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Should You E-File or File Taxes by Mail?

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 pros and cons.  E-filing is safe, faster, and more convenient than paper filing, but filing by mail can be cheaper, though it requires the IRS longer to process refunds.

The Advantages of E-Filing

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 however and, as of 2018, roughly 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 in 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 much more secure than paper filing, according to the IRS, since the return, with all your sensitive information, is transmitted directly to the IRS computer system.

Your refund is likely to be processed quicker because e-filing means the IRS does not have to sort or transcribe your tax return at its service center.


There’s a lesser chance that the IRS will make a error when processing your return because IRS employees don’t have to manually put in your return line-by-line into its own 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 very simple situation, and are prepared to learn, 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 advice 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.

E-filing comes with some potential headaches, too.

Fees

While there are tax preparation tools that 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 basic filing.  Fees can exceed $100, depending on which type 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 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 doesn’t support.  By way of example, you can’t file a return for someone who passed away, you can’t attach images or PDFs to your return, nor will you record 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’ve Got a Rare Filing Situation

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 lets you print and submit images or PDFs to supplement your 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 answers to complete forms without ever telling you which forms it is filing for your benefit.

If you want 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 every form line-by-line and see first-hand all the calculations and factors your refund requires.

Disadvantages of Paper Filing

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

Increases Odds of Errors

Data transcribers in the IRS must manually input taxpayer information for every paper return they get.  Because of this, it might 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 the forms necessary for things like student loan interest, mortgage interest, capital gains, and business deductions can be intimidating, and it might result in 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 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 return 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’s vital that you don’t make a mistake.

  3. Mail your return to the right IRS service center, since the address can change depending 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 correct address.

  4. Get an automatic extension if you’re mailing your return close to the official filing deadline of April 15, 2021.  Bear in mind that you should 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 own website, which include the following options:

  1.             Hire a tax professional to prepare your return. 
  2. Use the Volunteer Income Tax Assistance Program, or the Tax Counseling for the Elderly program, if you are eligible. There are specific 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 information, 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 the 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.