Should I File My Tax Return Electronically?

Here are the pros and cons of electronically filing with the IRS.

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You can add the paper income tax return to the list of items that used to be commonplace, but are now rarely used. Like vinyl records and personal postal letters, paper returns have largely been usurped by digital replacements.

The latest IRS tax filing statistics for the 2013 tax year show that of the 112,741,000 individual returns filed, over 101 million were filed electronically. Only about 12.5 million were filed on paper.

The IRS has been working hard for years to get everyone to file their returns electronically, instead of on paper. It’s clear that this is one battle the agency has just about won.

Professional tax preparers have long been filing their clients’ returns electronically. Indeed, IRS regulations require most professional preparers to file electronically, unless the client opts out of doing so and insists on filing on paper. To opt out, the preparer must file a special form with the client’s paper tax return.

However, most people who do their taxes themselves are filing electronically as well. In 2014, a little over 39 million returns that were self-prepared were filing electronically. This was a 4.5% increase over 2013. Tax preparation software like TurboTax, H&R Block, and TaxACT make it easy to file electronically.

Advantages of Electronic Filing

The big advantage to electronic filing is speed. The IRS will receive your return faster and process it faster if you file electronically. If you're owed a refund, you'll get it faster by filing electronically. The IRS says it issues most refunds for electronically filed returns within 21 days, while it could take six weeks to process a refund for a paper return.

Also, you will receive an automatic electronic confirmation that the IRS has received your tax return. This constitutes proof that the IRS received your return. If the IRS rejects your return, it will email you a rejection letter explaining the reasons for the rejection.

Disadvantages of Electronic Filing

Electronic filing is not without a potential downside. The IRS wants everyone to file electronically because it saves the agency an enormous amount of time and money. When taxpayers file paper returns, the IRS has to have the information manually input into its computer system--a big expense avoided with electronic filing. Because of the cost involved, the IRS inputs only about half the information on paper returns into its computer system and then sends the paper returns off to storage where they destroyed after six years. In contrast, when you file electronically, the IRS gets instant digital access to every item in your return forever. Thus, filing electronically makes it easier for the IRS to examine every nook and cranny in your return to catch any mistakes you've made. So, if you're not owed a refund, you might want to consider filing a paper return.

by: , J.D.

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