Smart Reasons to File Your Taxes on Time
Smart Reasons to File Your Taxes on Time
Tax season can often bring about feelings of stress and anxiety for many individuals.
However, there are smart reasons why it is crucial to file your taxes on time. Whether it is for avoiding penalties and interest, maximizing your tax refund, or ensuring financial stability, filing your taxes before the deadline is a responsible and beneficial step.
In this article, we will explore these smart reasons, shedding light on the importance of timely tax filing and the numerous advantages it can bring to your financial well-being. So, let’s delve into the world of taxes and discover why filing them on time is a wise decision.
What Is Considered Early Tax Filing?
Early tax filing refers to submitting your tax return well before the mid-April filing deadline. Typically, the IRS begins accepting tax returns in January, allowing individuals to file their taxes any time between early January and late March. Filing early gives you ample time to prepare and submit your return, as waiting until April leaves little time for preparation.
Good Reasons to File Your Taxes on Time
- Lessen your stress
Filing your taxes on time can significantly reduce stress in your life. Spring is a particularly busy time for educators as they juggle their teaching responsibilities and other commitments. By starting the process of gathering documents and filling out forms early, you can avoid the last-minute scramble that often leads to a frantic rush job.
Rather than feeling overwhelmed by the approaching deadline, take small steps towards completing your taxes throughout the year. For instance, begin by tallying up all the deductible expenses you sustained during the school year, such as classroom supplies purchased with your personal funds.
Eric Nichols, a certified financial planner and founder of Educated Wealth Strategies, a specialized financial services firm for teachers and education professionals, emphasizes the importance of not procrastinating. He notes that unexpected events, such as last-minute staff meetings, can disrupt your plans to complete your taxes.
By finishing the task early or being close to completion, you eliminate the worry and stress associated with such interruptions. Many educators perceive taxes as something that looms over their heads, causing constant concern. By taking action and filing your taxes on time, you can eliminate this lingering worry and experience a sense of relief once the task is done.
- You’ll have more time to retrieve missing documents and information.
One of the key benefits of filing your taxes on time is that it gives you ample time to retrieve any missing documents or information. Tax-related documents can often be scattered across various sources, from W-2 forms from multiple employers to 1099 forms for self-employment income or investment earnings.
Additionally, you may have other important documents, such as mortgage interest statements, charitable contribution receipts, or medical expense records, that are crucial for accurately reporting your income and deductions.
By filing your taxes ahead of the deadline, you allow yourself additional time to gather all the necessary paperwork. This extra time can prove invaluable, as it reduces the risk of overlooking important documents that could result in errors on your tax return.
It also helps you avoid the panic and rush that comes with last-minute tax preparation, reducing the chances of making mistakes or providing incomplete information to the Internal Revenue Service (IRS).
Furthermore, having sufficient time to retrieve missing documents allows you the opportunity to double-check and ensure their accuracy. You can carefully review all the figures and information before filing your tax return, ensuring that everything is in order and minimizing the risk of an IRS audit. This proactive approach not only saves you from potential penalties and fines but also guarantees a smoother and less stressful tax filing process.
- You’ll have extra time to arrange payment if you owe money.
You know the feeling – you complete your tax return and find out that you owe money to the government. It can be quite unsettling, especially if you’re not prepared for the additional financial burden. But here’s the thing: if you file your taxes on time, you’ll have the benefit of extra time to arrange payment.
By filing your taxes before the deadline, typically on April 15th (unless it falls on a weekend or holiday), you give yourself some breathing room. The IRS will send you a notice specifying the amount you owe, along with the due date. Typically, you’ll have around three weeks to a month until payment is due.
During this grace period, you can evaluate your financial situation and devise a plan to make the payment. This may involve reallocating funds from various accounts, adjusting your budget, or even exploring installment options with the IRS. The key is that you have the opportunity to explore different possibilities and choose the best course of action rather than rushing to come up with the money immediately.
Not only does this extra time allow you to take a strategic approach to payment, but it also reduces the likelihood of incurring unnecessary penalties or interest. If you fail to pay the owed amount by the due date, the IRS may impose penalties, which can increase your overall tax liability. By filing your taxes on time and making payment arrangements, you can avoid these additional charges and potentially minimize the financial impact.
- Your tax preparer will have more time for you.
In addition to the benefits of having extra time to arrange payment, filing your taxes on time also means that your tax preparer will have more time to dedicate to your tax return.
Imagine this scenario: it’s just a few days before the tax filing deadline, and countless individuals are rushing to get their taxes done. Tax preparers are inundated with a high volume of clients, and they may be stretched thin trying to accommodate everyone’s needs. The result? Limited availability and potential delays in getting your taxes prepared.
However, by filing your taxes on time, you can avoid this last-minute rush. Early filing allows your tax preparer ample time to review your financial documents, ensure accuracy, and address any potential issues or questions that may arise in the process. With a less crowded schedule, they can devote more attention to your specific tax situation, giving you the personalized service you deserve.
This additional time can be invaluable, especially if you have complex financial situations that require careful analysis or if you have specific questions or concerns about your taxes. By working closely with your tax preparer and allowing them the time needed to focus on your return, you can benefit from their expertise, insights, and guidance, ultimately optimizing your tax outcome.
Furthermore, filing your taxes early may also provide you with an advantage when it comes to responding to any follow-up inquiries from the IRS. In the event that your tax return is selected for audit or additional verification, having your taxes already filed and documented can make the process smoother and less stressful. Your tax preparer can readily assist you in gathering the necessary supporting documentation and promptly addressing any queries from the IRS.
- You can prevent tax-related identity theft.
One often overlooked but critical reason to file your taxes on time is the protection it provides against tax-related identity theft. Unfortunately, identity theft has become increasingly common, and tax season can be a prime time for criminals to strike.
When you file your taxes early, you minimize the window of opportunity for identity thieves to fraudulently file a tax return using your personal information. By submitting your return promptly, you reduce the risk of someone else beating you to the punch and claiming a refund in your name.
Delaying your tax filing, on the other hand, leaves your personal information vulnerable for a longer period. Criminals who obtain your Social Security number, date of birth, and other essential details can use that information to file a false tax return, potentially resulting in a loss of your legitimate refund, as well as countless hours spent rectifying the situation with the Internal Revenue Service (IRS).
Moreover, early filing gives you an opportunity to carefully review your tax documents and ensure that the information being submitted is accurate. This allows you to detect any potential signs of identity theft, such as discrepancies or unfamiliar activity on your return. Identifying and promptly reporting any suspicious activity can help mitigate further damage and protect your financial well-being.
What Is the Earliest You Can File Your Taxes?
The start of tax filing season varies each year, but it generally falls around mid-to-late January. To find the exact date for the upcoming year, you can refer to the IRS website. However, it’s important to note that while you can technically file a return on the first day of tax filing season, other factors can affect this timeline.
For instance, businesses have until January 31st to issue Forms W-2 and 1099 to contractors and employees. When your employer waits until the deadline to provide these crucial forms or other necessary documentation, it may delay your ability to file your return in the initial days of tax season.
What Happens If You File Your Taxes Early?
Filing your taxes early offers several advantages beyond simply alleviating the stress associated with last-minute filing. Firstly, filing early gives you peace of mind, knowing that your taxes are already taken care of. You can avoid the last-minute scramble and focus on other aspects of your financial life.
Additionally, filing early allows you to receive any tax refunds sooner. If you’re entitled to a refund, the earlier you file, the faster you can expect to receive your money. This can be beneficial for budgeting, paying off debts, or investing in your future financial goals.
Moreover, early filing helps protect against tax-related identity theft. By filing before potential fraudsters, you reduce the chances of criminals using your personal information to file fraudulent returns. If someone tries to file a return under your name after you have already filed, the IRS will reject the fraudulent return, safeguarding your financial security.
Considerations for Delaying Tax Filings
But there are also several valid reasons to postpone filing your taxes in 2021; let’s delve into them.
- Awaiting Essential Documents
If you’re employed by someone else or working as a contractor, you’ll need crucial forms like Form W-2 or Form 1099 from your employer or clients. Without these, you lack the necessary information to complete your tax filing.
To address this, request a tax extension promptly and reach out to your employer or clients to expedite the sending of required forms. This proactive approach ensures you’re not reliant on others to meet the tax deadline.
- Incomplete Bookkeeping
Filing taxes demands a comprehensive and accurate set of financial records for the entire year. If your books are not up to date due to overwhelming circumstances or a backlog of work, file for an extension without hesitation. Seek the assistance of a professional to swiftly catch up on your bookkeeping, ensuring the accuracy of income and expense reporting.
- Travel or Busy Schedule
Restrictions and lockdowns related to COVID-19 may hinder access to essential business records, especially if they are stored in a distant office. If circumstances prevent you from accessing necessary documents, filing for an extension is a prudent choice.
Additionally, if a busy schedule or disorganization is causing delays, opt for an extension and consider engaging professional support from an accountant or bookkeeper to streamline the process.
- Need for Additional Time Despite Financial Preparedness
If you’ve diligently set aside funds for taxes, waiting to file is an option. For those who have been withholding a significant portion of income, there might be sufficient funds to cover the tax bill. Filing for an extension allows you the time to calculate and pay your taxes accurately.
While the IRS mandates timely tax payments, filing late becomes more of an inconvenience than a financial burden if you’ve already set aside the required amount. However, this advice primarily applies to sole proprietors; partnerships or corporations with members or shareholders should prioritize filing promptly to avoid financial impacts on others.
In any case, filing for an extension is a proactive measure that provides the necessary time to address these considerations and ensures a more accurate and organized tax filing process.
There are several smart reasons to file your taxes on time. By submitting your tax return before the deadline, you can avoid penalties and interest, maximize your tax refund, ensure financial stability, have extra time to arrange payment if you owe money, receive more dedicated attention from your tax preparer, protect against tax-related identity theft, and address potential issues proactively.
As a private lender, GoKapital is here to support your financial needs, whether it’s for business loans or real estate financing. If you have any questions or need assistance with your financing goals, we invite you to contact GoKapital for personalized guidance and solutions. Don’t delay – file your taxes on time and take control of your financial future today.