6 reasons to file your taxes early
Thursday, January 09, 2020
The 2020 filing season starts on Jan. 27 and millions of taxpayers already are ready to send their 1040s to the Internal Revenue Service on that day.
Most of these folks are expecting refunds.
But that's just one reason to file your taxes early. Here are six reasons to finish up your Form 1040 and get it to the IRS ASAP.
1. To get your refund sooner.
Yes, a tax refund is always the top reason to file your taxes as early as you can.
I could go on (and on and on) about how it's better to adjust your withholding and get that tax money in each paycheck throughout the year, instead of letting the Bank of Uncle Sam hold onto it for months without paying you any interest.
But I get it. Some folks just aren't good at money management. Heck, some of them are my relatives! They need the untouchable forced savings account. And with the minuscule interest rates, owners of basic bank savings accounts aren't getting much of a return. So, I'm not going to preach, at least not any more in this post.
If you are due a federal tax refund, your best move in addition to filing as soon as you can is to do so electronically and have the refund directly deposited into a bank or other financial institution account. The IRS says this combination should mean your refund will show up in that account within 21 days of processing. In some cases, the tax cash turnaround could be even quicker.
And if your adjusted gross income is $69,000 or less, you can file for free at, where else, Free File. The online tax preparation and e-filing option is not available yet, but will be by the time Jan. 27 arrives.
Filing the old-fashioned paper way, meanwhile, could add weeks to your refund delivery.
Note, however, that regardless of how you file, if you're claiming a couple of popular tax breaks, the IRS is required by law to hang onto your refund for a while. The IRS can't issue refunds until mid-February at the earliest when taxpayer returns include the Earned Income Tax Credit and/or the Additional Child Tax Credit.
Still, getting your return with these credit claims into the IRS sooner will get you at the front end of that delayed refund issuance line.
2. To beat tax ID thieves to the punch.
The IRS and its Security Summit partners have made good progress in recent years in reducing tax identity theft and refund fraud.
Among those steps is increased filing filters to help catch any suspicious-looking 1040s. The downside of this added security is that it naturally slows things down. So you want to get your return in soon so it can be OK'ed and moved through the processing line.
By doing so, if tax identity thieves try to file under your name and Social Security number, the crooks will discover that you beat them to the tax punch!
If, however, a criminal falsely files a return as you, when you do get around to sending in your legitimate tax return, the IRS will kick it back to you since its records will show that "you" have already filed and been sent "your" refund. Clearing up the fake tax filing mess can take time, time that you're without your legal refund.
Instead, prevent that by filing before the crooks do.
3. To figure out how to pay what you owe.
Most folks who put off filing do so because they know they owe taxes. But filing early actually can help in this situation.
The sooner you fill out your Form 1040, the sooner you'll know exactly how much is still due the U.S. Treasury.
The tax bills can be because taxpayers didn't adjust their withholding to take into account the changes under the Tax Cuts and Jobs Act (TCJA). That's not expected to be as big a problem as it was last filing season, but there always are some folks who just don't get their W-4 calculations correct.
Other owing taxpayers had side hustles and forgot (or ignored) the need to pay estimated taxes on their gig earnings.
Whatever the reason for an unexpected tax bill, when you're armed with specific tax dollars due knowledge, you can figure out how to come up with the cash. Do you need to raid an emergency savings account? Or borrow from a family member? Or put it on a credit card (don't forget to take those fees into account!)? Or set up an installment payment with the IRS?
Remember, too, that you don't have to send that tax due amount when you file your form. You can submit your 1040 early and wait until the April 15 deadline to send in the money you owe.
When you do get around to delivering the due tax amount, you can do so electronically via the various e-payment options accepted by the IRS.
Or if you decide to send your tax payment via check or money order after filing your forms, you'll need to complete and include with your payment a Form 1040-V payment voucher. Just make sure it's got a snail mail postmark by April 15 so the IRS will count you as timely filed and not charge you any late-payment penalties.
4. To find a tax professional.
If you need the help of an educated, experienced tax professional to finish your return, you're more likely to find that help earlier in the tax season. As the filing deadline nears, it's generally tougher to get on a good tax pro's schedule.
In fact, as filing crunch time nears, if you can hire the tax pro you want, he or she probably will have to file an extension for you because they are working on the returns of other clients who came to them earlier.
There's also the basic economics of hiring a tax pro earlier in the season. Most tax preparers will charge more to work on returns as the filing deadline nears.
5. To get to work on your state taxes.
I live in Texas, one of the handful of states doesn't impose any type of income tax. But most Americans have to also file state tax returns in additional to their federal 1040s.
In most of these tax-collecting states (and the District of Columbia), your federal return is the foundation for filing your state and local taxes.
The sooner you finish your federal return, the sooner you can tackle your state and local tax counterparts and get any refund you might be due from those tax jurisdictions.
6. To clear the tax deck and start focusing on your 2020 taxes.
I know, you just want to be done with your tax return and take a break. If only.
Taxes always force us into a balancing act. At this time of year, we're working on last year's taxes while also trying to make moves this year to cut the amount we'll owe when we file this year's taxes next year.
With this tax convergence, it's no wonder the genius Albert Einstein, whose groundbreaking theory of relativity about time and space, would also observe that, "The hardest thing in the world to understand is income taxes."
All the science aside, the sooner you can be done with the 2019 tax year, the sooner you can focus this year's necessary tax actions, some of which show up every month in the (shameless plug alert!) ol' blog's right column as Monthly Tax Moves.
Your 2019 tax year return results also will make it clear whether you ended up in a good or bad tax situation, providing guidance on tax steps you need to take for the 2020 tax year.
So what are you waiting for, aside from IRS' Jan. 27 official opening of tax-filing season? Get to work on that 2019 return now!
You also might find these items of interest:
- 5 tax tips for Free File users
- The pros and cons of tax refunds
- 2019 tax return filing checklist, including documents itemizers need to complete Schedule A
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