Know the Pros and Cons of Digital and Paper Tax Returns
When you file your taxes, you’ve got two options for submitting 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 Advantages of E-Filing
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.
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 action and what you can do to fix your tax return.
E-filing is much more secure than paper filing, according to the IRS, since the return, together with all your sensitive information, is transmitted directly to the IRS computer system.
Your refund is likely to be processed quicker because e-filing means the IRS does not 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 error when calculating your return because IRS employees don’t need to manually put in your return line-by-line to 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 are 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 advice 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.
While 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 simple filing. Fees can exceed $100, depending on which type of features you desire.
Glitches are always possible when 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 submitting effort.
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’t attach pictures or PDFs to your return, nor will 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 Have a Rare Filing Situation
E-filing can only do so much. By way of example, 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 own tax return.
You Want to Build Your Tax Expertise
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 is filing on your behalf.
If you want 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 that you crave. 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 process riskier and more taxing than e-filing.
Increases Odds of Errors
Data transcribers in the IRS must manually input taxpayer information for each paper return they get. Because of this, it might lead to errors that you may have to fix via an amended return.
For filers who attempt 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 lead to 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 yield submission when you file :
- Make sure that your name and Social Security number are on each page, both back and front.
This is where the IRS will send any notices, so it’s vital that you don’t make a mistake.
Mail your return to the right IRS service center, as the address can change depending 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 you can find the right address.
Get an automatic extension if you are mailing your return close to the official filing deadline of April 15, 2021. Bear in mind that you ought to 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 own website, which include the following options:
- Hire a tax professional to prepare your return.
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 should 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 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.
- E-filing is fast and provides several free options
- Internet or site outages can cause frustrating delays for e-filers.
- Paper filing requires more time than e-filing and may be overwhelming.
- Alternatives to filing taxes in your include hiring a tax pro or engaging in filing assistance programs.