We are fully in the throes of tax season, but time after time, I hear clients tell me how they generally wait until the last minute to file. Even though many taxpayers file their tax returns on or about April 15, you don’t have to. In fact, filing an early tax return makes sense for a variety of reasons:
FASTER REFUNDS
The normal wait for a federal tax refund is less than 21 calendar days from when the IRS accepts your return. Filing sooner means a faster refund because the IRS won’t be as busy early in tax season as it will be in April. You could also potentially receive your state refund faster. State refunds vary by state, but you normally must file your federal return first. When you file electronically, the IRS's system acknowledges receipt of your state tax return and passes it to the state for processing. If you have money coming to you there’s no reason letting the government keep it longer than necessary and puts the money in your hands sooner.
FRAUD PROTECTION
The IRS recommends filing your taxes as early as possible as a security measure. Tax return receipt and processing is a first come-first serve process. In the event a thief gets hold of your social security number and files a false tax return to claim your refund, having that corrected can take months. This is especially important when dealing with children, for which fraud occurs frequently because of the benefits of claiming dependents.
PEACE OF MIND
When you file early, you avoid procrastination by giving yourself peace of mind from being able to check this off things-to-do list. Filing early also gives you time to fully understand changes to tax law or deal with changes in your life that alter your filing status. Rushing at the last minute can lead to mistakes that trigger audits, potentially leading to penalties and interest. In addition, if you find that you owe for Federal or state tax due, you give yourself time to pay since payment isn’t due until tax deadline. This gives you more time to plan how you will pay, or set up a payment arrangement as needed.