According to the Internal Revenue Service (IRS), about one-third of Americans wait until the last minute to file their federal taxes. Despite this tendency, there are many reasons to file taxes early. In fact, now is the time for people to dig out those receipts and gather documents together. Here are five reasons to file early in 2021:
If someone is expecting a refund, they will likely receive it the quickest if they file early. This is because the IRS isn’t as busy in January, February, or March as it is in April. Many people tend to procrastinate, so there is less competition when filing early. For the fastest method to receive a refund, file electronically and have refunds deposited directly into an account using direct deposit. It can take several weeks longer to receive a paper return.
First Come, First Served
The schedules of tax accountants or tax professionals fill up quickly, so it’s best not to wait too long to hire one. If a taxpayer isn’t completely confident about how to file their taxes, hiring a tax professional can help. Many do charge, but filers sometimes get back in the form of refunds more than they paid a tax preparer. Tax professionals also give tax guidance throughout the year, stay updated on changing tax laws, find little-known tax deductions for their clients, and more. When choosing someone to help with taxes, look for Certified Public Accountants (CPAs) or an Enrolled Agent (EA.) An EA is a tax professional licensed by the IRS through a special enrollment exam or after having worked for the IRS for five years.
Prevent Identity Theft
According to the U.S. Government Accountability Office, the IRS has paid more than $3.1 billion to individuals who have filed fraudulent returns using the identifying information of others over the past few years. As soon as a criminal gets access to someone’s Social Security number, they can do a lot of damage. If a fraudster files with someone’s Social Security number before they do, the IRS will decline the victim’s return, since records show they’ve already been paid. In fact, they haven’t received any money, but the criminal has. It can take months to clear this up with the IRS. So filing taxes early prevents the fraudsters from successfully filing a fraudulent return.
Extra Buffer Time
If a taxpayer is facing a tax bill instead of a refund, filing early can be equally important. The earlier someone files, the earlier they’ll know exactly how much they have to pay the government. Also, if someone owes state or federal taxes, they won’t have to pay in full until the filing deadline of April 15. With extra time to make a plan and allocate funds, it’s less likely they would have to drain their emergency fund in order to pay taxes on time.
Filing taxes isn’t a fun and exciting task, and while people may want to put it off until the last minute, they shouldn’t. Everything so far has been about money, but what’s even more important than money? The answer: one’s well-being. Filing early can help eliminate the stress of a looming tax deadline.