Why Should You File Your Taxes Early? Our Top 5 Reasons
Every year, many taxpayers wait until the last minute to file their federal income tax returns. Despite this tendency, there are many reasons to file your taxes early. If you will receive a refund, you may want to submit your return as quickly as possible. Additionally, there are benefits to filing early for those taxpayers who have a balance due.
- What’s considered early tax filing?
- What’s the earliest you can file your taxes?
- What happens if you file your taxes early?
• One of the most common reasons to file taxes early is to receive a tax refund sooner. E-filing will enable you to receive your refund even more quickly.
• If you owe tax, filing early will give you time to prepare for your tax payment, since you don’t have to pay the taxes you owe until the filing deadline.
• Preparing your tax return early can help you obtain essential information for major financial moves, including purchasing a house and returning to college.
• Getting an early start on your taxes decreases the likelihood that you will need the assistance of a tax professional to help you sort your finances and complete your return on time.
What’s considered early tax filing?
When you file your taxes early, this means that you’re filing your tax return well in advance of the mid-April filing deadline. Since the IRS typically begins accepting tax returns in January, early tax filing can mean that you’re filing your taxes any time between early January and late March.
Once April rolls around, the filing deadline is just around the corner and you won’t have much time to prepare your tax return.
What’s the earliest you can file your taxes?
Although the exact date that tax filing season begins varies from year to year, it generally falls around mid- to late January. Refer to the IRS website to find out the exact date that tax filing season begins for the upcoming year.
Keep in mind that, while you can technically file a return on the first day of tax filing season, other factors may complicate this timeline.
For example, January 31 is the deadline for businesses to issue Form W-2 and Form 1099 to employees and contractors. If your employer waits until the deadline to issue these key forms or other types of documentation, then you may not be able to file a return in the very first days of tax season.
What happens if you file your taxes early?
In addition to relieving some of the stress associated with last-minute tax filing, there are some very good reasons to file your taxes earlier rather than later.
1. Faster tax refunds
One of the most common reasons to file taxes early is to receive a faster tax refund. Filing 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.
The IRS is scheduled to begin accepting e-filed returns this year on January 23.
2. Extra time to pay taxes you owe
If you owe a balance due to the IRS, you may still have a good reason to file your tax return as soon as you can. If you submit your return in the middle of January, you do not have to pay taxes you owe until the filing deadline. Preparing your Form 1040 early will give you time to arrange your payment. This extra time is particularly helpful to taxpayers who need to find out exactly how much they will owe the IRS.
TurboTax Tip: Filing early helps prevent someone else from filing your tax return before you do and pocketing your tax refund–one of the most common ways criminals file a fraudulent tax return.
3. 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.
4. Avoiding a tax extension
Filing your tax return early may help eliminate the need to file an extension. Extensions of time are often required as a result of disorganization more than financial need. Some people who wait until the last minute to file their returns simply need time to look for additional deductions or gather receipts.
- Push the process too close to the filing deadline, and you increase the likelihood that you will need the assistance of a tax professional to help you sort your finances and complete your return.
- Even worse, if you file an extension but don't pay what you owe if you have a balance due, the IRS will charge you interest and penalties on the outstanding tax debt until it is paid in full.
- Preparing your tax return early in the year helps you avoid this situation.
5. Preventing tax return identity theft
Once someone gets access to your Social Security number, they have everything necessary to file a tax return in your name. The purpose of a fraudulent tax return is, obviously, not to pay your back taxes, but to pocket your tax refund. This scam occurs early in the tax season, well before most taxpayers file. Take every possible precaution to keep your SSN secret, and if possible, file your taxes early before someone else does.
Is it better to file your taxes early?
There are a lot of benefits that come with filing your taxes early.
Filing early allows you to get your tax refund more quickly, gives you more time to prepare payment for any taxes you owe, and can provide you with important financial information, among other benefits. Plus, filing your taxes early and getting the process over with can alleviate some stress and make it so that you’re not rushing to get your tax return in at the last minute.
At the same time, there are valid reasons why you can’t or might not want to file your taxes early. In some cases, you may be waiting to receive forms or documents that are crucial to filing your taxes.
You may have an extremely busy schedule or events in your personal life that prevent you from filing your taxes early. Ultimately, whether or not it’s “better” to file your taxes early depends on your unique circumstances and preferences.
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