Remember in grade school when you had to stand in line for lunch? Those in the front of the line enjoyed the best pick of whatever was offered while those in the back had to settle for leftovers, cold options, or whatever choice was least popular. The same behavior tends to apply to filing income taxes, and there are some key reasons why you want to get your filings in early.
Take Advantage of Filing Early While Everyone Else Waits
The first benefit is just plain timing. The tax filings that are sent in early get responded to and processed fast. In fact with e-filing, regular personal income taxes could be turned around as quickly as two weeks from the date of electronic transmittal. That's because the bulk of filers wait until April to avoid paying early. However, if you're owed a refund, you're just giving the government a free loan on your money letting it sit with the IRS. File early when the agency is not getting slammed with work, and your filing will most likely be handled much quicker by the IRS computers. The only reason for a delay is if there is something tricky with your filings (such as not declaring income when a party has already filed a big MISC 1099 showing payments to you) or, worst case scenario, someone committed identity theft and filed for a tax refund with your social security number. Both will cause an immediate flag on the IRS side as they go through automated checks.
Earlier Filing Means An Earlier Notification If Something Is Amiss
The second benefit is avoiding something we touched on earlier: identity theft. If your identity is compromised, it is to your advantage to get your tax filing in early. It can be an extremely challenging task trying to get the IRS to realize it made a mistake and processed a fraudulent tax refund. The straightening out of the matter and actual refund payment could take longer than a year, well after the time you expected to get your normal refund. Get in early, and you shut off the ability for a tax scam artist to use your identity.
File Early To Avoid Late Fees
Third, by filing early you get the task out of the way and avoid the risk of being late. Filing late triggers automatic penalties which, in the tax world, means costs. Many Americans wait until the deadline, but as we all know, life happens. Folks get caught up in an issue and become those filers seen on TV scrambling to get their filing to the post office before the cut off hour on April 15. If you know you're going to need more time, just ask for an extension. The approval is automatic and then you your extended deadline to file will be October 15. However, interest on amounts owed does start to add up.
Tax filing takes some work, no question about it. However, there are big advantages to filing early to protect your financial interests.
This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. The information in this material is not intended as investment, tax, or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.