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 pros and cons. E-filing is safe, faster, and more convenient than paper filing, but filing by mail can be cheaper, although it requires the IRS longer to process refunds.
The Advantages 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 this new technology at the time. 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 in your return, you’ll 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 fix your tax return.
E-filing is more secure than paper filing, according to the IRS, since the return, together with all of 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 at its service center.
Less Human Error
There’s a lesser chance that the IRS will make a mistake when calculating your return because IRS employees don’t have to manually enter your return line-by-line to its 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 are tax savvy, have a very simple situation, and are willing to learn, 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 might be better off using one of the IRS’ many free-file affiliates.
The Disadvantages of E-Filing
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 sort 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 filing attempt.
Does Not Allow for Certain Filing Situations
Though e-filing supports most tax situations, there are certain situations it does not support. By way of 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 file before the IRS opens e-filing for the year.
Advantages 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
For instance, if you 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 own tax return.
You Want to Build Your Tax Expertise
Several online tax prep tools automate the filing process by asking you questions and using your answers to complete forms without telling you which forms it’s filing on your behalf.
You can fill out each form line-by-line and see firsthand all the calculations and considerations your refund requires.
There are several drawbacks to paper filing which make the procedure riskier and more taxing than e-filing.
Increases Odds of Errors
Data transcribers at the IRS must manually enter taxpayer information for each paper return they get. Because of this, it might result in errors that you may have to fix through an amended return.
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, 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 submission when you file :
- Make sure that 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’s important that you don’t make a mistake.
Mail your return to the perfect IRS service center, as the address can change depending on which state you are in, and whether you’re 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. Bear in mind that you ought to make a payment with your extension if you believe you’ll owe anything. Otherwise, you might be subject to interest and penalties.
The IRS provides a list of acceptable filing options on its own website, Including the following options:
- Hire a tax professional to prepare your return.
There are specific requirements for e-filing or paper filing should you use one of 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 copy. You have to 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.
- E-filing is fast and provides several free options
- Internet or site outages can cause frustrating delays for e-filers.
- Paper filing requires more time than e-filing and can be overpowering.
- Alternatives to filing taxes in your include hiring a tax pro or engaging in filing assistance programs.