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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 pros and cons.  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 this 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.

The biggest benefit 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’ll receive 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.

Safety

E-filing is much more secure than paper filing, according to the IRS, since the return, together with all your sensitive data, is transmitted directly to the IRS computer system.

Faster Processing

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


There is a lesser chance that the IRS will make a error when calculating your return because IRS employees don’t 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 need to use an expensive 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 using one of the IRS’ many free-file affiliates.

The Disadvantages of E-Filing

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.

Glitches are always possible once you’re using the internet.  In 2020, TurboTax’s site experienced at least seven outages between April 15 and April 17.  Also, your internet service provider may face outages that could hamper your submitting 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 instance, you can not file a return for someone 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 certain scenarios that e-filing cannot accommodate.

You Have a Rare Filing Situation

E-filing can only do so much. For example, 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 own tax return.

You Want to Build Your Tax Expertise

Several online tax prep tools automate the filing process by asking you questions and using your answers to complete forms without telling you which forms it is filing on your behalf.

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 that you crave. You can fill out each form line-by-line and see firsthand all of the calculations and factors 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 at the IRS must manually enter taxpayer information for each paper return they get.  As a result of this, it might lead to errors that you may need to fix through 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 might lead to missing forms or errors.

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, leading to even longer delays than what you’d normally expect with a paper return.

You can do a few things to streamline your yield submission when you file :

  1. Make sure that 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, since the address can change based on which state you’re in, and whether you are 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 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 are eligible. There are particular requirements for e-filing or paper filing if you use 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 issue.

Key Takeaways

    1. E-filing is fast 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 on your own include hiring a tax pro or engaging in filing aid programs.