What Is The Best And Cheapest Online Tax Program

Should You E-File or File Taxes by Mail?

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 pros and cons.  E-filing is safe, faster, and generally more convenient than paper filing, but filing by email 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 though and, as of 2018, approximately 90% of taxpayers e-filed their returns.

Immediate Confirmation

The biggest benefit 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 fix your tax return.

Safety

E-filing is much more secure than paper filing, according to the IRS, because the return, with all your sensitive data, 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 in its service center.

Less Human Error


There is a lower chance that the IRS will make a mistake when processing your return because IRS employees do not need to manually enter your return line-by-line to its system.

You Don’t Have to Use a Tax Prep Program

You don’t have 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 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 basic filing.  Fees can exceed $100, depending on which type of features you want.

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.  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 scenarios, there are certain scenarios it doesn’t support.  By way of example, you can not file a return for someone who passed away, you can’t attach pictures or PDFs to your return, nor can you record before the IRS opens e-filing for the year.

Benefits of Paper Filing

Filing a paper return can be very beneficial in certain scenarios that e-filing can’t accommodate.

You’ve Got a Rare Filing Situation

For example, if you 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 tax return.

You Need to Build Your Tax Experience

Many online tax prep tools automate the filing process by asking you questions and using your answers to complete forms without ever telling you which forms it is filing on your behalf.

You can fill out every form line-by-line and see firsthand all the calculations and factors your refund requires.

Disadvantages of Paper Filing

There are several drawbacks to paper filing which make the process riskier and more taxing than e-filing.

Increases Odds of Errors

Data transcribers at the IRS must manually enter taxpayer information for every paper return they receive.  As a result of this, it could result in errors that you may need to fix through an amended return.

Overwhelming for Beginners

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 could result in missing forms or mistakes.

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, 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 by paper:

  1. Make sure your name and Social Security number are on every page, both front and back. 
  2. This is where the IRS will send any notices, so it is vital that you don’t make a mistake.

  3. Mail your return to the perfect 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.  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 website, which include the following options:

  1.             Hire a tax professional to prepare your return. 
  2. There are specific requirements for e-filing or paper filing if 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 the matter.

Key Takeaways

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