Reasons To File Your Taxes Early

Many taxpayers tend to wait because they see no harm in waiting until April 15th or are not aware of the positive effects from filing their taxes early. This year, try and file your taxes early because there are a number of benefits you can gain. The following are some of the main reasons as to why you should file your taxes early.

1. Tax refunds are processed faster

One of the main benefits of filing your taxes early is that you get your tax returns processed faster. One of the fastest ways to get your tax returns quickly is by filing it electronically. The IRS has been able to introduce the e-filing system that is quicker and allows you to deposit into your bank account directly. Therefore, most CPAs and software file your taxes electronically instead of mailing your papers as this is bound to take longer. It usually takes around 21 days for your tax return to be processed. The earlier you can file, the quicker you are likely to receive the returns.

Only the IRS has the status of your tax refund when it’s processing. After you file your taxes early, you can check with them to determine the status of your refund. This can be done by using the Where’s My Refund tool that is on their website or calls them using their number.

2. Avoid penalties for file extension

Most people who wait until the last minute to file their taxes usually opt for an extension from the IRS. An extension is simply filing for more time to be able to get your financial information together to file your taxes.

Filing for an extension can be beneficial if you pay the balance due on your taxes. However, if you file for an extension and fail to pay the balance, the IRS will charge you interest and other penalties. This will only increase the balance due and cause more strain to your financial situation. To avoid all this, you can file taxes early and have a stress free tax return period.

3. Avoid identity theft

The tax return period is a business to many fraudsters. They usually use this time to rob millions of people of their tax returns by claiming them instead. It is easy to avoid identity theft by filing your taxes early. This way no one can steal your social security number and claim your refund because you have already taken the necessary steps to avoid a mistake in haste.

Tax fraud has reduced over the years, but it is still a crucial issue. It is important for you to gather all your financial information and secure it before a document or tax form is accidentally lost or falls into the wrong hands. This can only be done by filing taxes early.

4. Plan your financial information accordingly

Filing your taxes early gives you plenty of time to plan your financial information. This is essential for people that are not aware of the balance that is due and need to get a hold of all their financial records.

It can also be helpful for individuals that are trying to make huge financial decisions like purchasing a house or a car. Ensure that you prepare your 1040 form early to get time to arrange how you will pay before the April 15 deadline. This is also important because you can decide how you will pay. Whether it is by credit card or debit card you can choose that which best suit you.

5. Have a stress free tax period

This may sound absurd, but it is likely to happen to individuals that wait till last minute to file their tax returns. It can be stressful to file taxes late especially if you do not have a tax professional helping you. This is because you have limited time to prepare your financial records and mode of payment. The rush that comes with last minute filing can also cause you to make errors in your financial record. For instance, you may miscalculate the balance due and end up paying more or less. Paying less will only lead to additional charges in the form of penalties.

Filing your taxes early gives you the opportunity to be in control of your financial situation. Filing taxes late is never good for your finances. It can cause a financial strain especially if you are late on your payment because you will need to pay more. All these can be avoided by filing your taxes today.

About the author

Seattle CPA+John Huddleston has written extensively on tax related subjects of interest to small business owners. He is a graduate of Washington State University and the University of Washington School of Law.