Since 1986, the Internal Revenue Service (IRS) has accepted e-filing of tax returns. However, in the beginning very few taxpayers were eligible for or made use of this method. Over time the IRS has greatly expanded access to e-filing, and as a result more and more people are now filing their returns this way.
Let’s take a look at some of the pros and cons of e-filing versus the traditional method of mailing in one’s tax return:
* Speed *
This one is almost entirely a pro. Your return can be transmitted to the IRS through cyberspace practically instantaneously, compared to days or weeks to arrive by mail. If you’re getting a refund, you’ll get your money much faster if you e-file.
The only con is some people might want a bit of a delay for their return to be processed, if they owe money. Let’s say you owe $500, but you only have $100 in your bank account, until you get a paycheck a few days after April 15. If you mail a $500 check with your return on April 15 to avoid a late fee, by the time it makes its way through the mail, arrives at the IRS, and the IRS deposits that check and tries to collect on it, you’ll have deposited enough money to cover it. Whereas if you e-file, and you don’t have a credit card and you try to send an e-check on April 15, you don’t have the funds to cover it. (E-filers do have the option of printing up a voucher and mailing that in by April 15, but that defeats some of the purpose of e-filing.)
* Efficiency *
Clear pro. Automating the process helps things go more smoothly at both ends.
* Assistance *
Another clear pro. Depending on how you e-file, the software will help you through the process. It will check your math, perhaps provide hints and suggestions to make sure you’re not overlooking a possible deduction, or entering information in the wrong space.
* Expense *
Used to be a con, now pretty much a wash. In the past, in order to e-file you generally had to have your taxes done by a professional tax preparer (for a fee) or you had to purchase software to do it yourself. But the IRS’s “Free File” program has been expanded over the years, to where now everyone can use it, without income or other restrictions. The only exception is there are a very few remaining forms that are not available through “Free File,” so taxpayers needing those forms and wanting to e-file will have to do so through some other means, and possibly pay.
But for virtually everyone, it’s now just as free to e-file as to submit your return by mail. Actually freer, because you save yourself a few cents for a stamp.
* Copies *
Small pro. Filling out your tax return by hand and mailing it means you have no electronic copy of your file unless you scan it into your computer, and no hard copy unless you fill out the form twice, own a copy machine, go somewhere else that has a copy machine, or perhaps use old fashion carbon paper.
When you e-file you can very easily save a copy to your computer, and/or print a copy if you have a printer hooked up to your computer.
* Security *
Thought of as a small con by most people, but probably a wash or a small pro. Yes it’s not impossible for there to be some breakdown in security when sending something through cyberspace to the IRS – for hackers to somehow get at your information, say – but it’s equally or more likely your written return (or refund check) will be stolen from the mail.
* Access *
Con. Even nowadays not everyone has access to a computer. For the minority who don’t, this is obviously a big con to e-filing. For the majority who do, this is a non-factor.
* Environmental *
Pro. Using less paper is good for the environment.
* Comfort level *
Pro and con. To some extent this is a generational factor. For people used to computers and similar gadgets in all areas of life, e-filing is totally natural and filing by mail is a chore. For many older people, filing by mail is what they’re used to, and trying to e-file would be distasteful, stressful, and confusing.
Really the pros and cons of e-filing vary for each person and their situation.
For more information on e-filing and all tax matters, see www.irs.gov.