5 Good Reasons to File Your Tax Return Early This Year (and Every Year)
By Tracy L. Hirsch
Filing your federal tax return at the beginning of the year has multiple advantages, both financially and emotionally.
Nobody enjoys filing their tax returns. Taking time and effort (and money if you hire someone to do them for you) to do something boring and anxiety-inducing isn’t at the top of most people’s “must do immediately” list.
Most of us put it off as long as possible, however, the sooner you get it over with, the more benefits you’ll enjoy.
Here are five good incentives to file your federal tax return now:
1.) You’ll receive your tax refund more quickly.
If you know that you’re going to get a 2019 tax refund, you’ll receive it a lot sooner if you file your return at the beginning of the year. If you’re looking to update your kitchen cabinets, pay off a small amount of credit card debt, or take a vacation, you’ll most likely be able to do it by the end of February instead of the end of April if you do your tax filing this week.
Who doesn’t want their hard-earned money as soon as possible? If you file electronically, you’ll get your refund even sooner as opposed to requesting a mailed check. A refund in your bank account in a matter of days? Yes, please!
Filing your taxes early with the IRS (and the Kentucky Department of Revenue) has major benefits, one of them being that you’ll get your refund sooner.
2.) You’ll have more time to pay any taxes that you might owe.
If you aren’t receiving a refund this year, and actually owe money instead, it’s still a good idea to file your tax return early. While no one wants to have to owe taxes, it’s best to complete your filing in January or February since you still don’t have to pay what you owe until April 15th.
There are two advantages to this. First, you’ll find out exactly what you owe. In an ideal situation, you might be surprised to find out that you owe less than you had guessed! However, if you owe a lot more than you thought you would, filing early gives you plenty of time to weigh your options.
Second, if you file early, you’ll know how much to save so that you can pay your taxes in full. If you determine that you owe a small enough amount to pay in full by mid-April, you’ll have at least two full months to set money aside.
This not only helps you avoid getting stuck with a huge tax bill right after you file (if you wait to file at the beginning of April), but also avoids a high amount of anxiety. Feeling prepared and having a plan will save you an enormous amount of emotional distress, and we could all use less stress!
3.) You’ll avoid having to file a costly tax extension.
Speaking of stress, staying organized will help you avoid the angst that comes with filing an extension. One of the most common reasons for filing an extension is due to the inability to pay what is owed. While an extension may seem like a good idea, it actually makes things a lot worse.
An extension does give you extra time to file your tax return, however it doesn’t give you extra time to pay what you owe. If you don’t pay what you owe by April 15th, the IRS will tack penalty fees and interest onto your outstanding tax balance.
That’s why it’s a good idea to file early, so that you have time to put a plan in place. If you know that you owe way more than you could possibly pay, it’s best to meet with a local bankruptcy attorney to see if you qualify for a Chapter 13 bankruptcy.
This will help you reorganize your debts so that you can pay your taxes in monthly installments (in addition to any other debts you may have), which is a much better option than not paying at all.
4.) You’ll help prevent tax-related identity theft.
Whenever you open a bank account, purchase a home, file your taxes, or complete any other type of transaction that requires your social security number, be sure to keep it as secure as possible. Never send your SSN through an unencrypted email, text message, or social media private messaging account.
Ideally, you’ll give it directly to a banker or CPA in person, or fax or send it in the mail if you can’t deliver the paperwork yourself. There are lots of reasons to be extra careful with your SSN, and one of them is to avoid a fraudulent tax return in your name. Criminals who obtain your SSN can use it to intercept your tax refund and keep it for themselves.
They usually do this early in the tax season since they know that a majority of tax payers don’t file until March or April. In order to avoid the likelihood of this happening, file your taxes as early as possible so that criminals don’t even have the opportunity to steal your refund!
5.) You’ll be able to obtain important financial information for a big life event.
Are you planning on going to grad school or buying a new home? If so, you should file your tax return early. Students need the information on their 1040 form so that they can apply for financial aid, and prospective home buyers need to show proof of income with their completed tax return.
Filing your tax return early gives you plenty of time to gather all pertinent financial documents so that you can start the home buying process or financial aid process sooner than you expected. If you’ve been eyeing your dream home recently, filing your tax return now might help you obtain it!
As you can see, there aren’t really any downsides to filing your federal tax return early in the tax season. So go ahead and carve out some time this week to do it – your bank account and blood pressure will thank you!