Many people wait till the last minute to file their taxes, which can lead to costly mistakes, unwanted stress, and delayed refunds. This article shows you the benefits of filing your taxes early.
1. Get Your Refund Faster
Each year, the IRS processes millions of tax returns. It takes time to slog through this mountain of paperwork, which means some taxpayers have to wait weeks – and sometimes months – to get their refunds.
That’s why the IRS urges taxpayers to file early, file electronically, and opt to get their refund through direct deposit, which means no waiting for that check in the mail.
If you’re counting on your tax refund to make a down payment on a car, do some home improvements, upgrade your appliances, or cover a big medical bill, filing early gets that money in your hands sooner. If you plan to use your refund to pay off debt, that faster refund can help you pay it down quicker and save on interest.
One more thing: That money you get back from your taxes? That’s actually YOUR money. You just lent it to the government for a year (interest-free, too). How nice of you! When you file taxes early, you get your money back faster. So, why wait? File as soon as the IRS starts accepting returns – generally in mid-to-late January.
2. Reduce Your Stress
It’s no secret that many people dislike doing their taxes as much as getting a root canal, and they’ll delay until the last minute. That kind of procrastination can definitely be stressful – often more stressful than the task itself. Why put yourself through that?
Rushing through your tax return last minute can also lead to mistakes, sometimes costly ones. Errors on your return can delay your refund, so it makes sense to take your time and get it right. Starting early gives you time to gather all your paperwork for potential deductions you may be eligible for, which may lead to a bigger refund. This is especially true if you’re itemizing, which takes more time and documentation than claiming the standard deduction.
So, check off a major chore from your to-do list early in the year and breathe easier without the burden of taxes hanging over your head.
3. Protect Yourself From Identity Theft
Imagine this: You’ve filled out your tax forms, clicked to submit, and then get an alarming message. Your return has been rejected. What went wrong? Most likely, someone used your Social Security number and already filed a tax return, making you a victim of tax refund fraud.
This scam usually happens early in tax season, long before most taxpayers file. Armed with your Social Security number, a scammer has everything they need to file a fraudulent return – and steal your refund.
How can you protect yourself? You might not know if your information has been compromised until the IRS notifies you that your return has been rejected. You can usually clear things up with the agency, but that takes time and can delay your refund. Experts recommend that you file as early as possible so that an identity thief has less time to file a fake return in your name.
Your Social Security number is like gold, so take precautions to protect it and other sensitive personal information. Scammers will try lots of tricks to get your Social Security number, so never give it out over the phone, or in a text or email.
4. Avoid the Rush
Tax season for tax preparers and certified public accountants (CPAs) is like Christmastime for Santa Claus – busy, busy, busy! If you want to make an appointment with a tax professional – especially right before Tax Day – you may find they’re all booked up. Some preparers also charge more to complete a return at the last minute, which can eat into your refund.
Experts agree that the best way to avoid all the hassles is to make an appointment with your tax professional as soon as you can. This gives your tax pro plenty of time to review your return, ask for any additional documentation, and focus on getting you the biggest refund possible.
Even if your return is relatively simple and you do it yourself using tax preparation software, don’t wait until the last minute to file. Rushing increases the chances of errors. Plus, as we said before, the sooner you file, the sooner you get your refund.
5. Give Yourself Time to Plan
Getting a refund is the best-case scenario, but if you end up owing money, doing your taxes early can give you time to create a plan and avoid a last-minute tax bill.
The good news is payment isn’t due until Tax Day. By filing in late January, you can give yourself up to three months to save so you don’t bust your budget. You can also set up a payment plan with the IRS if you aren’t able to pay your tax bill by the filing deadline.
To keep a handle on your finances, the IRS suggests reviewing your withholdings and tax payments in the last quarter of the year – October, November, and December. That way you can adjust withholdings and payments to avoid any surprises.
The Bottom Line
Whether you owe money or expect a refund, getting your taxes done early is a smart move. It will help you reduce stress, avoid mistakes, and protect yourself from identity theft. If you’re getting a refund, it’s a good idea to create a budget so you don’t blow it all on a big spending spree. As the old saying goes, “A penny saved is a penny earned.”
Filing your taxes early offers many benefits. The IRS recommends filing electronically and choosing to receive your refund via direct deposit to your bank account. If you need help planning for or preparing your taxes, consult a tax expert or reach out our Love My Credit Union Rewards for discounts.