The Internal Revenue Service won't start processing 2022 tax year returns until Jan. 23, but you can file before then. A lot of folks are doing just that.
The most common and obvious motive for filing early is to get the refund you're expecting.
But there are some other reasons you might want to get your return to the IRS as soon as possible.
1. 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.
One major step has been to let all taxpayers apply for an Identity Protection Personal Identification Number, or IP PIN, to further thwart would-be ID thieves. The IRS also continues to use multiple 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 the IRS can confirm it's from you and move it through the processing line.
Plus, when the IRS gets your real Form 1040 first and is done with it, any tax identity thieves who try to file under your name and Social Security number will discover that you beat them to the tax punch!
2. 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.
You don't have to pay your tax bill when you file. You just have to pay by Tax Day, which is April 18 this year.
The sooner you fill out your Form 1040, the sooner you'll know exactly how much you owe the U.S. Treasury. Then you'll have time to 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 and interest into account!)? You also can explore the IRS' various extended payment options if you can't come up with the full amount at once.
3. To talk with a tax professional.
OK, if you've decided you need professional tax help, you really should have started that search process sooner. Like last year. But January is way better than April when it comes to finding a tax pro who's taking on new clients.
Once you do find the perfect professional tax help for your circumstances, you'll also have a better shot at working with that person before Tax Day. As filing crunch time nears, even if you can hire tax help, chances are greater that they'll file an extension for your return because they are working with clients who came to them earlier.
Basic economics also come into play. Most tax preparers will charge more to work on returns as the filing deadline nears.
4. To get to work on your state taxes.
I live in Texas, one of the handful of states that 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.
5. To get your refund sooner.
Yeah, you knew this was going to make the list. Getting a tax refund as soon as possible is the main reason that so many folks file their taxes as early as they can every year.
Regular readers of the ol' blog know that I've repeatedly written 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 today's minuscule interest rates (yes, even after inflation bumped up everything else!), 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.
Note, though, that three-week turnaround doesn't apply to returns with Child Tax Credit and/or Earned Income Tax Credit claims. The IRS is required by law to take closer looks at these filings and not issue any associated refunds until mid-February.
Still, it doesn't hurt to go ahead and get into the queue for return processing by electronically filing your return as soon as you can. The tax software manufacturers, including those participating in this year's Free File program, will hold early prepared returns and then transmit them to the IRS when it opens its electronic doors on Jan. 23.
6. To get your tax information into the system.
Big life events usually involve money. And if you're going to need financial help with those changes, like a home mortgage or assistance in paying college costs, those funding sources are going to want to look at your tax returns. Getting your return in early will help you more easily answer any lender or financial aid questions, and have the tax paperwork to substantiate your financial requests.
7. To clear the 2022 tax deck and start focusing on 2023 taxes.
I know, you just want to be done with your current 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 our next return next year.
The sooner you can be done with the 2022 tax year, the sooner you can focus on this year's necessary tax actions, some of which show up every month in the (shameless plug alert!) ol' blog's right column as part of the monthly Tax Moves list or as the more frequent Tax Tips.
Your 2022 tax year return results also will make it clear whether you ended up in a good or bad tax situation, and will offer guidance on tax steps you need to take for the remaining 2023 tax year.
So what are you waiting for, aside from IRS' Jan. 23 official opening of tax-filing season? Get to work on that 2022 return now!
You also might find these items of interest:
- 4 tax moves to make this January 2023
- Tax documents you need to file your 2022 return
- RALs are still around, but be sure they're worth the cost
- Answers to these filing checklist questions could make a big tax difference