You can have up until April 15th to file your taxes, but the processing of your return as early as possible can save you from a series of stress. The IRS started accepting 2019 tax returns from Monday, January 27, 2020, and the sooner you file the sooner you will know your invoice or tax refund.
However, If you are not convinced, consider how filing your taxes early can also help protect you and your wallet.
Reasons to prepare your taxes as early:
·Get your refund soon enough
·Outsmart identity thieves
·Have more time to settle your tax bill
·Withholding tax adjustment for the coming fiscal year
·Prevent last-minute tax stress in April
Reduce the chances of Tax-Related Identity Theft
Stolen Social Security (SSN) numbers were used by identity thieves to file fraudulent tax returns and get a refund from the government. For example, just over a month into the 2019 tax season, more than 3,500 returns had been identified by the IRS claiming $ 15.8 million in fraudulent refunds. Those are just the agency’s captured returns, and unfortunately, among those flagged for fraud, he paid some of the refunds (the IRS prevented about 77% of fraudulent refunds from being issued).
In short, the tax season can be a gold mine for identity thieves, and this problem can get very personal too. .
When someone fraudulently uses your social security number to fraudulently claim a refund, you go to electronically file your tax return, the system may reject you because it flags your social security number as duplicate. Whether you are getting a refund or not, this will slow down the process of your tax filing.
To start with, you will have to file your taxes the old-fashioned way, using paper forms and submitting them to the IRS. If you are used to filing your taxes electronically, this will likely take you much longer. With this return paper, you need to attach a 14039 form, also called Theft Affidavit Identity.
In addition to the inconvenience of the paperwork, there is the issue of your tax refund. If you are expecting one, it will take a longer time to receive it. It takes the IRS an average of 278 days (about nine months) from the time the agency receives the tax return to the date the victim of identity theft receives its refund, according to the most recent audit of the problem of the Treasury Inspector General of Administration Taxes.
Tax related to identity theft can happen to you directly when your SSN has been compromised, but it can also affect you if someone fraudulently claims one of your dependents or steals the SSN from a deceased family member.
Filing your tax return as soon as you can does not guarantee that you will hit an identity thief for the punch, but it certainly increases your chances of avoiding the aforementioned fraud problems.
Get a refund sooner
If you are expecting a refund, there is a simple reason to take charge of things at the beginning of the year: The sooner the IRS has your tax return, the sooner it can issue your refund back to you. There is not much more to it than that.
The IRS issues approximately 90% refund within 21 days of processing the return. You can check the progress of your refund through the IRS Website.
Give yourself time to put together what you owe
If you need to send money to the IRS this year to pay your debts, you may want to know how much you owe as early as possible. Ideally, your tax bill doesn’t come as a surprise, but if it does, you don’t have much time to put together your payment.
You must send your tax payment to the IRS by April 15, 2020, because any balance you owe after the tax term will add interest and fees. The payment penalties start at 0.25% and go up to 25%, depending on how delinquent you are and whether you are enrolled in a repayment plan. If you do not file your return by April 15 or by any extension term that may have been granted, you will also face a lack of file penalties.
While you can use a credit card to make tax payments, this transaction is also subject to processing fees of up to 1.99% – not to mention the interest your credit card may charge if you do not pay the balance by the due date. (The average credit card interest is at 21.26% as of January 2020.)
While you can inquire for an extension to file your tax return, the extension only applies to paperwork. You no longer get time to make a payment.
Start getting your taxes prepared as soon as you receive all your forms to determine what you owe. This can give you a couple of months to find out where the money will come from. Here are some options for arriving with a tax payment:
·Divide the amount you owe by the number of weeks remaining until April 15th and set aside that amount each week, so you have enough money on tax day.
·If you can’t afford the above strategy, set aside as much as you can in the short term and cover the rest with the savings.
If you don’t have enough money in your savings account to pay your taxes or you have to make use or your emergency fund to do this, consider applying for a payment plan with the IRS.
See if you need to adjust Withholding Tax
As soon as you prepare your tax return, you will know how much of a refund to expect or the amount you owe the IRS. If your tax bill is surprising, adjusting your withholding for the present year can aid in preventing a similar shock in 2021.
Use a 2020 retention spreadsheet or a payment plan to determine how much you should reserve from each paycheck, and update your W-4 accordingly. If you are not sure about how to do this, make enquiries from your company’s human resources or payroll department for aid.
