Know the Pros and Cons of Digital and Paper Tax Returns
When you file your taxes, you have 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, although it requires the IRS longer to process refunds.
The Benefits of E-Filing
E-filing was initially 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, 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 on your return, you’ll be given a rejection notice (usually within 24-48 hours), and the notice will typically indicate what triggered the actions and what you can do to fix your tax return.
E-filing is more secure than paper filing, according to the IRS, because the return, with all your sensitive data, is transmitted directly to the IRS computer system.
Your refund is 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’s a lower chance that the IRS will make a error when calculating your return because IRS employees don’t have 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 a costly 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 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 with one of the IRS’ many free-file affiliates.
The Disadvantages of E-Filing
E-filing comes with some potential headaches, too.
When there are tax prep tools which are free, many of the leading tax prep companies like TurboTax, TaxSlayer, and H&R Block charge fees for tax returns that go beyond a basic filing. Fees can exceed $100, depending on which type of features you want.
Glitches are always possible once you’re using the net. 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 filing attempt.
Does Not Allow for Certain Filing Situations
Though e-filing supports most tax scenarios, there are certain scenarios it does not 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 record 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 instance, if you need to prepare a tax return for somebody who passed away, you must file a paper return. Also, paper filing lets you print and submit pictures or PDFs to supplement your own tax return.
You Want to Build Your Tax Experience
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’s filing for your benefit.
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 first-hand all the calculations and considerations your refund requires.
There are several drawbacks to paper filing that make the process riskier and more taxing than e-filing.
Increases Chances of Errors
Data transcribers in the IRS must manually input taxpayer information for each paper return they receive. As a result of this, it might result in errors that you may need 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 could result in missing forms or mistakes.
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 return entry when you file by paper:
- Make sure 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 that you can find the right address.
Get an automatic extension if you are 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 penalties and interest.
The IRS provides a list of acceptable filing options on its website, which include the following options:
- Hire a tax professional to prepare your own return.
There are particular requirements for e-filing or paper filing should you use one of these programs.
In the unlikely event 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 the matter.
- E-filing is quickly and provides several free options
- Web or site outages can cause frustrating delays for e-filers.
- Paper filing requires more time than e-filing and can be overpowering.
- Alternatives to filing taxes in your include hiring a tax professional or engaging in filing assistance programs.