January 31 marked the start of tax season which means it’s time to get all those receipts in order.
Tax season is a little delayed this year, but you don’t want to delay. It’s a good idea to go ahead and get those taxes out of the way so you’re not in the post office line April 14 waiting to send your information in and here’s why:
1. Get your refund sooner
If you’ve got a refund coming, the sooner you file your taxes, the sooner you get the money back.
“If you’re getting a refund have it sent direct deposit. Don’t get it sent to your mailbox (because) there are people out there waiting during tax refund time and they’re looking through mailboxes,” said Annalee Leonard with Mainstay Financial.
Early filers often get their refund 10 days quicker than late filers (according to Sienna College in Loudonville, NY.) That extra money in your pocket can go towards a savings account whether you want to start one or add the money to an existing account. You could also use that money to pay off debt.
“If you’ve got bills outstanding, use that refund to put the bills down especially on things that I call dead interest which is interest you can’t claim like credit cards,” Leonard said.
2. Cut down the risk of ID theft
“One of the big things now is identity theft. This is scary because all these people (thieves) need is your social security number and your name, that’s it. They can send in a false report with a false address and guess who gets money? They do, not you,” Leonard said.
3. Put your best foot forward
You might sit down at the last minute to do your taxes only to realize your situation is more complicated than you’re used to, and you don’t have time to figure it out before the deadline. Give yourself enough time to allow for any surprises, and to cut down on mistakes. If you are in a hurry and you do make a mistake, that could lead to penalties or even audits.
Invest in a professional who will stand up for you if there is a mistake. You’re investing in that person to keep you out of trouble so make sure the professional is certified. Leonard recommends a company that works with taxes throughout the year and not just during tax season.
4. Financial aid help
If you are applying for financial aid for yourself or for your children, getting your tax information early will help you get the maximum amount of financial aid. You can fill out your Free Application for Federal Student Aid (FAFSA) form with estimated figures even before you file your return, and then correct the numbers once you do file. The FAFSA now has an IRS Data Retrieval tool so you can have your tax information directly imported from the IRS. That ensures the numbers are correct.
5. Raise the funds
If you owe the IRS money, you don’t have to pay until April 15th. But you can still complete your return early and turn it in. Knowing early how much you owe can benefit you, because it will give you more time to set up a payment plan and put aside the money you owe.
Are there any reasons not to file early?
If Congress passes a new law, there could be a new update any time before April 15th. If you file early, keep an eye on the news and pay attention if there are any reports of tax law changes. The IRS’s website will have instructions on how to correct your tax forms. But, for the majority of taxpayers who have refunds coming, filing early rather than later is the smarter decision.