Do you rush to file your tax returns as soon as possible? If you can get all your documentation, this might even be as soon as January. But is filing early a good idea? Like many things in life, the answer is, “It depends.”
Not every situation supports the idea of filing early. In fact, filing for an extension and putting it off as long as possible makes sense for some filers.
Let’s look at the advantages and disadvantages of filing early.
- Receive your refund sooner. If you’re owed a tax refund, you might as well get your money back as soon as you can. If you’re going to mail your return (30% still use the mail), the IRS is less busy in February than in April, so the processing time might be quicker.
- Be free of the mental clutter. It has to get done one way or the other. It makes sense to get it over with and free yourself from it hanging over your head. Life is easier if you don’t procrastinate. Just do it.
- The post office is less crowded. Remember, 30% of the adult US population is a lot of people and most of them will be trying to use the post office at roughly the same time. A lot of people don’t want to electronically file for a variety of reasons. Avoid the crowds.
- You won’t be late. Many of us plan to do things at the last minute, but this is always risky. What if you find out that you’re missing some key piece of information? What if you get sick? There are too many variables in life to put off something like filing your tax return until the last minute.
- You’ll be more accurate. If you’re not rushed for time, you’ll be more likely to avoid errors. You’ll be able to ensure that you have everything you need and that it’s done correctly.
- Why pay early? If you owe the IRS money, you’ll make more money in interest if you can keep your money as long as possible. It makes sense to keep your money as long as you can.
- You might end up having to file a corrected return later. It’s not uncommon for employers, banks, and investment firms to come back a month after sending your documentation and say, “Oops, we made a mistake.” Taking a little time to file your return will help to ensure that you don’t have to do it more than once.
- Greater chance of being audited. It is commonly believed that early filers are more likely to be audited. The rationale being that if the vast majority of the population is filing at the last moment, then there are so many tax returns that the odds of being selected are minimal.
- Some experts say that getting an extension lowers the odds even more, since the IRS agents are already busy (and behind) with their audits.
Consider the above factors when deciding to file your tax return. If you’re in a situation that makes it more likely that you’ll be audited and you don’t need your refund or copies of your return right away, it can be wise to wait.
On the other hand, if your return is simple, you’re due a refund, and you need the refund now, there’s no time like the present to file your return. Assess your situation and make the smart choice for your circumstances.