Nobody likes to think about doing their taxes. Many people find it an unpleasant experience best dealt with at the last minute. This approach may provide a few months of avoidance pleasure, but could cause problems.
It’s important for people to realize there are benefits to doing your taxes early.
Stress Reduction
Waiting until the last possible moment to file taxes can be stressful. This stress can be avoided by doing taxes early.
All the proper forms can easily be obtained further away from the filing deadline. When done early, there is no shortage of tax forms. People who prepare taxes are not yet stressed by doing last-minute returns for clients.
Doing taxes early provides extra time to review them and detect any problems. If a mistake is found, it can be easily corrected prior to the filing deadline. Doing taxes correctly can avoid a lot of unwanted stress.
Avoid Late Filing Penalties
The penalty for filing taxes late with the IRS is usually 5 percent of the unpaid taxes for each month or portion of a month the tax return is late. This penalty starts and begins to increase the day after tax returns are due. It usually isn’t more than 25 percent of the unpaid taxes. If a person files their return but does not pay their taxes owed by the deadline, they can face a failure-to-pay penalty. This amount to ½ of 1 percent of the unpaid tax balance.
Know Tax Liability
When a person does their taxes early, they may find that they owe the government a certain amount of money. In some cases, a person may need to arrange for payment.
Doing taxes early will enable a person to make the right payment amount. Depending on when they’re done, a person will have the necessary time to prepare to meet their tax obligation.
Receiving Refund Early
The sooner a person files their taxes, the quicker they get their refund. Waiting until the last minute may make a refund not available until summer.
There are many people who file their taxes late. When this is done, the time to process the tax refunds takes more time.
The IRS is usually overwhelmed with processing tax returns by the end of the tax filing season. This means issuing tax refunds take a longer time.
Avoid Identity Theft
Most people don’t realize there is a high rate of identity theft that occurs during the tax refund season. One of the best ways to avoid this problem is to file taxes early. This decreases the opportunity for someone to file a tax return in another person’s name.
When this does happen, the IRS will notify the person who filed their taxes earlier that another return has been filed in their name.
Avoid Post Office Problems
The IRS says that over 70 percent of taxpayers in the United States file their tax returns electronically. This means that approximately 30 percent of tax paying citizens are using the U.S. Post Office to mail their tax returns.
Some people mail their tax returns out of habit, others by design, and some because their circumstances require it. There are taxpayers who mistakenly believe paper tax filing decreases their chances of being audited.
Waiting until the last minute to mail a tax return could lead to a number of unexpected problems such as crowds, traffic, closing times and more.
Avoid Amended Returns
There are times when employers make mistakes. Companies have been known to make mistakes when they report their employee’s wages to the tax authorities.
If a person files their tax return based on incorrect information, they will have to refile an amended return with the correct information. When a tax return is filed early, a mistake like this can also be addressed and corrected early.
Photo: 401(K) 2012 / CC 2.0