What Are the Benefits of Filing Your Taxes Early?
Each year, tax season looms large. Everyone has to prepare a tax return and file it with the IRS by mid-April – and most people put this off until right before the deadline. Why file early when there’s no reason to do so?
Well, it turns out filing your taxes earlier rather than later can be beneficial. When you file your tax return ahead of the April deadline, you’re able to take advantage of unique perks. And those small but meaningful benefits could wind up being particularly important.
So, what kinds of advantages are there to filing early?
Get Your Tax Refund Earlier
There’s one silver lining to tax season: tax refunds. Many people get money back after filing, with refunds anywhere from a few hundred to a few thousand dollars. In 2018, the average refund totaled $2,860.
While you’re guaranteed to get your refund at some point after filing your tax return, there can be delays. An influx of tax returns can slow down the refund process – so if you file when everyone else is filing, you’ll have to wait to see your refund.
However, the IRS actually begins processing refunds very early into the new year. In 2020, the IRS began issuing refunds on January 27. That means you could get your taxes filed and your refund in the bank before the new year really even begins.
And when you file early, you’ll likely get your refund faster. The IRS doesn’t get busy – at least in terms of tax returns – until late March or April. So, if you file before there’s a huge influx of others’ tax returns, your refund will be smoothly and quickly processed, getting the money to you in mere days or weeks instead of months.
Catch Mistakes and Avoid Amending Your Return
Have you ever wondered what happens when you make a mistake on your tax return? Many people assume even a small mistake leads to huge trouble with the IRS.
In reality, when you make a mistake on your taxes, you’ll have to correct it. That means you’ll have to create what’s called an amended return.
When you have an amended return, you’ll have to work with the IRS to correct the errors. This can be as simple as confirming your personal information or verifying financial data with past years’ tax returns. But it could also lead to an audit. Audits can cost you money in additional taxes, fees, and even legal fees. And they can be particularly frustrating for your financial future.
When you file your taxes early, you’re able to take your time. The extra months – or even weeks – of preparation allow you to double- and triple-check your tax return for incorrect information. And that can help you avoid an amended return and reduce the odds of being audited.
Avoid Potential Penalties
Even if you have the best intentions of filing your taxes before the April deadline, things can happen. Your tax return can be delayed thanks to the post office or crowded IRS offices. Returns can even get lost in the mail.
And if one of these unexpected mishaps occurs, you’ll have to face potential penalties. These penalties typically include late fees and are charged to people who owe the IRS money.
When you file your taxes early, you can avoid all of the possible penalties. Filing well before the April deadline means you can ensure your return gets submitted on time – and it’ll avoid crowds and other delays that can happen in the last weeks and days of tax season.
Prevent Identity Theft
You probably don’t think about identity theft when it comes to your tax return. After all, why would identity thieves want to file your tax return for you?
Identity theft in the form of fake tax returns is actually very common. And it’s a crime that’s growing in popularity. In 2013, the IRS paid out $5.8 billion in bogus tax refunds to identity theft criminals. That number has only been increasing each year.
And the longer you wait to file your taxes, the higher your risk is for identity theft. Identity thieves like to file early so they can go undetected. If they beat you to the punch and file a tax return with your information before you do so, they’ll get to claim false deductions, steal your refund, and wreak havoc on your life. Even worse, if a criminal fails to report income or performs other illegal behavior in your name, you’ll have a huge mess on your hands that won’t be easy to fix.
Filing early makes you less vulnerable to this kind of crime. If you file your tax return early in the season, you’ll be one step ahead of potential criminals. And that can save you time, money, and many headaches.
Get Started on Your Taxes Before April 15 Arrives
There are so many reasons to get a jump start on your taxes this year. Why wait until the last minute where there are plenty of benefits to starting now? You can avoid serious problems, lower your risk of getting audited, and even put cash in your pocket earlier via your refund.
Take the time to prepare your taxes now, before the April deadline arrives. You can work with a professional who’s an expert in tax law, or you can use online software and services that guide you through the process. Either way, getting your taxes ready now can be highly beneficial.