As the old saying goes, “There’s nothing certain but death and taxes.” And to prove the validity of that statement, we find ourselves once again in the midst of another tax season. There are receipts to collect, expenses to tabulate, and all manner of paperwork to be scrutinized and filed by the April tax deadline – this year on Tuesday, April 17.
Because the U.S. tax code can seem incredibly complex and arcane, many unusual theories and hypotheses have developed over the years pertaining to various aspects of the tax filing process. One such myth states that a taxpayer is more likely to avoid an audit if they wait to file closer to the tax deadline. Unfortunately, there’s no truth to that notion. But there are some advantages and disadvantages surrounding the timing of when to file your taxes, and I thought it would be a good idea to mention a few of them here.
Filing Early versus Filing Late
For some people, preparing one’s taxes is an excruciating process, akin to root canal surgery. Those folks are more likely to procrastinate and put off the entire process until they absolutely have to address it. Unfortunately for them, there can be serious disadvantages by waiting too long to prepare and file their taxes:
Haste Makes Waste – If one waits until the tax deadline nears and then frantically tries to collect all their paperwork and receipts (assuming they are itemizing their deductions), then two things are likely to occur. Something will be missed or overlooked, or mistakes will be made – both of which could cost them money. Plus, the IRS frowns on mathematical errors on tax returns and you don’t want to bring unwarranted attention to your return.
The Early Bird Gets the Worm – Let’s assume that a taxpayer prefers to use the services of a tax preparation company or, depending on their circumstances, a CPA. As most people know, the closer the tax deadline nears, the busier these tax professionals get. If a taxpayer waits too long before undertaking the tax filing process, they might not be able to find a tax professional to help them. There are exceptions, of course, but generally tax preparers and CPAs start to decline appointments beginning in the first week of April.
An Ounce of Prevention is Worth a Pound of Cure – One reason why some taxpayers put off filing their taxes is because they know they owe money to the IRS and they are going to have to write a check. As a result, they prefer to delay the inevitable for as long as possible. However, some taxpayers will have to transfer funds into their checking account in order to cover the check and if they wait too long, the needed funds might not be transferred in time. This could potentially result in IRS penalties, fines and fees. Again, waiting too long to initiate the process can cause regrettable things to occur.
Sooner Rather Than Later – Many taxpayers are entitled to a refund from the IRS and naturally, since it’s their money that’s being refunded, they would prefer to receive it as soon as possible. In all likelihood, by filing their taxes early, they will receive their refund sooner rather than later. And by filing taxes electronically and having a refund directly deposited into a checking account, it will speed up the process even faster.
Time is Money – Let’s say a taxpayer suspects he/she is going to owe money to the IRS. Instead of waiting until the last minute to prepare their taxes, it’s actually advantageous to prepare and file early. Why? Because they will know precisely how much they owe and it will give them additional time to figure out how to generate the payment, if needed. Maybe they take a part-time temporary job or maybe they drive part-time for Uber? Plus, even if their return is filed in the middle of January, the taxes that are owed don’t have to be paid until the filing deadline in mid-April. The extra time can be particularly helpful to some taxpayers.
The Measure of Success is Happiness and Peace of Mind – No one enjoys the process of preparing and filing their taxes but it is something as American citizens we are obligated to do. As I mentioned earlier, for some people, this process can induce severe anxiety and dread. For those folks, it’s better to do their taxes early and get it over with so they can enjoy some peace of mind, at least until next year’s tax season.