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Know the Pros and Cons of Digital and Paper Tax Returns

When you file your taxes, you’ve got 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 email can be cheaper, though it takes the IRS longer to process refunds.

The Advantages 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 this 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 advantage 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 be given 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.

Safety

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

Faster Processing

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

Less Human Error


There’s a lesser chance that the IRS will make a error when processing your return because IRS employees do not have to manually put in your return line-by-line to its own system.

You Don’t 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 understand, 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 guidance 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

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 basic filing.  Fees can exceed $100, depending on which sort 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 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 scenarios, there are certain situations it doesn’t support.  By way of example, you can not file a return for somebody who passed away, you can’t attach images or PDFs to your return, nor can 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 cannot accommodate.

You Have 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 must 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 Expertise

Many online tax prep tools automate the filing process by asking you questions and using your answers to fill out forms without 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 factors your refund requires.

Disadvantages of Paper Filing

There are lots of 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 enter taxpayer information for each paper return they receive.  Because of this, it could lead to errors that you might have to fix via an amended return.

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 lead to missing forms or errors.

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 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 yield entry when you file by paper:

  1. Make sure your name and Social Security number are on every page, both back and front. 
  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 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 think 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. 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 data, 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 this matter.

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 can be overpowering. 
    4. Alternatives to filing taxes on your own include hiring a tax pro or participating in filing aid programs.