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The Big Reason You Shouldn't File a Paper Tax Return This Year

By Maurie Backman - Mar 26, 2021 at 7:18AM

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Hint: It's all about improving your personal cash flow.

In case you missed the news, the IRS has extended this year's tax-filing deadline by a month, giving filers until May 17 to not only submit their returns, but pay any tax debts that are owed from 2020. If you haven't started working on your taxes, it could pay to do so sooner rather than later. Even though you now get an extra month to get the task done, the earlier you file a return, the sooner you'll get any refund you're due.

That said, if you're used to filing a return on paper, this isn't the year to do so. And if you go that route, you could end up delaying your refund extensively.

The IRS is still in catch-up mode

Last year, the IRS shut many of its offices down in response to the coronavirus outbreak. And now, it's grappling with a massive pile of unprocessed 2019 returns.

Man at laptop with papers and calculator

Image source: Getty Images.

As of late 2020, the agency was facing a backlog of almost 12 million paper returns, according to a report from the Treasury Inspector General for Tax Administration. This means a lot of people who filed their taxes on time last year may still be waiting on their refunds, so if you want to avoid an extensive delay in this year's refund, you'd be wise to file electronically.

Paper tax returns need to be processed manually -- and for that reason, the IRS generally takes twice as long to issue refunds for paper returns than electronic ones (six weeks versus three weeks during a normal tax season). But given the current backlog, if you file on paper this year, your refund may take a lot longer than six weeks. If you're struggling financially at all (whether due to the pandemic or another reason), the last thing you want to do is delay the arrival of that money.

Compounding the issue this year is that the IRS is also tasked with sending out stimulus checks as part of the recently passed $1.9 trillion coronavirus relief bill. While many of those payments are going out electronically, the agency still has to issue batches of paper checks and debit cards to recipients who can't get those funds via direct deposit. It's unclear as to how significantly that process is monopolizing the agency's limited resources, but given that the IRS has another monumental task on its hands, now's not the time to file a paper return.

Not only will filing your taxes electronically help expedite your refund, but it might also help you avoid mistakes. And it might make it easier for you to identify the different tax credits and deductions you're entitled to, from educator expenses to retirement plan contributions.

Best of all, if you have an income of $72,000 and below, you'll be entitled to file electronically for free this year. And having a software program do all of your math for you is apt to make the process of completing your taxes a lot smoother from start to finish.

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