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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 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 email 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 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 returns.

Immediate Confirmation

The biggest benefit of electronic filing is that you will receive almost immediate confirmation that the IRS has received your tax return.

If the IRS finds errors on your return, you’ll 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 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.

Your refund is very 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.

Less Human Error


There is a lesser chance that the IRS will make a error when processing your return because IRS employees don’t need to manually enter your return line-by-line to its 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 understand, you can fill tax forms in directly using IRS free fillable forms.  Be aware that you need to 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 prep tools which are free, many of the top tax prep firms 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 site experienced at least seven outages between April 15 and April 17.  Additionally, your online service provider may face outages that could hamper your filing attempt.

Does Not Allow for Certain Filing Situations

Though e-filing supports most tax scenarios, there are certain situations it does not support.  By way of example, you can’t file a return for someone who passed away, you can’t attach images or PDFs to your return, nor will you file 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 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 allows you to print and submit images or PDFs to supplement your 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 complete forms without telling you which forms it is filing for your benefit.

You can fill out each form line-by-line and see firsthand all of the calculations and considerations your refund requires.

Disadvantages of Paper Filing

There are several drawbacks to paper filing that make the process riskier and more taxing than e-filing.

Increases Chances of Errors

Data transcribers at the IRS must manually input taxpayer information for each paper return they get.  As a result of this, it could lead to errors that you might have to fix via an amended return.

Overwhelming for Beginners

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 might 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 return submission when you file by paper:

  1. Make sure that your name and Social Security number are on every page, both back and front. 
  2. Double-check your address. 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 right IRS service center, as 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 close to 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 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 return. 
  2. There are particular 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 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 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 overpowering. 
    4. Alternatives to filing taxes on your own include hiring a tax professional or engaging in filing assistance programs.