The Challenges and Risks of E-Filing Tax Returns

Camarda Wealth Advisory Group
Tax Control

Electronic filing of tax returns, while convenient for many taxpayers, poses significant challenges and risks that are often overlooked. Despite its widespread use, e-filing is vulnerable to cyberattacks and can be less forgiving for taxpayers compared to traditional paper filing methods.

One major issue with e-filing is its susceptibility to cyber threats. Recent malware attacks on tax software companies and data breaches involving taxpayers’ personal information highlight the security risks inherent in electronic filing systems. These incidents underscore the importance of ensuring the security of sensitive financial data.

E-filing can also lead to unfair treatment by the IRS. While paper returns enjoy certain protections, such as being considered valid if they contain enough information for the IRS to calculate the proper tax, electronic returns may face harsh penalties for seemingly minor errors. Taxpayers may find themselves penalized for mistakes made during e-filing, even if they were unaware of the errors at the time of submission.

Recent court cases have upheld penalties against taxpayers who relied on professionals to e-file their returns, emphasizing the need for vigilance and understanding of the e-filing process. Additionally, technical glitches and timing issues can further complicate e-filing, potentially resulting in rejected submissions and missed deadlines.

The proliferation of e-filing requirements imposed by the IRS has also contributed to the complexity and costliness of tax preparation. Mandates for certain organizations and businesses to e-file specific forms have increased the burden on taxpayers and preparers alike.

Despite these challenges, the IRS continues to promote e-filing over paper filing, citing efficiency benefits. However, the preference for electronic filing may overlook the security and fairness concerns associated with this method.

In conclusion, while e-filing offers convenience, taxpayers should be aware of its risks and limitations. Paper filing remains a cumbersome but perhaps safer alternative, providing greater security and flexibility for taxpayers. As the IRS works to address its weaknesses in processing paper forms, taxpayers should carefully consider their options to ensure compliance with tax regulations while safeguarding their financial information.


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