tips for Paper Filing

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

  1. Make sure your name and Social Security number are on every page, both front and back. 
  2. This is where the IRS will send any notices, so it’s vital that you don’t make a mistake.

  3. Mail your return to the perfect IRS service center, as the address can change based 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 that 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.  Bear in mind that you should make a payment with your extension if you believe you’ll owe anything.  Otherwise, you could 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. There are specific requirements for e-filing or paper filing should you use one of these programs.

In the unlikely event that 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 matter.

Key Takeaways

    1. E-filing is fast 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 professional or participating in filing assistance programs.