No one likes filing taxes. It’s tedious and stressful so we tend to put it off as long as possible. A lot of us wait until the week of April 15th to file our returns so it’s no wonder we’re all stressed out! But with over 125 million filers getting a refund of just over $2,500 each1 it pays to file early.
But that’s not the only reason to file your taxes early. Here are a few more reasons to get your act together early this year.
Filing Early Eliminates the Stress
Having a deadline looming that can come with steep penalties if you miss it, is stressful. The sooner you get it done, the sooner you are free from the stress of the deadline. Set a goal, grit your teeth, and get it done. Then reward yourself for being efficient!
Understand Any Tax Changes
Give yourself time to understand all the new limits, deductions and credits that can help increase your refund, so you have more money to save and invest, or pay off debt. Here are some of the biggest tax changes for the 2021 filing season.
Early Filers Get a Larger Refund
IRS data shows that taxpayers who file by late February get an average of $400 more in refunds than those who wait to file! That may be because early filers are expecting a refund, so they file sooner. But it also may be because they have more time to make sure they are claiming all the tax deductions they are eligible for versus rushing through their tax preparations and missing something.
The IRS announced that the tax filing season will open on February 12, 2021, and they expect to receive more than 150 million individual tax returns. Be proactive and get in the front of the line!
Remember, getting a large refund from the IRS means you’ve been paying in too much all year and the IRS is just returning what’s already yours! If your refund is more than a few hundred dollars, you probably need to work with a tax pro and your HR department to adjust your withholdings on your W-2 form.
Better Protection Against Scammers
As of April 27, 2019, the IRS reported that it identified 58,061 fraudulent tax returns with approximately $345.5 million claimed in fraudulent refunds. The good news is that this was a 57.5% decrease over the number of tax returns identified the previous filing season.
Fraudsters want your Social Security number and other key personal information to file fake tax returns as early as they can. The crooks want to e-file tax returns before you do because they know that the Internal Revenue Service system will reject a tax return when the IRS has already received another return using the same Social Security number.
If you discover that you can’t e-file your tax return because of an issue relating to a duplicate Social Security number, you are probably a victim of fraud. Contact the IRS immediately! Filing early may not eliminate the threat of identity theft, but it can protect your refund. Last year the IRS was able to prevent almost 93% of those fraudulent refunds.
Plan if You Have to Pay
If you think you are going to owe money instead of getting a refund, fill out your tax forms early so you know exactly how much you have to pay. You won’t have to pay until the April 15th filing deadline, which gives you more time to come up with the money or develop a repayment plan.
Access to Tax Professionals
The closer it gets to April 15th, the harder it will be to find a tax professional to help, if needed. If you do need help, book an appointment early to avoid the hassles. Plus, some tax pros will charge more for rush returns!