Online Bookkeeping And Tax Services

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’ve got 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 takes the IRS longer to process refunds.

The Advantages 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 time.  The new filing method eventually caught on however 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 will 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 much more secure than paper filing, according to the IRS, because the return, with all your sensitive information, is transmitted directly to the IRS computer system.

Faster Processing

Your refund is likely to be processed quicker because e-filing means the IRS doesn’t 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 mistake when processing your return because IRS employees do not need to manually put in your return line-by-line to 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 are tax savvy, have a simple situation, and are willing 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 with one of the IRS’ many free-file affiliates.

The Disadvantages of E-Filing

E-filing comes with some potential headaches, too.

Fees

While 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 sort of features you desire.

Vulnerable to Outages

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.

Doesn’t Allow for Certain Filing Situations

Though e-filing supports most tax scenarios, there are certain scenarios it doesn’t support.  By way of example, you can’t file a return for somebody 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.

Advantages of Paper Filing

Filing a paper return can be very beneficial in certain scenarios that e-filing can’t accommodate.

You Have a Rare Filing Situation

By way of instance, if you need to prepare a tax return for somebody who passed away, you must 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 complete forms without ever telling you which forms it’s filing on your behalf.

If you want 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 that you crave. You can fill out each form line-by-line and see firsthand 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 Odds of Errors

Data transcribers at 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 need to fix through an amended return.

For filers who try 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 could lead to missing forms or mistakes.

You Will 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.

Tips for Paper Filing

You can do a few things to streamline your return entry when you file :

  1. Make sure 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’s vital that you don’t make a mistake.

  3. Mail your return to the perfect 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 you can find the right address.

  4. Get an automatic extension if you’re mailing your return close to the official filing deadline of April 15, 2021.  Keep in mind that you ought to make a payment with your extension if you think 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, Including the following options:

  1.             Hire a tax professional to prepare your own 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 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.

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 pro or participating in filing assistance programs.