So, I “Bit the Bullet” and Finally E-filed Our Taxes

Last year, I wrote a post that described the pros and cons of filing your income taxes by paper or electronically (e-filing). Looking back, it was also a “personal pep talk” for me because I knew I was part of a dying breed of paper income tax filers. 

Only about 8.2% of tax returns are filed by paper or, in numerical terms, nearly 13.2 million tax returns of the nearly 160.8 total returns that are filed. I needed to justify why I was swimming against the tide, so I researched and wrote the post.

My Rationale for Paper Filing

 

In my prior post, I noted that I am a tax geek. I actually like preparing our household tax return because it provides valuable insights into our finances. To me, it feels like piecing together a quilt or completing a complex jigsaw puzzle. The reward is having all the pieces fit together at the end.

 

I’m also frugal. I reasoned…why pay for software or a tax preparer to do something that I could easily do, myself, for free? I was also busy and didn’t want to take the time to transfer all my hand-calculated data into IRS Free File Fillable Forms and then figure out how to e-file it.

 

In addition, last year we owed tax, so there was no tax refund to wait for or get stolen by identity thieves. I knew the IRS was swamped but, if they didn’t get to my tax return for 4 or 5 months, so what? That was not my problem. It was theirs. Last year, I couldn’t see a personal downside to paper filing and the cost was minimal (priority mail and printing forms).

 

Here’s What Happened to Our Tax Return

 

In a word, nothing. Okay…very little. Yes, the IRS got my paper filed tax return. I know this from USPS priority mail tracking and the fact that they cashed my check. After that, my return probably went into a file folder on a table in the cafeteria of the Austin, TX processing center. It may still be there now. Check out the photo in the article link above. Wow! A massive sea of paper tax returns just sitting there!

Last November (2022), I knew something was wrong. I was due a benefit increase from Social Security because my 2021 earnings as an entrepreneur should have knocked out a low-earning year from my teens in the 35-year benefit calculation formula. The Social Security Administration (SSA) has not yet sent me that letter.

When we got the SSA notice at year-end about 2023 Social Security benefits, our 2023 Medicare premiums were based on 2020 income, instead of 2021 income as they should have been with a two-year look back. Obviously, if our tax return has not yet been processed, the IRS cannot send SSA the current data that it needs.

So, I found out that there is another downside to paper filing besides those that I wrote about last year: for older adults, it’s being caught in between two federal government agencies that share tax data with one another. Someday- I don’t know when- SSA will get our 2021 tax information from the IRS and send us a few letters.

So…We Capitulated

This year, I hired a tax pro to file our tax return electronically. First, we are due a refund and want our money quickly. Second, I don’t want to compound the SSA problem. We pay IRMAA tax and the gap between what we should be paying for Medicare and are not keeps growing. Eventually, we’ll have to pay back what we owe.

I hand-calculated everything as usual, again because I enjoy it and also because line-by-line tax preparation is a very useful financial planning aid. My draft also saved the tax pro time, which saved me money. 

He taught me a thing or two but, in the end, the difference between our tax calculations was a negligible $37, much less than the cost of the e-filing tax-preparer. 

Next year, with a good template to follow, I may just try to tackle tax software.

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.