Know the Pros and Cons of Digital and Paper Tax Returns
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 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 however and, as of 2018, approximately 90% of taxpayers e-filed their returns.
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.
E-filing is more secure than paper filing, according to the IRS, because the return, with all your sensitive information, 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 need to sort or transcribe your tax return in its service center.
Less Human Error
There is a lesser chance that the IRS will make a error when processing your return because IRS employees do not have to manually enter your return line-by-line to its own 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 simple situation, and are willing to understand, you can fill tax forms in directly using IRS free fillable forms. Be aware that you need to 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 using one of the IRS’ many free-file affiliates.
The Disadvantages of E-Filing
While there are tax prep 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 sort of features you desire.
Glitches are always possible when you’re using the internet. 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 effort.
Does Not Allow for Certain Filing Situations
Though e-filing supports most tax scenarios, there are certain scenarios it doesn’t support. For example, you can not file a return for someone who passed away, you can not 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 some specific scenarios that e-filing cannot accommodate.
You’ve Got a Rare Filing Situation
By way of example, if you need to prepare a tax return for somebody who passed away, you must file a paper return. Also, paper filing lets you print and submit pictures or PDFs to supplement your tax return.
You Want 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 may 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 procedure riskier and more taxing than e-filing.
Increases Chances of Errors
Data transcribers in the IRS must manually input taxpayer information for every paper return they receive. Because of this, it might lead to errors that you may have to fix via an amended return.
For filers who try 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 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.
You can do a few things to streamline your yield entry when you file :
- Make sure your name and Social Security number are on each page, both back and front.
This is where the IRS will send any notices, so it is important that you don’t make a mistake.
Mail your return to the right IRS service center, as the address can change based on which state you’re in, and whether you’re including payment with your return. The IRS provides a state-by-state list online so you can find the right address.
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 ought to 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, Including the following options:
- Hire a tax professional to prepare your own return.
Use the Volunteer Income Tax Assistance Program, or the Tax Counseling for the Elderly program, if you’re eligible. There are specific requirements for e-filing or paper filing should 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 situation and mail it in with Form 14039, the”Identity Theft Affidavit,” notifying the IRS of this issue.
- E-filing is fast 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 overpowering.
- Alternatives to filing taxes on your own include hiring a tax professional or participating in filing assistance programs.