Should You File Taxes Early or Wait Until the Deadline?
Tax season brings a common question to many: Is it better to file taxes early or wait until the deadline? While there’s no universal answer, understanding the advantages and drawbacks of each approach can help make an informed decision. Also, if you live in Michigan and have any tax related questions, contact ATS Advisors. Let’s dive into the pros and cons of filing early versus waiting until the tax deadline.
The Case for Filing Early
Filing taxes early can be an appealing option for many. The primary benefit is receiving your tax refund sooner. If you’re owed a refund, filing early means the IRS processes your return faster. This can result in receiving your money weeks ahead of time, which could ease financial pressures or help with big expenses.
Another advantage of filing early is avoiding the rush. Tax season tends to get hectic closer to the deadline, and waiting can increase your risk of errors. Early filers have more time to review their returns and avoid making mistakes that could lead to audits, delays, or penalties.
Identity theft is another concern. The earlier you file, the less time someone has to file a fraudulent tax return using your personal information. Once your return is submitted, it essentially “locks out” anyone trying to file in your name.
Reasons to Wait Until the Deadline
Despite the benefits of filing early, there are also valid reasons why some taxpayers choose to wait. One significant reason is missing forms. By mid-February, most W-2 and 1099 forms are sent out, but some might still be delayed. Rushing to file without all the necessary documents can lead to incorrect filings and costly amendments later on.
Waiting may also allow you to take advantage of any last-minute tax law changes. Congress sometimes passes new tax legislation late in the year, and waiting can give you a better idea of how these changes affect your return.
Taxpayers with more complex financial situations might also benefit from waiting. If you own a business, have multiple income streams, or invest in the stock market, you may need additional time to gather all the necessary documents. Filing early without all the proper forms can be a headache down the line, especially if your taxes require professional help.
The Middle Ground: File on Time
For most people, filing on time without rushing or delaying too much is the best approach. Filing by the April deadline ensures that you avoid penalties while still giving you enough time to accurately report all your financial information. If you anticipate needing more time, requesting a filing extension can give you six extra months without penalties for late filing.
An important thing to remember is that if you owe taxes, waiting to file doesn’t delay the payment. The IRS requires payment by the April deadline, regardless of when you file.
Conclusion
When it comes to filing taxes, timing matters. Filing early can result in a quicker refund, protection from identity theft, and a smoother process. However, waiting until the deadline might allow for more complete filings, avoiding the need for amendments or corrections. Ultimately, the decision depends on your financial situation, the complexity of your taxes, and personal preferences. Whether you file early or wait, the key is to stay organized and informed, ensuring your tax return is accurate and timely.