As the tax season approaches, many taxpayers don’t take the necessary steps at the right time and end up suffering from stress and anxiety near the deadline. Early tax preparation can give you the peace of mind and financial relief you were looking for. Filing your tax returns as early as the IRS starts processing the returns will help you avoid any unpleasant experiences.
What do you need to remember for early tax filing? Mark April 15th as tax day on your calendar. The IRS starts processing tax returns at the end of Jan or early Feb. You can reap potential rewards by early filing your taxes. And what are the potential benefits, you may ask? Here are five benefits of filing your taxes early.
Early tax filing makes the whole experience hassle-free
Most tax filers consider the tax filing exercise cumbersome and troublesome due to inexperience and lack of knowledge. It is especially applicable to first-time filers. Early preparation to file taxes helps you understand the terms and conditions and tax procedures. In addition, you have more time to collect essential documents and receipts that are required to claim deductions. Furthermore, you can use this time to learn about the latest tax law changes and if any alterations impact your filing status.
If you still feel it is a hassle, you can get help with tax preparation from seasoned experts and take professional advice to reduce annual tax bills. Taking a tax specialist on board can also help you to enjoy early tax perks for your small business or large enterprise. This way, you can avoid last-minute headaches and make your experience more productive.
Early tax filing brings faster and larger refunds
The earlier you file a tax return, the more chances you have of faster and larger refunds. With less workload and work pressure, the IRS processes your refunds more quickly in February than in April if you have all the required documents ready. According to the IRS, taxpayers are likely to receive larger funds, on average $200, who file their taxes by late February than later.
It is important to note that a tax refund is not free cash. Receiving a large refund indicates that you have been giving your money to the government as a loan throughout the year without any interest rate. The IRS is just giving your cashback to you.
Some taxpayers rely on tax returns to pay large bills. Early payment of taxes helps you stay in charge of your finances and avoid taking short-term loans to incur financial expenses and huge bills.
Early tax filing helps avoid penalties and tax extensions
Rushing at the eleventh hour to file your taxes may lead to penalties and other serious consequences.
Though the government offers tax extensions to people who fail to file their tax returns in due time, the leading cause of these extensions is mainly the mishandling of documents at the last hour rather than financial constraints.
Make sure to start preparing for the tax season at the start of the year. Don’t wait till April to take your accountant and tax advisor in the loop to begin the documentation for your tax returns. People who don’t pay attention to the approaching tax return deadline have to suffer from financial loss as they have to sort out legal obligations at the last moment, resulting in documentation errors. In the worst cases, the IRS can give the filer a penalty and charge them interest for the outstanding tax debt, so be careful.
Early filing leads to no amended returns
Starting the preparation of tax filing early gives you the chance to claim an accurate return. On the flip side, inaccurate returns can lead to amended returns that may trigger uninvited audits. However, you can avoid amended returns with careful documentation and consideration of updated laws and procedures. Follow these tips to file your tax accurately:
- Review and check all documents such as interest statements, W-2s, and others coming from banks and other companies. Spot on the errors in these documents, as they may lead to amended returns.
- In case of early filing, you might miss some important forms like K-1 or 1099 because they arrive late. Ensure the inclusion of every essential document in your tax return.
- Be well-informed about important changes in tax filing, including new form layouts and tax law amendments. You must know that after the enforcement of the TCJA 2017, the Form 1040 layout has changed, and Form1040-EZ has been eliminated. Lookout for recent changes and watch the news to file accurate tax returns.
Early tax filing prevents identity theft
Early filing of tax returns also makes you less vulnerable to security threats like identity theft. An identity thief can compromise your social security number and file tax in your name. It can create a mess, especially when a thief fails to submit the correct income records, claim wrong deductions, etc. You can avoid this trouble which can take months to fix, by filing your tax early.
What is more damaging about identity theft? You cannot possibly know about your compromised identity and false tax claim until you receive a notice from the IRS. They may notify you about suspicious activity in your tax return and potential identity theft. Watch out for signs when changes happen in the status of your accounts, tax claims, and returns and you did not request. The potential cause of all these changes can be identity theft.
However, you need to act vigilant and respond to the IRS immediately by calling the number mentioned in the notice. Submit Form 14039, an Identity Theft Affidavit, if you fail to file your tax online due to a duplicate Social Security number.
Conclusion
Early tax filing undoubtedly helps you stay ahead at many forefronts. You can receive high returns with zero penalties and leverage your financial situation. Make sure to take assistance from a reliable and professional tax service provider to avoid any issues in the tax filing.