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 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 Benefits of E-Filing
A scant number of tax professionals–five of them, according to the IRS–took advantage of this new technology at the moment. 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 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 repair your tax return.
E-filing is more secure than paper filing, according to the IRS, because the return, with all of your sensitive data, is transmitted directly to the IRS computer system.
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 in its service center.
There’s a lesser chance that the IRS will make a mistake when calculating your return because IRS employees don’t need to manually put in your return line-by-line into its own system.
You Do Not 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’re tax savvy, have a very simple situation, and are willing to learn, 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 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
While 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 want.
Glitches are always possible when you’re using the net. In 2020, TurboTax’s site 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 situations it doesn’t support. By way of example, you can not file a return for someone who passed away, you can not attach pictures 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 some specific scenarios that e-filing cannot 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 have to file a paper return. Also, paper filing lets you 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 replies to fill out forms without ever telling you which forms it is filing for your benefit.
You may fill out each form line-by-line and see firsthand all of the calculations and factors your refund requires.
Disadvantages of Paper Filing
There are several 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 enter taxpayer information for each paper return they receive. Because of this, it could lead to errors that you may have to fix via an amended return.
For filers who attempt 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 might result in 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 won’t 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 return entry when you file by paper:
- Make sure that your name and Social Security number are on every page, both back and front.
This is where the IRS will send any notices, so it’s vital that you don’t make a mistake.
Mail your return to the right IRS service center, as 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 correct address.
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 ought to 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 website, Including the following options:
- Hire a tax professional to prepare your return.
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 if you use 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 must 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.
- E-filing is quickly and provides several free options
- Internet or site outages can cause frustrating delays for e-filers.
- Paper filing requires more time than e-filing and may be overwhelming.
- Alternatives to filing taxes on your own include hiring a tax pro or participating in filing assistance programs.