What Is The Best Online Tax Software

Should You E-File or File Taxes by Mail?

When you file your taxes, you have 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 mail can be cheaper, although 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 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 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.

Safety

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

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


There is a lower chance that the IRS will make a error when processing your return because IRS employees do not need 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 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 learn, you can fill tax forms in directly with IRS free fillable forms.  Be aware that you need to 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 might be better off using 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 top tax prep companies 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 type of features you desire.

Vulnerable to Outages

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 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 scenarios it does not support.  By way of example, you can’t file a return for somebody who passed away, you can not 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’ve Got 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 ever telling you which forms it’s filing for your benefit.

You may 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 that make the procedure riskier and more taxing than e-filing.

Increases Odds of Errors

Data transcribers at the IRS must manually input taxpayer information for each paper return they receive.  As a result of this, it might lead to errors that you might need to fix through 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 might result in 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.

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

  1. Make sure your name and Social Security number are on every page, both back and front. 
  2. Double-check your address. 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, 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 that you can find the correct 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 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, which include 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 are eligible. 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 information, your e-filed return will be rejected by the IRS as a copy.  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 matter.

Key Takeaways

    1. E-filing is fast and provides several free options
    2. Internet or website outages can cause frustrating delays for e-filers. 
    3. Paper filing requires more time than e-filing and may be overwhelming. 
    4. Alternatives to filing taxes in your include hiring a tax pro or participating in filing assistance programs.