Your taxes might not be due for a few more months, but there are plenty of good reasons why you should file your tax returns early.
Americans cannot escape their annual filing of tax returns, and tax professionals never stop receiving questions about when is the right time to file tax returns, and how early can a person file their tax returns.
This year, the IRS has allowed for an extension; giving people the opportunity to file their tax until May 17th, 2021. This date is liable to change if a person wishes to plead an extension – which is usually 6 months, bringing the deadline to October 15th, 2021.
If you think that leaving your taxes until the last minute is the best approach, you might want to reconsider that after we run you through how filing your taxes early can keep you save, and protect your wallet too.
Enough Time to Gather what you Owe
Filing your taxes on time will give you enough time to figure out what you owe, gather the funds, and pay off your taxes.
Leaving your bills until later will not give you ample time to arrange your payment according to how you wish to pay them. You might get them mixed up, or underpay some bills.
The law demands that you send your tax payment to the IRS before your filing deadline. Payments made after this deadline will attract fees and additional charges.
To make your payment easier on you, once you determine how much you owe for tax, set aside a stipulated amount for the weeks until the deadline. You can also apply for a payment plan with the IRS; especially if you don’t have enough emergency or savings funds to pay your taxes.
Reduce Chances of Tax-Related Fraud
Cyber criminals devise means to steal from individuals and the government. If they get a hold of your Social Security Numbers, they could fraudulent tax returns, and be compensated by the government. Sometimes, these fraudulent returns are detected and stopped, while others get away with the identity theft.
The issue of identity theft poses not just a problem for the government, but also for the individuals whose Social Security and taxpayer identification numbers have been stolen. When the affected people file for a legitimate tax return, the IRS system will automatically detect fraudulent activity linked to that account, and reject it. Sorting out the process of clearing the previous return filed with your account will prove stressful, and will slow down the process of getting a refund.
Filing your tax return as early as possible reduces the risks of an identity fraudster filing it before you do.
Process Your Refund Quicker
The quicker your tax return gets to the IRS, the quicker you can expect your refund. The average time for the IRS to complete processing returns is 21 days, but you can go through the IRS website. Paul Joseph from Joseph & Joseph Tax & Payroll in Williamston, Michigan, says “Obviously, if you have a refund, you’ll get it earlier”.
During the final weeks leading too tax-filing deadline, it might be harder to book an appointment with a tax professional, since more people would be seeking their help at this time too.
When is the Earliest Time I Can File My Tax Returns?
The IRS will begin accepting 2020 tax returns on the 12th of February, 2021, but there is allowance for an extension.
Firms with clients who have brokerage accounts are usually advised to wait until late February or early March to file their tax.
What do I Need for Early Filing?
The documents you will need when filing early varies; depending on your income situation, among other things. However, these are some of the documents you will most likely need:
- 1099 forms from dividend income or retirement
- W-2 forms from your salary earning job
- Property and mortgage tax statements
- Business expense receipts
- Medical bills and charitable donations receipts
- K-1 form
Although steps have been taken by the IRS to reduce the menace of identity theft, fraudulent activities still take place. Luckily for people who file their tax early, they might be able to beat fraudsters to their crime while still saving their future selves a load of worry and financial stress.