When Can You File Taxes? 7 Benefits of Early Filing
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- By David Lukic
- Jan 07, 2021
When can you file taxes? No one likes to think about taxes. The very word “taxes” produces anxiety in most Americans. Tax Day is a day that many people dread unless, of course, you are getting a nice, fat, refund. If you are one of those lucky individuals, then it may pay off to file your taxes early. For those who have to pay each year, there are also significant benefits of filing and paying your taxes sooner rather than later.
1 - Get an Early Tax Refund
The process of dragging out your receipts, bank statements, and pouring over financial documents to find every little deduction is not something many people enjoy. That is why most U.S. citizens wait until the last minute to file their taxes. However, according to the IRS, most refunds average about $3,000. That is a lot of money you are leaving on the table for a few extra months when you could be taking a cruise or paying off bills. By filing early (as soon as you have your W2s and other documents), you can get your refund faster and start spending it.
If you are still asking yourself when you can file taxes, you can file as early as January 28th and get the ball rolling and then wait for that windfall to come in. It usually takes most refunds only a week or two to be processed when filing electronically. You can even have it automatically deposited into your bank account! What are you waiting for?
2 - Save Money on Interest by Paying Down Debt
f you plan on using your refund to pay down debts, you could actually save yourself a good amount of interest. Credit cards are notoriously high-interest, and it’s a great feeling to pay those off and not owe anyone anything. It can also help improve your credit report. You can expect your money within 21-days after filing and save yourself weeks and even months of interest payments.
3 - More Time to Pay Your Taxes if You Owe
Many self-employed individuals and others end up paying taxes each year. Tax time is not only less fun for them, but it can be stressful and financially draining. When filing taxes early, the quicker you know the damages and can plan. You don’t actually have to pay the full amount until April 15th, so if you file early, you can start putting funds aside and formulate a solid plan of how to pay before the due date.
Just going through the process of tabulating everything relieves stress and lets you know exactly where you stand early. Procrastination only adds stress to an already tense situation.
4 - Less Stress and Competition When Using an Accountant
Tax time is stressful for just about everyone. Even those people who get refunds, don’t enjoy the process or the looming due date. The later you wait, the more crowded places like walk-in tax preparation offices and your accountant’s office are. You will have a harder time fitting into their schedule, which causes you even more stress. If you don’t want to fight the crowds, book an appointment early in February or March and get it done!
5 - Don’t Miss Out on Tax Benefits
Most people who file last-minute tend to rush and make mistakes. You may end up missing out one some tax breaks that could put more money in your pocket and boost your refund quite a bit. Early filers often find out they are getting more back than they expected because they take the time to account for every life-changing event (getting married, divorced, a new baby, the purchase of a house, etc.) and it factors in nicely.
6 - Avoid Penalties & Fees, and Pay Less
People who owe money often file their taxes at the last minute only to find; they don’t have the money to pay their taxes. By the time you file an extension and ask for a payment plan, the IRS will tack on additional penalties and fees, and it will end up costing you much more than if you filed early. If your taxes are complicated, you may also have to pay a tax professional to help, and there goes even more money out the door.
7 - Less Chance of Identity Theft or Refund Fraud
If an identity thief gets ahold of your social security number, they may file a false tax return on your behalf to get your refund. Identity theft occurs every tax season very early because most people file at the last minute. If you want to get a jump on those thieves, file your taxes as soon as possible, so your well-earned refund doesn’t end up in the hands of a criminal.
There are numerous reasons to file your taxes early. These are just a few. The bottom line is, it’s far less stressful to get this ugly chore off your plate early and get your refund or have plenty of time to pay what you owe.