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

The Benefits 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 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.

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 will be given a rejection notice (usually within 24-48 hours), and the note will typically indicate what triggered the actions and what you can do to repair your tax return.

Safety

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

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

Less Human Error


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 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 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

E-filing comes with some potential headaches, too.

Fees

When there are tax preparation tools that 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 sort of features you desire.

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.  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 situations, there are certain situations it doesn’t support.  By way of instance, you can’t file a return for somebody who passed away, you can not 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 some specific scenarios that e-filing cannot accommodate.

You’ve Got a Rare Filing Situation

E-filing can only do so much. By way of example, if you will 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 images 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’s filing for your benefit.

You can fill out each form line-by-line and see first-hand all of the calculations and factors your refund requires.

Disadvantages of Paper Filing

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

Overwhelming for Beginners

For filers who attempt 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 lead to 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.

You can do a few things to streamline your return submission when you file by paper:

  1. Make sure 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 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 that you can find the right address.

  4. Get an automatic extension if you are mailing your return near the official filing deadline of April 15, 2021.  Keep in mind that you should 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 own website, Including the following options:

  1.             Hire a tax professional to prepare your own return. 
  2. There are particular 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 data, your e-filed return will be rejected by the IRS as a duplicate.  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.

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 professional or participating in filing aid programs.