The Benefits of Filing Your Taxes Early
While many taxpayers file their tax returns around April 15, you can do it much sooner. Filing an early tax return may make sense for various reasons, including receiving your refund sooner and reducing your identity theft risk.
Even if you don't file early, there are compelling reasons to begin tax preparation as soon as possible. For starters, it allows you to gather the documents and information needed to claim your deductions, saving you the headache of last-minute stress over receipts.
If you hire a paid preparer like Duran Business Group, your accountant can work on your accounts sooner. Furthermore, if your tax return is prepared during non-peak times, tax preparers may charge lower fees or an hourly rate.
With W-2s coming out in late January, you have plenty of time to meet the April deadlines. However, it's almost always better to file your taxes early. Here are some other main reasons why.
- You will receive your tax refund sooner.
It's best to file early if you want your tax refund in your bank account as soon as possible. Getting a head start on your tax return means you'll be among the first to receive your refund. When the IRS begins processing returns, choosing to e-file and receive your refund via direct deposit is the quickest way to receive your money.
When the government owes you money, you should get it as soon as possible. The sooner you get your money, the more time you have to put it to good use! For example, you could use the extra tax refund money to pay off a credit card bill, eliminating the need to pay interest on outstanding debt.
- You'll have more time to organize yourself.
Most people aren’t as organized as they should be when it comes to filing taxes. The benefit of tax planning using online software is that you can begin filing your federal and state returns early and then continue to update them as you receive tax forms (W-2s, 1099s, etc.).
For example, suppose you wait until the last minute to file your federal income tax return. You realize you need to include some important forms in the middle of filing, and you need more time to locate the required paperwork.
Waiting to file can make it hard to do so. Filing early in the year makes it easy to remember which tax-deductible expenses and credits you can claim. Remembering what happened over a year ago could be easier if you kept adequate records. It's best to file early while the previous year is still fresh in your mind, especially if you have itemized deductions.
Giving yourself that extra time to file helps you avoid filing a tax extension and increases your chances of filing a complete tax return (and a larger tax refund!).
- You will have additional time to pay your tax bill
If you owe the IRS money, completing your return early gives you more time to pay your tax bill. You have until the April 18, 2023, tax deadline to file your taxes and pay the amount owed. If you're on a tight budget and expect a tax bill, completing the forms early gives you more time to plan for that payment. That way, you can also avoid paying late penalties and interest on any outstanding tax debt.
It's also worth noting that the IRS provides several different repayment options for American families who cannot pay their entire tax balance out of pocket. Filers can apply for a payment plan with the IRS, if necessary, but they will almost certainly have to pay late fees. File as soon as possible to give yourself time to budget for a potential bill.
- You will decrease the risk of tax fraud.
Tax fraud, unfortunately, is a common form of identity theft. If someone obtains your Social Security number, they will have everything necessary to file a federal tax return in your name to steal your tax refund.
Filing your taxes early reduces the likelihood of tax fraud. The sooner you file your IRS return, the less time a criminal has to file a false tax return in your name and force you to call upon tax representation to get you out of the mess.
When Do I Have to File My Tax Return?
You can file as soon as you have all the necessary information. With W-2s due at the end of January, that makes early February a feasible time to get your taxes in. You may need to wait for documentation, such as 1099s from investment income, but your accountant can help you determine the earliest, best date for your filing purposes.
Owners of pass-through entities like a partnership or S-corporation may receive tax forms for their business revenue in March. On the other hand, employees should have received their pay information by now. Employers must mail all W-2 forms, which record employee wages, tax withholding, and other data needed for tax filings, by January 31. The same deadline applies to 1099 forms, sent to independent contractors or used to report nonwage income such as interest or distributions from retirement accounts.
What Do I Need to File My Taxes Early?
Depending on the intricacy of your income and tax status, you could need the following papers to file your tax return:
- W-2 records from jobs that pay wages.
- Independent contractors and gig workers receive 1099 forms.
- Dividend, brokerage, and retirement income are all reported on Forms 1099.
- Mortgage and property tax statements are necessary for itemizing deductions.
- For itemizing deductions, copies of medical bills and donation receipts are required.
- Schedule C business deductions receipts for company expenses.
- For partnership income, use the K-1 form.
To ensure you have all the required documentation for filing, consider where you earned money in the last year and where you invested it. You can also look over your tax papers from last year, using them as a guide to help you stay organized. Contact us today to get started!