Income Tax Done Online

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 advantages and disadvantages.  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 Benefits 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 time.  The new filing method eventually caught on though and, as of 2018, roughly 90% of taxpayers e-filed their returns.

Immediate Confirmation

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 on your return, you’ll receive a rejection notice (usually within 24-48 hours), and the notice will typically indicate what triggered the action and what you can do to fix your tax return.

Safety

E-filing is 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 very likely to be processed faster because e-filing means the IRS doesn’t have to sort or transcribe your tax return at its service center.

Less Human Error


There’s a lesser chance that the IRS will make a mistake when calculating your return because IRS employees do not need to manually enter your return line-by-line into its system.

You Don’t Have to Use a Tax Prep Program

You don’t have 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 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 with one of the IRS’ many free-file affiliates.

E-filing comes with some potential headaches, too.

Fees

When there are tax prep tools that 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 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 online service provider may face outages that could hamper your filing effort.

Doesn’t Allow for Certain Filing Situations

Though e-filing supports most tax situations, there are certain situations it does not support.  For instance, you can not file a return for someone who passed away, you can not attach images or PDFs to your return, nor will you file before the IRS opens e-filing for the year.

Advantages of Paper Filing

Filing a paper return can be very beneficial 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 have to file a paper return.  Also, paper filing allows you to print and submit pictures or PDFs to supplement your tax return.

You Need to Build Your Tax Experience

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’s filing on your behalf.

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

Disadvantages of Paper Filing

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

Increases Chances of Errors

Data transcribers in the IRS must manually enter taxpayer information for every paper return they get.  As a result of this, it might result in errors that you might have to fix via an amended return.

For filers who attempt paper filing after years of electronic filing, collecting all 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 won’t 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 each page, both back and front. 
  2. This is where the IRS will send any notices, so it is vital that you don’t make a mistake.

  3. Mail your return to the right 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 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 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 own website, which include the following options:

  1.             Hire a tax professional to prepare your own return. 
  2. Use the Volunteer Income Tax Assistance Program, or the Tax Counseling for the Elderly program, if you’re eligible. 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 information, your e-filed return will be rejected by the IRS as a copy.  You must file a paper tax return in this case and mail it in with Form 14039, the”Identity Theft Affidavit,” notifying the IRS of the issue.

Key Takeaways

    1. E-filing is fast 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 may be overwhelming. 
    4. Alternatives to filing taxes in your include hiring a tax pro or participating in filing aid programs.