There are so many tasks that go along with filing your tax return–digging up documents, finding and figuring out receipts, confronting complicated tax forms–that it’s obvious why people put it off. Even the best tax software on the market may require you to spend hours answering questions and inputting information.
But procrastination in filing your taxes can cost you. People who wait to submit their tax returns could miss important deadlines and be forced to leave some benefits on the table.
Filing your return with the IRS early in tax season is a smart move for at least four reasons.
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Benefits of Filing Early
The IRS usually begins accepting tax returns in late January, roughly 10 weeks before Tax Day. Employers are generally required to send wage forms, such as W-2s, to their workers by the end of January. If your return is a simple one and you live in one of 12 pilot states, you may be able to use Direct File, the IRS’s own free tax service, for your 2023 return.
1. Getting Your Tax Refund Sooner
According to the IRS, tax refunds are typically issued within 21 days of receipt. You’ll maximize your chances of getting your money sooner if you file your return electronically and request that the refund come to you by direct deposit.
Even so, some factors can slow down the refund process, including:
- The claiming of certain tax credits, such as the earned income tax credit or an additional child tax credit
- Errors or incomplete information on your tax return
- Evidence of fraud or identity theft
2. Avoiding Tax Extension Problems
Requesting a six-month tax extension is simple to do. Most tax software programs allow taxpayers to file an extension request for free, or you can complete Form 4868, “Application for Automatic Extension of Time To File U.S. Individual Income Tax Return,” and mail it to the IRS according to the instructions.
An extension pushes back your tax return due date to October 15. (If that date falls on a weekend or holiday, the return is due on the next business day.) Bear in mind, though, that even if you plan to file your paperwork in mid-October, you still have to pay any tax you owe by April 15. (Exceptions: In Maine and Massachusetts, 2023 tax returns are due April 17, 2024.)
If you don’t pay that tax on time, the IRS will charge you a failure-to-pay penalty. The penalty accrues for every month or part of a month between April 15–or whatever your original tax deadline was–and the date on which you finally pay those taxes in full.
Also, if you’re planning to take out a loan, the lender may request your most recent tax return (or two). So if you filed an extension and don’t have the completed return to hand over, it may delay the processing of your loan application.
As a CPA, I can’t tell you how many of my clients have directed me to get an extension on their tax return, expecting to file in October, and then come back to me in June or July anxiously needing to file their return as soon as possible because they’ve found the perfect house and their mortgage lender is asking for the return. If these clients had filed before the April 15 deadline, they wouldn’t have had a problem.
Filing an extension can also have technical drawbacks. One example would be if you fall behind on your taxes and other debt payments and are seeking to get your taxes discharged in bankruptcy. Filing an extension for a given year could postpone the date on which you could file for bankruptcy to have that year’s taxes discharged.
3. Allowing for Delays in Processing
The IRS is known for being slow: slow to pick up the phone, slow to process returns and slow to issue refunds. The Taxpayer Advocate Service recently reported to Congress that in 2023, IRS processing delays caused “significant burden and frustration” to millions of taxpayers awaiting refunds or other resolutions of tax account issues.
This is especially true if you file a paper return. Returns submitted on paper take significantly longer for the IRS to process.
Given the possibility of processing delays, it pays to file early.
4. Guarding Against Tax Return Identity Theft
In one common type of tax-related identity theft, someone who has stolen your personal information then uses it to file a fake tax return in your name. The scammer includes their own bank account information on the return to have your refund sent to them.
Victims often don’t know about the fraud until they file their tax returns. The IRS generally rejects such returns. It alerts the victim by mail that someone using their Social Security number has already filed a return for the year.
If this happens to you, your next move would be to file Form 14039, “Identity Theft Affidavit,” with the IRS. Investigating the fraud can be a lengthy process. Cases handled by the IRS’s Identity Theft Victim Assistance organization currently take an average of 650 days to resolve.
However, you can lower this risk simply by filing your taxes early. That way, even if a bad actor gains access to your personal information, they won’t be able to file a return in your name because you’ll already have filed one.
What Else Happens If You File Taxes Early?
Apart from those major benefits, filing your taxes early can also help you in other ways.
Three More Advantages
- You can save up before Tax Day. If you don’t expect a refund, calculating your tax bill sooner gives you time to budget for the amount you’ll have to pay. Even if you prepare and file your returns early on in tax season, you can just set your tax software to debit your account on April 15.
- You may get better prices on tax software. Tax return software tends to increase in price over the course of tax season, so doing your taxes early could cost you less.
- It’s easier to correct errors. If you submit your tax return early, any errors that the IRS may find can be corrected by filing a superseding return. You can do this electronically–if your tax software supports superseding returns–or by mailing in a paper copy of the corrected return with “superseding return” written across the top.
Fixing problems on your return before Tax Day is much simpler than amending your return later. For that, your only option is to complete and file a separate tax form called Form 1040X.
One Reason To Wait
While it pays to file early, don’t get ahead of yourself. Make sure you’ve received all your tax documents before you send in your return. Otherwise the IRS will adjust your filed tax return to reflect the information on the documents you didn’t include. It will then send you a CP2000 notice to tell you about the changes and specify the amount you now owe the IRS.
This could be a minor inconvenience if the omitted tax form was, say, a 1099-INT for a $200 bank bonus; if your marginal tax rate were 24%, the extra bonus would cost you an additional $48 in income taxes. But if the amount shown on the missed document was substantial, the unexpected tax on that income could really bite your budget.
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Bottom Line
Filing your tax return early will—at the very least—mean less stress for you when Tax Day rolls around. Other outcomes, ranging from a speedier refund to a lowered risk of identity theft, could help you financially. As always, if you have questions about your taxes, it’s wise to consult a tax professional.
