Accuracy: Estimates for the error rate for paper returns vary from 10% to 21%. Estimates for the error rate for electronic returns also vary, but the IRS pegs it at one in 200. Electronic returns are easier to correct, too. Most online or computer programs will check the math on a return automatically and catch data entry errors. Speed: An electronically filed return will be processed by the IRS in one or two days, while it takes much longer for a paper return. As a result, refunds for an e-filed return will be processed in about two weeks -- 10 days if you have a very simple return without itemized deductions and direct deposit -- while it may take six weeks for a refund to arrive after submitting a paper return.
Some filings can't be done electronically: Some conditions are complicated enough for the IRS to require a paper trail. For example, if you're married filing separately and you live in a state with community property rules, you'll need a paper filing. You can't e-file before Jan. 15 or after Oct. 15. You can't file electronically directly through the IRS site if you live overseas; you have to use a third-party preparer to do so -- which is stupid and may be somewhat more expensive depending on the firm used. Pay now or later: If you owe money, you'll owe it sooner. The IRS will let you know if you need to write a check just that much faster, while a paper filing can buy you some time. Security: While electronic tax records are convenient, they're also a massive security risk. It's one more file on your computer that could conceivably be stolen by a hacker, so some consideration to your computer security should be made. If you file electronically through a third-party preparer, you have to trust that tax firm to keep your information safe.