The Risks and Benefits of Electronic Filing Your Income Tax Return

When it comes to filing your income tax return, electronic filing (e-filing) vs. traditional mail poses a number of risks and benefits. Understanding these can help you make an informed decision regarding the best method for your filing needs.

Security Risks of E-filing

Concern about Social Security Number Compromise

One common concern is the risk that your social security number (SSN) might be compromised by a hacker through e-filing. However, it's essential to note that the security measures in place significantly reduce this risk. Many tax preparation software providers use advanced encryption and secure transmission methods to protect sensitive information.

Uncommon Major Threat

While it's a valid concern, the risk of your SSN being compromised in this context is relatively low. Given the robust security measures and regulations, this threat should not deter you from e-filing your return.

Potential Pitfalls of Mailing Your Return

Manual Entry Errors

When you mail your return, it must be manually entered into the IRS system, which can lead to errors. This process is susceptible to human mistakes, causing delays and potential issues. For example, Ingeborg experienced a situation in 2013 where she was notified of a missing filing and owed taxes, penalties, and interest due to manual errors in the submission process.

Advantages of E-filing

There are several advantages to e-filing your income tax return:

Precision and Speed

Automated Data Transmission

When you e-file, the data is transmitted in a structured format, similar to 'boxsome piece of data.' This means that the form you submit manually doesn't need to be scanned or hand-processed because Optical Character Recognition (OCR) software can't read handwriting. This speeds up the processing time and reduces the likelihood of manual errors.

Verification and Automated Processing

The data is automatically checked and processed. If your return is accepted, a refund check can be issued if warranted. If taxes are owed, the record will be flagged and matched to any payments made with your SSN or Taxpayer Identification Number (TIN) on the check. This ensures accuracy and expediency.

Faster Processing

Reduction in Transit Time

E-filing eliminates the time required for postal transit and manual processing. The files are transmitted electronically, which means your return is processed much more quickly than if it were sent through the mail. For instance, tax professional Ingeborg faced a significant delay and financial burden when her return was processed manually, as evidenced by her experience in 2013.

Accuracy and Efficiency

Reduced Human Errors

Manual processing is more prone to human errors, such as data entry mistakes, misinterpretation of handwriting, and delays in processing. E-filing reduces the likelihood of these issues, ensuring a faster and more accurate return filing process.

Conclusion

While the risk of social security number compromise exists, it is not a major concern given the robust security measures in place for e-filing. Mailing your tax return can lead to errors and delays, making e-filing a safer and more efficient option. By choosing e-filing, you can ensure that your tax return is processed accurately and quickly, leading to a smoother tax-filing experience.

In summary, the advantages of e-filing far outweigh the risks, making it the preferred method for filing your income tax return.