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Filing a Tax Return? The Pros and Cons of Filing Early

Each year, Americans suck it up and file their taxes. Every year, the same question seems to arise: should you file your taxes early? The answer is that there are both pros and cons to filing your taxes early. It is also important to keep in mind that every taxpayer is in a different situation, and so it is highly recommended that you consult a tax professional before filing your taxes. However, here are some pros and cons to be aware of when deciding whether or not to file your taxes early this season.

Pro: Take Advantage of Your Tax Refund

Many people are aware of whether or not theyق€™ll get money back when they do their tax returns. Many actually take advantage of the IRS, and use it as a type of no-interest savings account. They ensure that the government takes out the highest amount of taxes possible during the tax year so that when it comes to filing and writing off their interest from their real estate taxes, children and mortgages, theyق€™ll receive a very nice refund. If this is something that youق€™re interested in then filing your taxes early will allow you to get back your refund faster due to the fact that the processing times will be much shorter then if you filed on time. Essentially, the earlier that you file your taxes, the less time itق€™ll take to process them because of simple supply and demand. If you wait until last minute in order to file your taxes then you may find yourself waiting a lot longer to receive your refund, as the IRS often becomes backed up.

Pro: You Know Exactly How Much You Owe the IRS

If you owe money to the IRS then it is a smart financial move to file your taxes earlier than waiting to the very last minute to file them. This is because by filing early, youق€™ll know the exact amount that you owe the IRS. However, you will have until April 15 to get all of the money together. By knowing earlier on how much you owe on taxes, youق€™ll have a lot more time to get the funds together in order to be able to pay off the debt you owe to the IRS and avoid having to pay any penalties or interest that you could have easily avoided

Pro: You Can Correct Mistakes

If you submit all of your tax data, only to realize that you made an error somewhere in your tax return form, however you submitted them early, then you are in the clear as it is much easier to correct them with time on your hands. Early submission will allow you to re-asses and then add any corrections that are needed to your forms. This is much more ideal then having to handle a penalty or fine if you submitted your forms late and did not have enough time to make corrections. These fines can be incredibly substantial, and so avoiding them at all costs is recommended.

Con: You May Not Have All of the Necessary Information

It is often the case that you will not have all of the necessary information in order to file your taxes early. This is especially the case if youق€™re the owner of a brokerage account and sold stocks within the year, as it often takes some time to get the required information from that transaction.

Con: You Donق€™t Have As Much Time to Fund an IRA

Essentially, you are given until the filing date, which is April 15 to keep funding your IRA account from the previous year. If you wait until April to file your taxes then youق€™ll be given more time to get the money together in order to fund your IRA account. However, by filing early you are cutting the amount of time you have short, which can lead to an insufficient IRA account if you file early year after year.

Con: Some Forms Arenق€™t Available to File Your Tax Return Early

Each year the IRS has to wait until the government decides what credits or taxes will be voted in to use for the next tax year, as well as which ones will be retired. This usually occurs at the very last minute. They also have to wait around to see whether they need to add another year or so to a credit that was going to expire, as well as if they need to extend the deadline for another year or so on a tax break that was originally going to be suspended. Whatever the outcome, the IRS needs to reprogram all of their computers in order to allow for the new rules and regulations, as well as print all new tax forms, and so these may not even be available if you plan on filing early.