While it might be easy to wait until April to file your taxes, fighting the temptation to procrastinate can have some serious advantages, and not just relief from the nagging feeling that you’re ignoring something important.
More Time to Prepare
Taxes can be complicated. What exactly can you deduct from your taxable income? Is it better to take the standard deduction, or itemize deductions? A tax professional or tax software can make these calculations much easier, but gathering the documentation you need — W-2s, 1099s and receipts — still takes time. If you wait until the last minute, you sacrifice valuable time that you could be using to talk to your tax professional about your best options or review your return for errors.
Finding errors after your return has been filed can be costly, in terms of both time spent filing an amended return and potential penalties if you owe more in taxes than you originally thought.
Get an Early Refund…Or More Time to Pay
Many Americans over pay their taxes every year and look forward to a refund at tax time. If you’re among them, the earlier your file your taxes, the earlier that refund makes it to your bank account to pay off bills, save for retirement, or buy something new. Keep in mind that refund processing times tend to increases as April 15th draws closer, so filing early benefits your refund time double — the process starts earlier, and takes less time.
If, on the other hand, you end up owing extra come tax time, filing your return early is still beneficial. The difference between what you’ve already paid and what you owe is due on April 15th, and after that the IRS begins to assess penalties for late payment. Getting a head start on your return means that you’ll know what you owe before the deadline, and it gives you time to budget for the extra expense.
You can request an extension, but it only applies to filing your return: Any taxes you owe that aren’t paid by April 15th will still accrue interest and penalties.
Proof of Income
If you’re a student applying for financial aid or a home buyer, you’ll probably be required to provide your tax return as proof of income during the application process. Knocking your return out early in the season means you’ll have it handily available if you find yourself in those markets.
Reduce Identity Theft
The IRS has a page on its website devoted to tax-related identity theft. Anyone with your personal information can submit a tax return in your name, directing your refund to their account or saddling you with taxes you shouldn’t owe. Warning signs include notification that your social security number was used on more than one return or records that you received wages from an unknown employer.
Most tax-related identity theft occurs early in the tax season, which started even earlier this year, on January 20, 2015, and filing early reduces your risk.
Information is power. Taking care of your taxes early in the tax season reduces tax-related stress, helps prepare you for financial decision-making, and reduces your exposure to identity theft.
*Guest post courtesy of Checkworks.com, a leading supplier of personal and business checks.