Online Tax Prep Software Reviews

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 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 generally 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 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 moment.  The new filing method eventually caught on though and, as of 2018, approximately 90% of taxpayers e-filed their yields.

Immediate Confirmation

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 action and what you can do to fix your tax return.

Safety

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

Faster Processing

Your refund is likely to be processed faster 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 calculating your return because IRS employees don’t have to manually enter your return line-by-line to its own system.

You Do Not Have to Use a Tax Prep Program

You don’t have 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 learn, 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 advice 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 preparation tools which are free, many of the leading 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 desire.

Vulnerable to Outages

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.  Additionally, your internet service provider may face outages that could hamper your filing effort.

Doesn’t Allow for Certain Filing Situations

Though e-filing supports most tax situations, there are certain situations it does not support.  For example, you can not file a return for somebody who passed away, you can’t attach pictures or PDFs to your return, nor will you record 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

E-filing can only do so much. 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 allows you to print and submit images or PDFs to supplement your tax return.

You Need to Build Your Tax Expertise

Several online tax prep tools automate the filing process by asking you questions and using your replies to complete forms without telling you which forms it’s 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 each form line-by-line and see firsthand all the calculations and factors your refund requires.

There are lots of drawbacks to paper filing that make the procedure riskier and more taxing than e-filing.

Increases Odds of Errors

Data transcribers at the IRS must manually enter taxpayer information for each paper return they receive.  As a result of this, it might lead to errors that you might have to fix via an amended return.

Overwhelming for Beginners

For filers who attempt 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 by paper:

  1. Make sure that 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 is important that you don’t make a mistake.

  3. Mail your return to the right IRS service center, as 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 correct address.

  4. Get an automatic extension if you are 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 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’re eligible. 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 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 this issue.

Key Takeaways

    1. E-filing is fast 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 may be overpowering. 
    4. Alternatives to filing taxes on your own include hiring a tax professional or participating in filing assistance programs.