Every April, many taxpayers wait until the last minute to file their federal income tax returns, whether from taking more time to find and organize their documents or from simple procrastination. As long as individuals get their taxes in by the April 15 deadline, they will not incur any late filing penalties. However, waiting until then can still complicate tax matters and there are a number of benefits that come with filing sooner rather than later.
Extra Time to Pay Balance Due
Individuals who anticipate owing a tax liability may not be aware of how high their bill will be. This extra time is particularly helpful to those who need to find out exactly how much they will owe the IRS or State, giving them more time to save money or reorganize their finances before their balance is due on the filing deadline in mid-April.
Faster Refunds
This is the most obvious reason a taxpayer might want to file as early as possible, but try not to fall into the trap of thinking you need the refund before the IRS can get it to you. Some tax preparation services offer refund anticipation loans, which have steep fees that eat into that refund. Submitting your return electronically with direct deposit into your bank account is the fastest way to get your refund. It can take up to several weeks longer for paper returns, so it is always better to e-file a return if you want to receive your refund quickly. This quicker return can be used to bump up savings, plan a vacation or pay down debt. Either way, early filing will put individuals in a position to better manage their finances and plan ahead.
The earlier you begin, the less stressful filing will be!
Early tax filers may also find that tax season – traditionally classified as a stressful time for individuals – is made simpler and more efficient the earlier they begin. This is the case for a number of reasons. First, early filers will likely already have their documentation in order for claiming credits and deductions, which can greatly cut down on the time it takes looking for this information.
Additionally, those who begin early on may have more time with their tax preparer than those who wait until the last minute. The closer to April 15 we get, the busier tax preparers often become. Therefore, individuals who want to have several meetings with a professional or extended sessions might benefit from setting up an initial meeting early. This will give them a great deal of time to ask questions, get advice on their particular situations and review their returns.
Obtaining Financial Information
If you are expecting a big life change such as purchasing a house or returning to college, preparing your tax return early can help you obtain essential information. College students use the information from Form 1040 to apply for financial aid, while prospective homebuyers often have to show their completed tax return as proof of their household income. Getting your tax return done early — whether you owe money or expect a refund — gives you a head start on the paperwork you will need for these processes.
You’ll lessen your odds of becoming a victim of identity theft.
The sooner you file your return, the less opportunity someone else has to file a return in your name, which has become a popular form of identity theft. Refund fraud caused by identity theft is one of the biggest challenges facing the IRS. Some criminals have been known to break into a home or car, steal identification and then file taxes in that person’s name, scoring a refund that doesn’t belong to them. While the odds are slim that that will happen to you, it is another reason to file earlier rather than later.
There’s more time to catch potential mistakes.
If you wade into your taxes now and discover there’s paperwork you need that you don’t have, or it’s simply going to be a more complicated tax year than you anticipated, you may not end up filing early, but now you have more time to spend on your taxes.