Tax season is officially underway (Jan. 31 - April 15) and while it may be a painful process for some, delaying it can only bring a bigger headache.
John Ams, executive vice president for the National Society of Accountants (NSA) says whether you owe money or anticipate a refund, getting it done early can prove beneficial. If you are owed money, your chances of getting it faster are better when you file early. If you owe money, you will at least know how much you owe and can begin saving to pay for it, says Ams.
Anyone who hopes to file an extension should remember, it is only an extension of time to file your return, not an extension of time to pay. "You have to file the extension and the money you think you are going to owe. If you substantially underpay, you get a substantial underpayment penalty," Ams says. Taxes are due on April 15, period. And yes, the IRS does charge interest.
Here are seven reasons why you may want to file early:
1. If you think you have a refund coming, filing early often makes your refund show up faster. In recent years, early filers have received refunds in 21 days. Taxpayers filing nearer the deadline day waited an average of 31 days.
2. If you think you’ll owe taxes, you find out sooner how much you’ll owe. This gives you more time to save up money before the balance comes due. You may also file early and not pay the tax bill until the April 15 deadline – and you have until that date to arrange a payment schedule with the IRS.
3. Your tax preparer has a lot more time – and energy – early in the tax-filing season to talk to you. If preparing your taxes is going to mean several meetings with your preparer and questions for them to answer or research, start ASAP. You also gain more time to correct any errors that crop up during preparation.
4. Filing early forces you to organize such tax documents as your wage and earning statements (forms W-2, K-1, 1099-MISC and 1099-R) and your receipts for deductions and credits. The more time you have to put these documents in order the better you’ll feel about justifying deductions that the IRS often scrutinizes, such as those for home office space or charitable contributions.
5. The last minute is no time to discover a wrinkle that complicatesyour tax situation. Nor is the last minute the time to make a hurried and careless mistake in your return – a mistake that could trigger an audit.
6. About three out of 10 taxpayers still mail paper returns. Filing early spares you from the early-April crowds at the post office.
7. Filing early reduces the risk of some identity thief filing in your name later in the season to steal a refund. Identity thieves can use yoru name and social security number to file a falsified return in your name and claim whatever credits they want to get a refund, says Ams. They may then have it sent to a P.O. Box and by the time you find out, they have disappeared.
If your return is not fairly simply, you may want to consult a tax professional for help. You can spend a lot of time spinning your wheels on complex issues, Ams says. If you need tax-preparation help this coming season, you can find a qualified tax preparer in your area, on the NSA website at www.nsacct.org. Click on “Find a Professional” or call 800-966-6679. [Discover More]
You can also ask friends or relatives for recommendations, but be sure to find someone with expertise that matches your own financial situation, Ams says. Any tax preparer you use should have a professional tax identification number which he or she uses upon signing your return. You may also qualify for free tax preparation assistance. Click to read