When you file your taxes, you’ve got 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 more convenient than paper filing, but filing by email can be cheaper, although it requires the IRS longer to process refunds.
The Advantages 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 this new technology at the moment. The new filing method eventually caught on however and, as of 2018, roughly 90% of taxpayers e-filed their yields.
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’ll 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.
E-filing is more secure than paper filing, according to the IRS, because the return, together with all of 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 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 processing your return because IRS employees don’t have to manually put in your return line-by-line to its system.
You Do Not 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 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 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 with one of the IRS’ many free-file affiliates.
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 basic filing. Fees can exceed $100, depending on which type of features you want.
Vulnerable to Outages
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 online service provider may face outages that could hamper your filing attempt.
Doesn’t Allow for Certain Filing Situations
Though e-filing supports most tax situations, there are certain scenarios it doesn’t support. For instance, you can’t file a return for someone who passed away, you can not attach images 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 beneficial in some specific scenarios that e-filing cannot accommodate.
You Have a Rare Filing Situation
For example, 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 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 replies to complete forms without ever telling you which forms it is filing on your behalf.
You may fill out each form line-by-line and see firsthand all the calculations and factors your refund requires.
Disadvantages of Paper Filing
There are lots of drawbacks to paper filing which make the procedure riskier and more taxing than e-filing.
Increases Chances of Errors
Data transcribers at the IRS must manually enter taxpayer information for each paper return they receive. Because of this, it could result in errors that you may need to fix via an amended return.
Overwhelming for Beginners
For filers who try paper filing after years of electronic filing, gathering all of 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, resulting in 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:
- 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 is important 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 are 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. 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, Including the following options:
- Hire a tax professional to prepare your return.
There are specific requirements for e-filing or paper filing if you use one of 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 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 issue.
- E-filing is fast and provides several free options
- Web or website outages can cause frustrating delays for e-filers.
- Paper filing requires more time than e-filing and may be overpowering.
- Alternatives to filing taxes on your own include hiring a tax professional or participating in filing assistance programs.