Taxes are due Monday, April 15, 2024 for the 2023 tax year. However, the IRS already started accepting returns in January. Although taxes may not be due until April, there are a number of benefits you gain when you file early.
Here are ten reasons to get your return started early this tax season.
1. Faster Refund
One of the biggest benefits of filing your taxes before April is a faster tax refund. The IRS typically process returns on a first-come, first-served basis. When you submit your return early, it is processed sooner and if eligible, a refund is issued early.
With this in mind, filing your return tax electronically and choosing direct deposit will be the fastest way to get your refund. The IRS started accepting e-file returns on January 23.
2. More Time to Pay Taxes
Even if you know you owe the IRS taxes this year, you still have a reason to file your tax return early. Taxpayers who submit early returns don’t have to pay the taxes they owe until the April filing deadline.
Submitting your Form 1040 as soon as possible gives you more time to pay or make payment arrangements with the IRS.
3. Qualify for IRS Payment Plan or Offer in Compromise
To be eligible for IRS payment plans/installment agreements or an Offer in Compromise (OIC), you must have filed all your tax returns.
By filing early, you give the IRS more time to assess your financial situation and consider your request for an installment agreement or OIC.
The sooner the IRS approves your payment plan, you can start to pay off unpaid taxes and avoid future collection actions like a federal tax lien, bank account levy, and wage garnishment.
4. Avoid Interest and Penalties On Unpaid Taxes
Filing early can help you settle your full tax liability before accumulating additional interest and penalties on unpaid taxes.
Taking care of your taxes ahead of time is a smart way to minimize extra fees. Keep in mind that even when you’re on an IRS payment plan, they’ll add interest until your taxes are paid in full.
5. Extra Time to Request Missing Tax Documents
Early filing gives you more time to gather any missing tax documents, like W2s and 1099s, that you lost or never received. If you are waiting on important income tax forms, preparing your return early provides a buffer to request and receive these documents before the tax deadline.
Even when you request an extension to file your taxes in October, you must pay all taxes you owe the IRS by the April deadline. You’ll want all your tax documents as early as possible, so you know whether you owe the IRS or you’ll be getting a refund.
6. Proof of Income for Home and Student Loans
Having your tax returns filed early can provide valuable proof of income when applying for home or student loans. Lenders often require recent tax returns as part of the application process to determine how much you’ll be approved for.
Having your most recent tax return ready can expedite your loan approval and may help you qualify for a higher loan amount if your income increased.
7. Protect Against Scammers and Tax-Related Identity Theft
The IRS says taxpayers lose millions each year from tax scams and stolen personal information. These scams often occur early in the tax season before most taxpayers file, allowing a scammer to file a fraudulent return to claim someone else’s refund.
Filing your tax return early is an effective way to dodge these scams. If you file your return as soon as possible, fraudulent returns filed after will be rejected should a scammer attempt to file and steal your refund.
8. Fix Tax Return Errors So You Don’t Have to File an Amended Return
Preparing your return early gives you time to file an accurate return. Besides, in case you make mistakes, you will have enough time to rectify them, so you avoid having to file an amended return.
Remember, amended returns can sometimes trigger audits.
Some of the common mistakes to avoid include:
- Basic math errors
- Failure to report all income
- Claiming the wrong credits and deductions
9. Plan for Tax Withholding Changes and Retirement Contributions
Filing well before the April deadline gives you extra time for better financial planning to improve your tax situation for the next tax year.
For example, you may want to adjust your withholding amount to make sure you have the right taxes withheld from your pay so you’re not paying the IRS more when you file.
Also, preparing your taxes early enables you to maximize retirement contributions to 401(k) and IRA accounts for the year.
10. Beat the Rush for Appointments With a Tax Preparer or Tax Attorney
Early filers get more time with tax professionals such as tax attorneys and tax preparers. Whether you need help filing your return or resolving past due taxes with the IRS, getting an appointment with a tax expert is more challenging as the April tax deadline approaches.
Tax preparers suggest scheduling an appointment at least four weeks before tax returns and payments are due.
Taxpayers usually consider tax matters a tedious obligation each year, but getting your return done sooner makes all the other aspects of your finances much easier.
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