Pros and Cons of Filing Your Taxes Early
Do you rush to file your tax returns as soon as possible? Do you gather all your documentation and stand at the IRS virtual door on opening day? As with everything, filing early has its pros and cons, but is filing early really a good idea?? Like many things in life, the answer is, “It depends.”
Not every situation is conducive to filing early. Filing for an extension and putting it off as long as possible may make more sense for some filers. Read on to learn the good, the bad, and sometimes the downright ugly of filing early and why waiting might be best.
Your security. This is probably the best reason to file early and therefore makes #1 on my list. Filing your taxes early can protect you from would-be cyber thieves.
The IRS will only allow one return per social security number, and it’s first come first served. If your social security number has been hijacked, you will get a rejection notice from the IRS.
At this point, you will need to file a claim and start the process of proving your identity, and you will have to show proof you weren’t involved in committing fraud against the IRS. Most of these cases do not get resolved until after tax season. Protect yourself now! Get ahead of the cybercrooks by protecting your computer and devices. Enroll in Cybersecurity At Home and discover how quick and simple it is to secure your home network.
Receive your refund sooner. Obviously, It’s your money! Who doesn’t want their money as quickly as possible?
If you’re owed a tax refund, then the earlier you file, the faster the refund. This is especially true if you’re going to mail your return (yes, 30% still use the mail). As you can probably imagine, the IRS is less busy in February than in April.
Be free of the mental clutter. It has to get done one way or the other. It makes sense to get it over with and free yourself from it hanging over your head. Life is easier if you don’t procrastinate. Just do it.
The post office is less crowded. Remember what I said about 30% still mail their returns? That’s over 62 million of the adult US population trying to use the post office at roughly the same time. Many people don’t want to file electronically for a variety of reasons, one being security! Avoid the crowds and file early.
You won’t be late. I have a knack for stating the obvious. How can you be late if you file early?
Many of us plan to do things with the best of intentions, then life happens, and they usually end up waiting until the last minute.
I don't have to point out how risky that can be. What if you find out that you’re missing some key piece of information? What if you get sick? There are too many variables in life to put off something like filing your tax return until the last minute.
You’ll be more accurate. Starting your return early will keep you from rushing through it, thus ensuring that you have everything you need and that it’s done correctly. Remember, slow and steady wins the race. If you’re not rushed for time, you’ll be more likely to avoid errors.
Why pay early? You want to file early when you expect a refund, but why would you want to pay early? It's your money!
If you owe the IRS, you’ll want to keep it as long as you can, maybe even make a little more in interest. It makes sense to keep your money as long as you can.
You might end up having to file a corrected return later. W-2s and 1099s are due February 1; however, It’s not uncommon to get them late or for providers to come back a month after sending your documentation and say, “Oops, we made a mistake.” Taking a little extra time to file your return will give you that much more time to gather your documents and ensure that you don’t have to do it more than once.
Early filers have a greater chance of being audited. If you file early, are you more likely to get audited? I’m not sure if we can ever answer that definitively. Still, it is believed that if the vast majority of the population is filing at the last minute, the odds of being selected are minimal due to the sheer number of tax returns the IRS agents must handle. Truth or fiction? No one knows, but why take a chance.
Consider the above factors when deciding to file your tax return. If you’re in a situation that puts you at risk of being audited, and you don’t need your refund or copies of your return right away, it can be wise to wait.
On the other hand, if your return is simple, you’re due a refund, and you need the refund now; there’s no time like the present to file your return.
Assess your situation and make the smart choice for your circumstances.
Need help preparing your return? Have a question? Why not set up a courtesy call with me?