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 more convenient than paper filing, but filing by mail can be cheaper, though 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 the new technology at the moment. The new filing method eventually caught on however 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’ll receive a rejection notice (usually within 24-48 hours), and the note will typically indicate what triggered the action and what you can do to repair your tax return.
E-filing is much more secure than paper filing, according to the IRS, since the return, together with all your sensitive information, is transmitted directly to the IRS computer system.
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.
Less Human Error
There is a lower chance that the IRS will make a error when calculating your return because IRS employees don’t need 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 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 prepared to understand, 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 guidance 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.
While there are tax prep tools that are free, many of the top 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 type of features you want.
Vulnerable to Outages
Glitches are always possible when 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 submitting attempt.
Doesn’t Allow for Certain Filing Situations
Though e-filing supports most tax scenarios, there are certain situations it does not support. By way of example, you can not file a return for somebody 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.
Benefits of Paper Filing
Filing a paper return can be very beneficial in some specific scenarios that e-filing can’t accommodate.
You Have a Rare Filing Situation
E-filing can only do so much. For instance, 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 own 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 ever telling you which forms it is filing on your behalf.
You can fill out each form line-by-line and see first-hand all of the calculations and considerations your refund requires.
There are several drawbacks to paper filing which make the process riskier and more taxing than e-filing.
Increases Chances of Errors
Data transcribers in the IRS must manually input taxpayer information for each paper return they receive. Because of this, it could result in errors that you may have to fix through 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 lead to 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, resulting in 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 submission when you file :
- Make sure that your name and Social Security number are on every page, both front and back.
Double-check your address. This is where the IRS will send any notices, so it’s important that you don’t make a mistake.
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.
Get an automatic extension if you’re 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 penalties and interest.
The IRS provides a list of acceptable filing options on its website, Including the following options:
- Hire a tax professional to prepare your return.
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 must file a paper tax return in this case and mail it in with Form 14039, the”Identity Theft Affidavit,” notifying the IRS of the matter.
- E-filing is quickly and provides several free options
- Internet or website outages can cause frustrating delays for e-filers.
- Paper filing requires more time than e-filing and can be overwhelming.
- Alternatives to filing taxes on your own include hiring a tax pro or participating in filing assistance programs.