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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 filing have their advantages and disadvantages.  E-filing is safe, faster, and generally more convenient than paper filing, but filing by email 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 time.  The new filing method eventually caught on however and, as of 2018, approximately 90% of taxpayers e-filed their returns.

Immediate Confirmation

The biggest benefit of electronic filing is that you’ll receive almost immediate confirmation that the IRS has received your tax return.

If the IRS finds errors in 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 repair your tax return.

Safety

E-filing is much more secure than paper filing, according to the IRS, since the return, 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 have to sort or transcribe your tax return at its service center.


There’s a lesser chance that the IRS will make a mistake when processing your return because IRS employees do not have to manually enter your return line-by-line into 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 willing to understand, you can fill tax forms in directly with 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 might be better off using one of the IRS’ many free-file affiliates.

E-filing comes with some potential headaches, too.

Fees

When there are tax prep tools which are free, many of the top 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.

Glitches are always possible once you’re using the internet.  In 2020, TurboTax’s website experienced at least seven outages between April 15 and April 17.  Additionally, your online 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 does not support.  By way of example, you can not file a return for somebody who passed away, you can not attach images or PDFs to your return, nor can you file before the IRS opens e-filing for the year.

Benefits of Paper Filing

Filing a paper return can be very helpful in some specific scenarios that e-filing cannot accommodate.

You’ve Got a Rare Filing Situation

By way of instance, if you 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 own 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 is filing on your behalf.

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 that you crave. You may fill out each form line-by-line and see firsthand all the calculations and considerations your refund requires.

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

Overwhelming for Beginners

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 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 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 yield entry when you file :

  1. Make sure that your name and Social Security number are on each page, both front and back. 
  2. This is where the IRS will send any notices, so it is important that you don’t make a mistake.

  3. Mail your return to the perfect IRS service center, as the address can change based on which state you are in, and whether you are 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 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 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 website, which include the following options:

  1.             Hire a tax professional to prepare your return. 
  2. There are particular requirements for e-filing or paper filing should you use these programs.

In the unlikely event 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 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.

Key Takeaways

    1. E-filing is quickly and provides several free options
    2. Internet or site outages can cause frustrating delays for e-filers. 
    3. Paper filing requires more time than e-filing and can be overwhelming. 
    4. Alternatives to filing taxes in your include hiring a tax pro or participating in filing aid programs.