Should You E-File or File Taxes by Mail?
What to Know About Filing Digital and Paper Tax Returns
The U.S. tax code has undergone a great many changes since late 2017, but one thing remains the same: You only have two options for filing your tax return with the Internal Revenue Service. You can submit your tax return by e-filing it, or you can file your taxes by mail. E-filing is safe, faster, and generally more convenient than paper filing. Filing on paper can be cheaper, but it takes the IRS longer to process refunds resulting from these returns.
The IRS announced on May 28, 2020 that it will be able to accept e-filed amended returns, Forms 1040-X, by late summer 2020 as well.
The Advantages of E-Filing
The option of e-filing tax returns was first introduced in 1986, and it got off to a slow start. A scant handful of tax professionals—five of them, according to the IRS—took advantage of this advent in technology. E-filing eventually caught on, however, and in a big way: Approximately 90% of taxpayers e-file their returns these days, for a few reasons.
Electronically submitting your tax return to the IRS is more secure than paper filing because the return is transmitted directly to the IRS computer system. Your refund is likely to be processed faster because e-filing means the IRS doesn't have to sort or re-transcribe your tax return at their service center. There's less chance that the IRS will make a mistake when processing your return.
E-Filing Provides Immediate Confirmation
The biggest benefit of electronic filing is that you'll receive almost immediate confirmation that the IRS has received your tax return. This is proof that the IRS has accepted it—at least for the time being—and has started processing it. The IRS computer didn't throw up any red flags, such as that you've entered the same Social Security number for a dependent that was already entered on a return filed by someone else.
This doesn't necessarily mean that an agent won't find something amiss with further review, but agents generally only review returns because the computer has thrown up a flag. They might also do so for other reasons, however, such as because you've received and reported income from an entity that's being audited.
If the IRS doesn't accept your tax return, you'll receive a rejection notice.
The confirmation or rejection notice is typically sent within 24 hours of electronically transmitting your return. The IRS e-file rejection letter will tell you what triggered the action. Fixing your tax return so it will be acceptable to the IRS will depend on the nature of your error.
The Disadvantages of E-Filing
On the down side, you can't prepare your return by hand, scan it into an electronic file, and shoot the file off to the IRS. The IRS does provide a list of acceptable filing options on its website, however, along with additional information regarding each:
- Hire a tax professional to prepare your return
- Prepare your return yourself using tax software
- Use one of the "Free File" web software programs, the Volunteer Income Tax Assistance Program, or the Tax Counseling for the Elderly program, if you're eligible. There are specific requirements for e-filing or paper filing if you use one of these programs.
- In the unlikely event that your identity is stolen and the thief files a tax return with your information (to steal any tax refund due to you), your e-filed return will be rejected by the IRS as a duplicate. In this case, you will need to paper file your tax return and mail it in with Form 14039, 'Identity Theft Affidavit', notifying the IRS of the issue.
The IRS doesn't recommend or endorse any specific software for e-filing, although many well-known software providers are members of the IRS Free File Alliance.
Some Taxpayers Can't E-File
There are also a few circumstances in which you won't be able to e-file:
- If you need to add statements or PDF attachments to your return
- If the "additional information" section on your tax form doesn't contain enough space to allow you to explain a situation that requires more detail
- If you're filing before e-file begins on January 27, 2020 or after e-filing ends in November—the IRS usually announces an exact date each year in its QuickAlerts Library provided online some time in October.
The Free File Alliance
The IRS has partnered with the Free File Alliance—a group of tax preparation software companies—to provide free preparation and filing to eligible taxpayers. The idea behind the Free File program is to promote e-filing, which the IRS has gone on record as recommending over the paper return option.
The companies—not the IRS—provide the software and preparation assistance, but the IRS provides a tool on its website for selecting one that works best for you if you qualify.
Taxpayers must have adjusted gross incomes of $69,000 or less to qualify for free preparation and filing of 2019 tax returns—those that are due to the IRS in 2020. The Alliance also offers Free File Fillable Forms that you can complete electronically if your income is greater than this. You can still e-file your return, but you'll have to prepare the forms yourself.
The Pros and Cons of Paper Filing
Filing on paper can be the best option if you have a very simple tax return or if you're prevented from e-filing for some reason. But data transcribers at the IRS must manually input taxpayer information for every paper return they receive, so consider e-filing if you have an even moderately complex tax return. It cuts down the margin for error. Even IRS employees can make mistakes.
Some Tips for Paper Filing
You can do a few things to streamline submission of your tax return if you prefer to use paper:
- Make sure your name and Social Security number are on every page, both front and back.
- Double-check your address. This where the IRS will send your refund and any notices, so it's important that you don't make a mistake, such as transposing numbers. Consider using a P.O. box or other permanent address where you can always access your mail if you'll be moving within a few months of mailing in your return.
- Mail your return to the right IRS service center. This depends on your state of residence, but 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 close to the official filing deadline of April 15, 2020, and keep in mind that you should make a payment with your extension if you think you'll owe anything. Otherwise you could be subject to penalties and interest.
The IRS will generally accept paper filings postmarked by April 15—they don't have to actually receive it by this date—but it can be tricky depending on your mail service and the timing. In some cases, you can mail in your tax return but pay online, such as through IRS Direct Pay.
IRS. "IRS Announces Form 1040-X Electronic Filing Options Coming This Summer; Major Milestone Reached for Electronic Returns." Accessed May 31, 2020.
IRS Fact Sheet. "IRS E-File: A History." Accessed May 31, 2020.
IRS. "Electronic Filing (e-file)." Accessed May 31, 2020.
IRS. "Age, Name, or SSN Rejects, Errors, Correction Procedures." Accessed May 31, 2020.
IRS. "IRS Opens 2020 Filing Season for Individual Filers on Jan. 27." Accessed May 31, 2020.
Free File Alliance. "About Free File." Accessed May 31, 2020.