In this digital era, it may seem surprising that there is an option to file a paper tax return. But before you kick the idea of paper filing to the curb, consider the advantages and disadvantages of e-File vs. paper file below.
E-File vs. paper file
E-Filing, or electronic filing, is the process of submitting tax returns over the internet. On the other hand, paper filing is sending tax returns via mail.
Individuals must choose between e-File vs. mail to file Form 1040, U.S. Individual Income Tax Return. Form 1040 is typically due by April 15 each year.
Businesses must file a business tax return along with their individual tax return. Be sure to submit the correct forms, which depend on your business structure. And, be aware of your business tax return due date.
Advantages of e-Filing
Consider the benefits of e-Filing below.
Faster process
The last thing you want to do is spend days or weeks sifting through paperwork to file your tax return.
According to one source, the IRS typically processes electronically-filed returns within one or two days, whereas mailing a paper return takes much longer.
Because e-Filing cuts down on processing time, individuals and businesses receive refunds more quickly (e.g., three weeks after e-Filing). And, the IRS instantly sends a confirmation when they receive an e-Filed tax return.
Accuracy
Your tax return must be accurate. Online e-Filing does the calculations for you, leaving less room for error. You can opt to use a computer program or software to e-File, too. Most computer programs and software will catch any data entry errors before you complete the e-Filing process.
If there is an error, electronic returns tend to be easier to correct, too.
Want to impress your friends at a dinner party?
Get the latest accounting news delivered straight to your inbox.
Disadvantages of e-Filing
Check out some of the reasons why you may opt not to e-File.
Limitations
Filing taxes electronically is not for everyone. Although convenient, there are some limitations to e-Filing.
For individual tax returns, you cannot use the e-File application if:
- You need to add statements or other attachments (e.g., PDF attachments)
- You are filing decedent returns
- The “additional information” section on your form does not contain enough space
- You file before e-Filing begins (January 28) or after e-Filing ends (October 20)
Visit the IRS website for additional details on limitations for e-Filing.
Data loss
E-Filing does have the advantages of safe storage and regular backups. However, technology isn’t perfect.
The possibility of losing data is a risk you take with e-Filing. Consider what would happen to your information if your system, computer, or hard drive crashes. Could you replace your information? Will you have the historical documents you need to prepare for upcoming tax years?
Advantages of paper filing
Review some advantages of paper filing before choosing between e-File vs. paper file.
Security
Even though e-Filing may seem like a simpler process, paper filing might have less potential security risks than e-Filing.
Paper filing allows you to avoid entering personal information on the internet. Information such as your name, address, and Social Security number could be at risk when electronically filing.
Paper filing lets you steer clear of storing tax information electronically. And, it may help prevent information from getting into the wrong hands (e.g., identity theft).
Easy to do
Unlike e-Filing, paper filing does not require you to use technology. Some find it easier to personally fill out a form versus trying to enter information on a computer.
If you prefer to use pen and paper or are not tech-savvy, paper filing may be a better option.
Disadvantages of paper filing
Consider the disadvantages below before deciding to paper file.
Longer processing time
Because paper filing requires mailing, it can take a longer time to process.
Unlike e-Filing, which processes in a few days, paper files may take weeks to fully process. And, individuals may have to wait up to six weeks to receive their refund after submitting their tax return.
Less time to prepare
Consider the amount of time it takes to prepare and mail your tax return when deciding whether or not to paper file. If you wait too long, you may miss the deadline and incur fees.
Give yourself plenty of time when filing to avoid late penalties. For example, you could start the process two months before the deadline.
Need to organize your records before your tax return due date? Update your books and reduce the stress of the tax filing process by using Patriot’s online accounting software to record transactions. Try it for free today!
This article has been updated from its original publication date of February 14, 2019.
This is not intended as legal advice; for more information, please click here.