Four reasons why filing early is filing smart.
SMITH BRAIN TRUST – Tax season officially starts on Feb. 12 this year. It’s the date the IRS will start accepting and processing tax returns.
Sure, those returns aren’t actually due to be postmarked until the usual April 15. But Maryland Smith accounting lecturer and CPA Samuel Handwerger says you should get moving and get them done now.
“If you file early, the IRS will send you a sticker that says, ‘Good American Taxpayer!’ OK, maybe not,” says Handwerger, who is also the faculty advisor for TerpTax, Maryland Smith’s free, student-run tax preparation service. “But you should still not procrastinate.”
Here are Handwerger’s four reasons why early filing is smart filing.
You avoid the hassle of being a victim of tax identity theft. There are still a lot of fraudulent tax returns filed every year illegally using someone’s Social Security number to fraudulently claim their refund. The IRS processes refund claims on a first-served basis. If someone uses your tax identity to file before you do, the processing of your return will be delayed while you work with the IRS to get the whole mess straightened out. “If you file first,” Handwerger says, “then this doesn’t become your problem.”
You get your refund sooner. “Three out of every four returns are due a refund,” Handwerger says. “That’s just math. Why not get the money sooner?”
You get more time to pay, and plan. If you do owe money to the IRS for 2020, you have until April 15 to pay anyway to avoid penalty and interest charges. “Knowing what you have to pay sooner can help you budget,” he says. Plus, you’ll have a bit more time to consider taking advantage of tax-savings techniques, such as putting money into an Individual Retirement Account (IRA). The deadline to make that move and get the deduction for 2020 is also April 15, “and there are no extensions for that,” Handwerger says.
You get more time with your tax preparer. If your CPA is seeing your records for the first time on April 14, this isn’t great for you. “When tax preparers are in a rush, they might miss asking you pertinent information that could save you money,” Handwerger says. “Meet with your tax advisor early in the season while they’re still – relatively – calm.”
GET SMITH BRAIN TRUST DELIVERED
TO YOUR INBOX EVERY WEEK