5
Reasons to File Your Taxes Early
Advantages to
filing early include receiving your refund faster and avoiding fraud.
If you
like to file your taxes early and then chuckle at all the procrastinators who
wait until April 15 nears, your day of reckoning is getting close. The earliest
day the IRS will begin processing 2013 individual tax returns is Jan. 31, 2014,
a date slightly later than usual due to the government shutdown last fall.
What are
the advantages of filing early? Here's a list of good arguments from tax
preparers.
Get
your money now. This is the most
obvious reason a taxpayer might want to file as early as possible. But try not
to fall into the trap of thinking you need the refund before the IRS can get it
to you. Some tax preparation services offer refund anticipation loans, which
have steep fees that eat into that refund.
You'll also likely get your money in a
shorter amount of time
if you file earlier than the person who files a month or two after you,
according to Elaine Phelan, a professor of accounting at Siena College in
Loudonville, N.Y. Early filers may only have to wait for their refund for 21
days – the average time taxpayers have had to wait in recent years, and
sometimes less, according to the Internal Revenue Service – whereas a later
filer may have to wait longer, say, 31 days.
"If
you work with a paid preparer, they are excited to jump into the new year and
will enthusiastically get your taxes done quickly," Phelan says. "If
you are expecting refunds, the IRS processing centers are less busy and will
process your claim faster, so you might even get that refund sooner."
And, of
course, if you file electronically versus putting your form in a mailbox, you
should get your money even faster.
It may
help with financial aid. "Taxpayers
with college-age children need to get their tax information early to get the
maximum amount of financial aid," says Lawrence Pon, a tax specialist who
owns an accounting firm, Pon & Associates, in San Francisco. He says there
is a direct link between the Free Application for Federal Student Aid form and
the IRS, so your tax information is sent directly to the financial aid form
without you having to provide it yourself.
It may
help if you and your ex-spouse are feuding. Hopefully you don't fall into this category, and it's better
for each party if you can keep the IRS out of your marital strife, but Pon says
that "sometimes divorced people do not agree on who claims the children as
a dependent, even though there may be a court order and an agreement. Whoever
files first will claim the child, and the other ex-spouse may be out of
luck."
You'll
lessen your odds of becoming a victim of identity theft. "The sooner you file your return,
the less opportunity someone else has to file a return in your name," says
Joe Reynolds, identity fraud product manager at Travelers, headquartered in New
York.
He points
out that some criminals have been known to break into a home or car, steal
identification and then file taxes in that person's name, scoring a refund that
doesn't belong to them. The odds are slim that that will happen to you, of
course, but it is another reason to file earlier rather than later.
Reynolds also advises getting your refund
via direct deposit "so criminals can't have it redirected to their address
or steal it from your mailbox."
There's
more time to catch potential mistakes. If
you wade into your taxes now and discover there's paperwork you need that you
don't have, or it's simply going to be a more complicated tax year than you
anticipated, you may not end up filing early, but now you have more time to
spend on your taxes.
Not that
there aren't smart reasons to file close to or on April 15, of course. If you
owe the IRS money, there's really no financial advantage for you to give it to
them any earlier than April 15. Still, by
preparing your taxes early, you'll know earlier how much you owe and will have
more time to drum up the money to pay.
