Which Online Tax Service Is Actually Free

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 takes the IRS longer to process refunds.

The Benefits 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 the new technology at the time.  The new filing method eventually caught on though and, as of 2018, approximately 90% of taxpayers e-filed their yields.

Immediate Confirmation

The biggest advantage 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 repair your tax return.

Safety

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

Your refund is likely to be processed faster because e-filing means the IRS does not need to sort or transcribe your tax return in 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 need to manually put in your return line-by-line into 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 prepared to understand, you can fill tax forms in directly using IRS free fillable forms.  Be aware that you should 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 with one of the IRS’ many free-file affiliates.

The Disadvantages of E-Filing

Fees

When 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.

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

Benefits of Paper Filing

Filing a paper return can be very helpful in some specific scenarios that e-filing can’t accommodate.

You’ve Got a Rare Filing Situation

For example, if you will 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 pictures or PDFs to supplement your tax return.

You Need 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.

If you want to learn about, and better review, the details of your tax return, including all forms related to your tax situation, filing a paper return provides the transparency that you crave. You may fill out every form line-by-line and see firsthand all of the calculations and considerations your refund requires.

Disadvantages of Paper Filing

There are lots of 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 input taxpayer information for every paper return they get.  Because of this, it might result in errors that you might need to fix through an amended return.

Overwhelming for Beginners

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 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, 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 each page, both front and back. 
  2. Double-check your address. 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 right IRS service center, since the address can change based 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 that you can find the correct address.

  4. Get an automatic extension if you’re 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 might be subject to penalties and interest.

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. Use the Volunteer Income Tax Assistance Program, or the Tax Counseling for the Elderly program, if you are eligible. There are particular requirements for e-filing or paper filing if 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 have to 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 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 in your include hiring a tax pro or participating in filing aid programs.