While taxes are not due until April, filing as soon as possible is a good idea. There is no way for millions of Americans to avoid filing an annual tax return. And if you must file a tax return, do it as soon as possible.
According to CBIZ MHM’s managing director in the Boston office, Joanna Powell, CPA, the IRS urges taxpayers to file early so they may receive their refunds faster. This is not the only incentive to file your taxes early, it can also provide additional time for double-checking work, planning payments, and preventing tax fraud. Moreover, you may file now and pay later if you owe taxes.
However, early filing is not for everyone. The IRS has encouraged recipients of state-issued stimulus or rebate payments to wait until the government determines whether or not the funds are taxable.
Benefits of Early Tax Filing
There are various advantages to submitting tax returns early rather than on Tax Day:
- More precise returns may result in higher tax refunds.
- Less competition for tax preparation appointments.
- More planning time for tax payments.
- Less possibility of tax fraud.
The possibility of obtaining a refund swiftly motivates many individuals to file early, but it’s not the only incentive to get started on your return today. Early filers may be eligible for a bigger tax refund. People filing close to the tax deadline may overlook important deductions or credits.
Starting early allows more time to collect data on prospective tax incentives. In addition, for divorced parents, an early filing might prevent potential issues with claiming children on a tax return. Moira Corcoran, a CPA and a tax expert on the website JustAnswer, says if you and your ex-spouse have an agreement regarding who can claim the children, they can disregard the agreement and claim them anyhow. The IRS will reject the subsequent return with the same dependents if this occurs. The deductions go to the first person to file and claim them, according to Corcoran.
Completing tax forms early also allows you to prepare for how to pay the bill if you wind up with a tax liability. Corcoran said, If you owe money on your tax return, you have until the filing date to make the payment. This year’s filing deadline is April 18.
It may be difficult to secure an appointment with a tax specialist in the weeks leading up to the tax filing deadline. You may be able to meet at a convenient time, and your tax return will not compete for the attention of your tax preparer if you schedule an early appointment.
Avoiding tax fraud is one of the most important reasons to file as soon as feasible. Powell states, “the possibility of identity theft through a fraudulent tax return is diminished.” Using stolen Social Security numbers, fraudsters generate and file fraudulent tax returns early in the tax season. If the IRS does not mark the return for a review, the return is completed, and a refund is provided. The system rejects the legal taxpayer’s return when he or she attempts to file it. Consequently, an affidavit must be written, supporting evidence must be produced, and a paper return must be filed.
Leah Diehl, an associate professor of accounting at the University of Montana College of Business, suggests filing your taxes before anyone else tries to claim your return.
When is the earliest filing deadline for my tax return?
This year, the IRS began taking tax returns on January 23, though some individuals may not be able to submit them if they have not yet received their tax forms.
For example, 1099 forms from investment accounts may not be distributed until the middle of February. Until March, owners of pass-through businesses such as partnerships and S corporations may not get tax forms for their company revenue.
However, employees should now have access to their salary information. Employers were obliged to send all W-2 forms, which document employee pay, tax withholding, and other essential information, by January 31. The same deadline applies to 1099 forms used for non-investment sources of income, such as interest or distributions from retirement funds, and delivered to independent contractors.
Who Should Not File Early in This Year’s Filing Season?
While there are several advantages to submitting your tax return early, there is a significant reason to wait this year. If you got a stimulus or rebate payment from your state in 2022, it appears that the taxability of that money is uncertain.
Recently, the IRS made a statement indicating that it collaborated with state tax officials to clarify how these payments should be reported on tax returns. Last year, more than a dozen states provided some form of payment to their inhabitants, and the IRS added that the procedures around these payments are complicated.
The government is expected to provide more guidelines. Meanwhile, the IRS encourages impacted taxpayers to delay submitting their tax returns or consult a tax expert. According to the IRS, if you have already submitted your 2022 tax return, there is no need to alter it at this time.
Ways to Prevent Tax Fraud
Although the IRS has tried to prevent tax-related identity theft, the practice continues to be widespread. Those unable to submit early may have additional methods to prevent fraud.
The IRS provides a transcript service that allows taxpayers to check their records. This strategy does not prevent identity theft, but it assists people in proactively addressing issues rather than discovering fraud while filing their taxes.
Using a PIN for identity protection provides additional protection against fraud. In the past, the federal government only granted PINs to victims of tax-related identity theft and residents of certain states. Now, anyone may join the program voluntarily. Once you request a PIN, you must use it yearly to submit your taxes. If you choose not to use a PIN, submitting as early as possible remains the most effective strategy to minimize tax identity theft.
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