Tackling Your Taxes Early Isn't Just a Good Idea—It Saves Money Too
So taxes aren’t your idea of fun. That’s still no reason to put off filing—which will save you money and minimize tax-time terror.
Photo by Juan Moyano / Stocksy
Think of this as the real world version of extra credit or brownie points you’d get in school for turning in your work early—except instead of getting a gold star, you'll be rewarded with more money and less stress. Filing your taxes well before the April 15 deadline this year can offer huge advantages, especially for first timers who may need more time and help getting paperwork together. In many cases it will actually save you money too.
The Internal Revenue Service began accepting 2018 tax returns on January 28, and this tax season is going to be a little different for everyone because of the new tax law. Filers who are married with children will likely see larger refunds, but most single-income filers should expect smaller returns. Either way, it pays to get a jumpstart on your taxes. Here are five reasons why:
Get your money back sooner
Tax refunds aren’t guaranteed, but most Americans who file their taxes do have money coming back to them. For the 2017 tax season, 97 million refunds were doled out, with the average amount slightly exceeding $2,700.
With the recent government shutdown, there could be delays processing returns, so filing early is your best bet. What’s more, changes to the tax law mean fewer people will get refunds and those who do will likely get less money back. But chances are you'll still get one, which means you can pay off debt, deposit your refund into an interest-earning savings account faster, and reach your money goals sooner.
Avoid surge pricing
If you plan to file your taxes yourself, many programs are less expensive if you pay before mid-March or so. For example, H&R Block and TurboTax are both offering their regular software for about 40 percent off right now. You can also use free tax software like Credit Karma and IRS Free File right up to the tax deadline, but paid versions are more likely to include useful extras like expert advice, technical support, and the ability to save past returns indefinitely—making filing faster and easier.
Keep crooks from stealing your refund
Tax season is also identify fraud season. Internet crimes put $445 billion in the pocket of thieves last year, and tax fraud was the main source of that score. Filing early doesn’t entirely protect you from identity fraud, but it does protect your refund. Essentially, the IRS encourages people to file early to avoid scammers claiming your refund.
While the IRS received 40 percent fewer reports of fraud in 2017, a huge amount of people—more than 242,000!—still said they got scammed. If your refund is claimed by a scammer, you can get your money back, but most people waiting at least eight months to get the fraud situation sorted. So it pays to call dibs on your refund by getting your paperwork in as soon as possible.
More time to figure out how you’ll pay if you owe money
Girl Scouts teach us two things: Thin Mints are addicting and it’s important to be prepared. Take the latter to heart by applying their motto to your taxes. By preparing your taxes much earlier than the April 15 deadline, you have time to figure out how you’ll scrape up extra cash if you underpaid during the year.
If you do owe the tax man, figuring that out early gives you you time to put together a plan to pay, whether that’s dipping into savings or side hustling. Remember, you don’t have to pay early if you owe money and should definitely put that part of the task off until the last minute. But by figuring out what you owe now, you’ll have more time to brainstorm deductions to cut your tax bill.
There is a silver lining to owing taxes this year. The IRS is going to be more lenient about penalties because of the confusion surround the tax code changes.
No nausea-inducing, last-minute scrambling
Whether you are DIYing your taxes or dropping off paperwork with Mom and Dad, starting the process sooner can save you from freaking out later. Most documents will make their way to you by early February, if not sooner. If you realize you’re missing something, you (or Mom and Dad) have time to track it down.
You’ll also have more time to react if you notice a mistake. Maybe your Social Security number is transposed on your W-2 or one of your side gigs incorrectly reported how much money you made on a 1099. To get that fixed, reach out to your employer or contact the IRS.
Tax season is a pain, for sure. But the peace of mind that comes with planning ahead can be priceless.