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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 pros and cons.  E-filing is safe, faster, and more convenient than paper filing, but filing by mail can be cheaper, although it requires the IRS longer to process refunds.

The Advantages of E-Filing

E-filing was first 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 moment.  The new filing method eventually caught on though and, as of 2018, roughly 90% of taxpayers e-filed their yields.

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 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 of your sensitive information, 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 need to sort or transcribe your tax return in its service center.


There is a lower chance that the IRS will make a error when processing your return because IRS employees do not have to manually put in your return line-by-line into its system.

You Do Not Have to Use a Tax Prep Program

You don’t need to use a costly tax preparation program to e-file your taxes–if you are tax savvy, have a very simple situation, and are willing 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 advice is provided.  And if your adjusted gross income (AGI) is less than $72,000, you may be better off with one of the IRS’ many free-file affiliates.

The Disadvantages of E-Filing

Fees

When there are tax preparation tools that are free, many of the leading 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.

Vulnerable to Outages

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.  By way of example, you can not file a return for somebody who passed away, you can’t attach pictures or PDFs to your return, nor can 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 cannot accommodate.

You’ve Got a Rare Filing Situation

For instance, 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 Need to Build Your Tax Experience

Several online tax prep tools automate the filing process by asking you questions and using your answers to fill out forms without ever telling you which forms it’s filing for your benefit.

If you would like to know 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 every form line-by-line and see firsthand all of the calculations and considerations your refund requires.

There are several drawbacks to paper filing that make the procedure 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 receive.  Because of this, it could result in errors that you might need to fix via an amended return.

For filers who try 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 might 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 will not 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 return submission when you file by paper:

  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’s important that you don’t make a mistake.

  3. Mail your return to the right IRS service center, since the address can change depending 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 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 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, 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 if you use 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 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 quickly 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 overpowering. 
    4. Alternatives to filing taxes on your own include hiring a tax professional or engaging in filing aid programs.