Don't Mess With Taxes

Fortune cookie tax filing wisdom (Photo by Kay Bell)

If the 2024 tax-filing season is anything like previous ones, millions of taxpayers sent their 2023 taxes to the Internal Revenue Service today, the official start of federal return processing.

The most obvious and common motive for first-day filing is to get expected refunds.

But there are some other reasons you might want to file your taxes early. Here are eight.

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 associated tax refund fraud. But the crooks are still out there.

You can preempt them by filing before they do. When the IRS gets your real Form 1040 first and is done with it, any tax ID thieves who try to file under your name and Social Security number will discover that you beat them to the tax punch!

An added protection step you also might consider is using an Identity Protection Personal Identification Number, or IP PIN, to further thwart would-be ID thieves. Any taxpayer can apply for this special six-digit code.

The IRS uses the IP PIN to verify that it is indeed you who has filed your tax return, and it won't accept any electronic return subsequently filed in your name. If a paper return shows up without the IP PIN, it will get added IRS scrutiny.

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.

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.

Those payment decisions are separate from your filing. You aren't required to pay your due taxes when you file early. Just make sure that if you do file early and owe, you pay that tax bill by Tax Day, which this year is April 15.

3. To talk with a tax professional.
You started working on your tax return early and discovered it's not as easy as you had hoped. Since we're just at the start of the filing season, you have some time to find professional tax help.

Of course, when you do hire a reputable tax preparer, the actual early filing of your Form 1040 is likely off the table. Tax pros currently are working with clients who came to them well before filing season started, so you're going to the end of the line. But at least you realized you needed help early and are in the system.

Also, you might get a bit of price break since it's still early in the tax season. Most tax preparers will charge new clients more if they come for help as the filing deadline nears.

4. To reduce tax-related stress.
Even when your taxes are simple and you know you got your filing right, most taxpayers still feel added anxiety when it comes to this annual task. That's why tax time surveys always include outrageous things people say they'd rather do — serve on a jury, swim with sharks, have a root canal, be celibate for the rest of tax season — than file their taxes.

Getting a daunting task, like filing your taxes either by doing it yourself or getting professional help, can ease this annual concern. And give you more stress-free time to do what you really enjoy.

5. 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.

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.

Also, as we learned during the COVID-19 pandemic, tax data often is used when Uncle Sam decides to provide additional financial assistance. The various coronavirus payments that went to millions of individuals got to them sooner if they were in the IRS database.

7. To get your refund sooner.
Yeah, you knew this would make the official why file early list. If you are due a refund, then by all means do what's required to get that money. your best move is to file early and file electronically, instructing the IRS to directly deposit the money into a bank or other financial institution account. That should mean your refund will show up in that account within 21 days of processing.

But also consider ending your refund reliance. 

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. Instead, you could be putting that extra pay into a savings account to cover future fun (a much-needed vacation) or emergency needs (unexpected car or home repairs).

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.

Still, at least think about it. Then you wouldn't have to rush to file your taxes every January.

8. To clear the 2023 tax deck and start focusing on 2024 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 yet another tax return next year.

The sooner you can be done with the 2023 tax year by filing, the sooner you can focus on this year's necessary tax actions, some of which show up every month in — shameless plug alert! — ol' blog's upper right column as tax tips. And yes, this post will be part of the January Tax Tips collection.

So what are you waiting for? If one or more of these eight early filing reasons applies to you, get to work on your return!

You also might find these items of interest:

• 9 ways to make tax filing easier
• Do you have to file a tax return? Probably
• Before you file your tax return, answer these checklist questions

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