Unless you’re wealthy enough to employ your own stable of tax attorneys and accountants, the annual chore of filing taxes is up to you. And April 15 will be here before you know it. We want to offer you five reasons why it makes sense to file early.
Unfortunately, many Americans are in for an unpleasant surprise this year due to last year’s Republican tax overhaul. The IRS reports that early returns to date have shown a drop in refunds of eight percent over last year, with 25 percent fewer filers receiving a refund. This is due to the fact that, while most Americans saw an increase in their paychecks last year, they didn’t change their withholding amounts with their employer to compensate.
In addition, many of the previous deductions are gone, including those for: property and local income taxes (known as SALT, or state and local taxes); personal exemptions (last year, $4,050 for yourself and each family member); the interest on home equity loans; moving and job-related expenses; and, tax preparation fees. The standard deduction has doubled, but for those who choose to itemize it may not make up for the loss of deductions in these other areas.
The good news is, you can still make moves now to reduce your 2018 taxes. If you qualify, you can make contributions to an Individual Retirement Account (IRA) or 401(k) as long as you identify those contributions as meant for 2018. You can also contribute retroactively to a Health Savings Account (HSA) for 2018, and be able to deduct the amount.
So now let’s look at the reasons why you should consider filing your taxes now rather than later.
1. Faster refund
If you think you’ll be getting a refund, no doubt you already have plans for this money. If you file now, you’ll have the money in your hands that much sooner, whether to invest, pay down bills (and save the associated interest charges), or plan a vacation. If you e-file with direct deposit, you could have your refund in less than three weeks if there are no problems with your return.
2. Prevent identity theft
The may be the most important reason to file your tax return early. As we explained last year (“File Taxes Early To Beat the Crooks”), cybercriminals who have just your name, birthdate, and Social Security Number can file a tax return in your name and collect your refund. According to a 2016 General Accounting Office (GAO) report, the IRS paid out $3.1 billion in fraudulent refunds to identity thieves in 2014. The IRS’s Taxpayer Advocate Service (an ombudsman for taxpayers within the IRS) reports that at the end of 2015, it had over 600,000 identity theft cases with taxpayer impact in its inventory, which was nearly 2½ times its inventory in 2014. And having a credit freeze or other type of credit monitoring service in place will not prevent tax-related identity theft.
3. Time to pay
One of the most common reasons people put off filing their taxes early is because they’re afraid they’ll owe and they don’t have the money yet. Surprise: Even if you file now, you don’t have to pay what you owe until April 15th . Filing now relieves the stress of wondering how much it will be. Plus, you’ll have more time to come up with any money owed. And because the tax law resulted in so many changes from last year, you may even find you won’t owe at all, thus saving two months of worry.
4. Less stress
Many people end up pulling all-nighters on April 14th to complete their tax returns. Getting started ahead of time will allow you spread the pain out over several days or even weeks. You’ll also have time to track down missing paperwork, rather than scrambling to find it at the last minute. If you file a paper return, you’ll also encounter smaller crowds at the post office. If you file electronically, there’s always a chance you’ll encounter a last-minute computer glitch that can result in 11th-hour frustration. Filing earlier gives you time to recover if that should occur. Finally, the chore will be done and off your plate.
5. Accessible help
If you’ve tried #4, doing it yourself, and find you can’t because all the changes in the new law are too confusing, filing early will give you more time to find qualified help, rather than taking the only appointment available as the April 15th deadline approaches. In addition, tax preparers and accountants are less busy this time of year, and will have more time to devote to your return.
If you’re not sure you’re getting a refund or think you might end up owing the government, let Billshark find the hidden savings on your bills. That’s fast money in your pocket that you can put toward your tax bill or anything else you’d like.