E-File Vs. Paper File Audit Risk

E-File Vs. Paper File Audit Risk

It is a known fact that e-filing or paper filing is the only way through which you can submit your tax audit to the Internal Revenue. Although the very first method introduced was paper filing, e-filing has become more popular. Studies carried out in 2010 showed that about 98 million people adopted the option of e-filing, while 46 million people still subscribe to the option of paper filing. Each style of submitting your audit consists of benefits attributed to them, respectively.

Taking a look at E-File vs. Paper File Audit Risk

E-filing is sending tax returns via email while paper filing is sending manual mails. Taking a look at both e-file vs. paper file audit risk, one can experience audit risk with both types of filing. Someone conversant with the computer will prefer sending his audit via email. On the other hand, someone that is not computer literate might prefer sending paper files.

Keep reading to get more details about this amazing topic!

Comparing E-Filing Vs. Paper Filing: Why Choose E-Filing?

It is safe and secure

Submitting tax returns via e-filing can be more secure and reliable than paper filing. It sends electronic mails directly to the IRS system through your computer. Your mail does not have to pass through different procedures to reach the IRS staff in charge of audits.

While in the case of paper filing, the mail has to pass through several IRS staffs. Also, there have been few cases of mails getting mixed up on the way, and even mails going missing, thereby leading to further delays.

It saves time

Sending of tax returns in electronic format makes it quick and easy to get it in touch with the right persons. There is no need for thronging or having to wait for long hours before the emails get across.

Studies carried out by Intuit have shown that it could take up to six weeks before you get feedback in a paper filing, whereas, regarding the e-Filing, it usually takes a maximum of two days to get feedback.

It is easy to correct

Now, thinking about the fact that paper filing takes up to six weeks before you get feedback, it is scary and discouraging. I mean what if you had made a mistake in the data you sent out, you may have the need to make corrections and would have to wait for another six weeks again to rectify it. Whereas, as regarding e-filing, it is easier to make various corrections and send it back quickly to the IRS system.

Also, you are less likely to make an error when adopting the method of e-filling. It is because when you begin entering your data, the computer automatically makes the necessary calculations for you. You can also opt to use a utility software or program to aid the task.

It is cost-effective

Contrary to popular belief that paper filing is cheaper than the method of e-filing, it is a blatant lie. The process of e-filing makes for a very inexpensive way of getting your tax refunds.

Whereas, in the aspect of paper filing, you would have to start considering if you have ink, paper, and toner cartridge. Even if you have successfully printed out the forms, you still need to find transport fare or gas money to get to the post office. Also, if your Adjusted Gross Income is about 58,000 dollars or less, you can even send in your mail for free

It makes for record-keeping

Usually, when one has to store different records in the years, or in cases where an auditor needs previous information from a particular year, it takes a whole lot of stress, having to search through past documents to get the required information.

E-filing helps the IRS to efficiently store data in their system for usage at any point in time. Also, they make software and programs that make it easy to access any data from any particular point in time.

Why Choose Paper Filing?

One can use it whether computer-oriented or not

Although we are in an age whereby everybody seems to be able to read, write and operate a computer system, we still have to consider the fact that not everyone has the privilege of being computer literate in our time.

Those that are not conversant with modern technologies may choose to subscribe to the option of paper filing. It becomes necessary to avoid mailing a tax return with so many mistakes and inaccuracies.

In essence, if you know you are not good with a computer and all these digital gadgets, you do not have to stress yourself about it because the option of paper filing is always readily available.

Limitations

There are a lot of constraints that come with the option of e-filing. Firstly, in Personal Tax Returns, here in America, we all know that e-filing can only take place from January 28 to October 20 and asides that, the only option you have is to send in a paper file.

Secondly, you need to make other attachments, and it applies in only decedent returns. Finally, most times, the space in the “additional information” column is too small to communicate your thoughts effectively.

No loss of data

Imagine that one is working on writing a job for a particular client, and in the course of rounding it up, the person’s device gets damaged or missing, such will affect the relationship between such a person and the client.

In essence, e-filing has the benefit of secured storage on your system. However, in the cases whereby your hard disk gets damaged, or something happens to your computer system, and you cannot use it again, what would be the fate of the information stored in it?

It would cost you a whole lot of stress and money trying to get back the lost documents. So in this aspect, paper filing presents a safer and more secure form of filing.

Internet security

Recent studies have shown that the rate at which cyber-crime is growing, if not adequately addressed, could achieve an all-time growth rate of about 11% per year. Now, this is not to put any fear in your minds but to inform you to be diligent in securing your details like your name, address, credit card number, social security number, etc.

Although e-filing may seem simpler to process, it can be insecure in the case whereby your details or computer system is victim to hackers. Now, you may want to consider paper filing because you would not have to upload any of your details online and this would, in turn, help you to steer clear of any cyber-crimes

E-File Vs. Paper File: An Audit Risk Or A Myth?

When opting for a paper return, the IRS has to input all the necessary data into their system. Not just that, but also keeping and protecting it for about six years before clearing it all up again. Due to the amount of work involved in having to transfer all the information from a paper into their database, IRS staff and auditors majorly input only the necessary pieces of data from the forms.

However, in the case of e-filing, all the information given out gets saved and stored indefinitely on their system’s database. It, in turn, will mean that if there are any questions or you made any errors when filling out your return, the IRS will have complete access to all of your files from the past, more than they would have been able to get in the option of paper filing.

There is a myth that has gone for quite a several years that if you opt to go for the option of e-filing, you would be at a higher risk of your form getting audited. The ideology hinges on the fact that if you are going to review a paper return, it is very stressful having to go through the papers and documents attached, and auditors prefer to take the most accessible routes to avoid the workload.

However, it is just a personal belief, and the IRS has stated or confirmed this belief in many ways. Also with a vast number of returns processed out electronically and sent through mails, putting into consideration that more number of mails done electronically goes through an audit, that may be the reason for that ideology

Nevertheless, recent studies carried out by the IRS shows the fact that forms processed manually are about 20 times more probable to include mistakes and we know that where there is a mistake, one needs a second look and that would be a source of concern if you are going for the option of paper filing

Conclusion

Taking into consideration that the world is gradually changing day by day, and the concept of e-services seems to be progressively dominating every sphere of influence, an individual may choose to subscribe to the option of e-filing. When we take a look at the issue of E-File vs. Paper File Audit Risk, we believe that it varies according to individual preference, and one should pick what is ideal for you.