Know the Pros and Cons of Digital and Paper Tax Returns
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 submitting 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 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 moment. The new filing method eventually caught on however and, as of 2018, approximately 90% of taxpayers e-filed their yields.
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’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.
E-filing is more secure than paper filing, according to the IRS, because the return, together with all of your sensitive data, is transmitted directly to the IRS computer system.
Your refund is 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 lower chance that the IRS will make a mistake when processing your return because IRS employees don’t 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 a costly tax preparation program to e-file your taxes–if you are tax savvy, have a 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 advice 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
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 basic filing. Fees can exceed $100, depending on which type of features you want.
Glitches are always possible when you’re using the net. In 2020, TurboTax’s website 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’t file a return for someone who passed away, you can’t attach images 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 can’t accommodate.
You Have a Rare Filing Situation
E-filing can only do so much. 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 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 can fill out each form line-by-line and see firsthand all of the calculations and considerations your refund requires.
Disadvantages of Paper Filing
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 enter taxpayer information for every paper return they get. Because of this, it might lead to errors that you may 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 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 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 yield submission when you file by paper:
- Make sure your name and Social Security number are on each page, both front and back.
This is where the IRS will send any notices, so it is vital that you don’t make a mistake.
Mail your return to the perfect IRS service center, as 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 you can find the correct address.
Get an automatic extension if you are 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 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 data, 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 the issue.
- E-filing is quickly and provides several free options
- Web or site outages can cause frustrating delays for e-filers.
- Paper filing requires more time than e-filing and may be overpowering.
- Alternatives to filing taxes in your include hiring a tax pro or engaging in filing aid programs.