Tax Advice: Filing a Tax Return Early?
Last updated: June 6, 2016
You can always file your tax return before April 15th after you have received all your tax forms (W2 and the multiple 1099s). You can file in January, but sometimes this may or may not be to your advantage. Check with your local tax advisor to find out how you might be affected.
Filing Early May Help You
It is often possible to file in January, after you have received all your 1099s, W2s and other income tax information forms. But there is a situation when the early bird doesn’t get the worm.
Procrastination in performing this dreaded chore is often the preferred action for most taxpayers. But if you have paid more taxes than you are required, getting your refund as soon as possible is a good reason to send that tax return in as early as you can. And the time between filing and the IRS processing your refund will be less in January than during the crunch time in April.
Another good reason to file early is get it out of the way. Your local tax firm might be very busy if you wait until the last minute. Having this task hanging over your head for three and a half months can’t be good for your peace of mind. Life is too short to have that nagging feeling. Also, waiting to the last minute could cause you to discover too late that you’re missing some forms or the information on your W2 and 1099s is incorrect. Getting them corrected may not be possible before April 15th. And although you can file for a six month extension, you will still have to come up with an accurate estimate of your taxes owed. Should you owe additional taxes (not getting a refund) you will have to include that with your extension request or face penalties and interest expenses.
The possibility of making mistakes will increase dramatically if you’re rushing to file on April 14th or 15th and if you're not using a tax preparer. Forgetting to fill in some fields, making simple math mistakes, to include all Social Security Numbers or have all persons required sign and date the return are just some of the possible mistakes that could arise.
Filing Early May Hurt You
While procrastinating until April 15th like all too many of us are prone to do, doing so may not be that bad an idea under some circumstances.
Should you owe money to the government, keeping your money in an interest bearing account until the last minute instead of sending the IRS an interest free loan is a good idea.
At times, employers, banks and other investment firms may make a mistake on the duplicate income tax forms they send to you and the IRS. It will take some time for those entities to send corrected information forms. If you file before these corrections are made, you will have to file an amended tax return. Filing a tax return a second time is not only time consuming, it can also mess up your finances if you end up owing more taxes or getting back a smaller refund you have already had plans for. Or even worse, you may have already received your expected refund and spent it. Where will you find the money to pay what you now owe?
And it is always possible that tax legislation is passed late in December and the old forms will have to be updated. If you filed early using the old forms, you’ll have to file again. If you’re not in the tax business, will you know about the changes should they affect you? You’ll have to determine whether filing early or late is best for your situation. A local tax advisor or income tax preparer might be able to help you decide.