Should I e-file my tax return? Hmmmmm.
There are two schools of thought here as to whether you should file your tax return electronically. yes it is great- I get my refund faster! or heck no, why would I give the IRS all of my information!
Some factors to consider:
1. Filing electronically gives the IRS immediate use of your data. The IRS takes about 6-8 weeks to "post" your return to their master file. Filing electronically gives the IRS about 10 days to post the return. The time for the IRS to audit your return is 3 years from the due date of the return or date filed, whichever is later. Filing the return by paper decreases the time for the IRS to review the return and select it for examination. At the very least, it would put pressure on them with other priorities in mind to make an audit decision. The same could be said about filing early- yes you get the refund faster, however, the IRS has more time to consider the return.
2. Filing electronically gives the IRS your entire return to review via their master file database. Filing by paper only allows the IRS to key critical items on your tax return. If you do not believe me on this fact, pull a return transcript on a paper filed return and compare it to the return you actually filed. You will notice significant differences especially if you made disclosures on your paper
3. A paper return can have documentation attached that may preclude an examination. If you file by paper, you are given the opportunity to attach disclosures of your position. For example, if you have an enormous amount of charitable deductions and you have the required documentation, you may attach it so as to provide substantiation for any potential audit. The IRS classification specialist who selects the return for examination or the downstream examiner must consider these facts attached. With so many returns to examine with great potential for adjustment, the IRS Agent will take heed of the disclosures and consider the cost/benefit in an examination of a return that appears to have the proof of the deduction already attached to the return.
4. The IRS has sped up payment of refunds. In fact, if they are substantially late in paying a refund, they must pay interest on the refund. Hence, the difference in a paper filed or an e-filed return refund is negliglible- the maximum of 6 weeks delay. If you direct deposit, the difference in time is more likely to be around 2-3 weeks.
Having spent my time around the IRS, I can tell you what some insiders say: why does anyone file their return electronically other than to get their refund a little quicker?
The civic respopnsibility to lower the government's cost in filing your return electronically is only reason I would file electronically. Otherwise, inviting, in any manner, an audit is not prudent.