The Best Time To File Your Taxes Is Well Before April 15 – Forbes Advisor

Procrastination rarely pays off, especially when it’s time to file your tax returns.

Most Americans receive their annual tax documents for the previous year by late January or early February. You can prepare your taxes as soon as you have those documents in hand, and you should have a couple of months—until April 15 (or the next business day)—to fill out and file your returns.

Should You File Your Taxes Early?

For most people, filing taxes in February or March can be smart. Here are six reasons to prepare your return early.

1. You’re owed a refund. The earlier you file, the sooner you’ll get your tax refund. The speediest option is to e-file your return and use the direct deposit option. For taxpayers who do that, the IRS issues most refunds within 21 days. Processing paper returns, by contrast, can take four weeks or more.
2. You want to save money. As the filing deadline approaches, retailers tend to charge more for the best tax preparation software. To avoid late-season price hikes, aim to file before March 15.
3. You need a tax professional to help prepare your return. The longer you wait, the more likely you’ll have difficulty getting onto someone’s schedule in time—and you may well have to pay extra for a rush job.
4. You want to figure out how much you owe the IRS so you have time to come up with the cash. Once you’ve got all your tax statements in hand and can calculate your taxes, you’ll know the size of your tax bill. If you decide to file your tax return well before the deadline, you can still wait to submit your payment. There’s no penalty as long as you get both the return and the money to the IRS before the mid-April deadline.
5. Calculating your tax bill early gives you time for last-minute moves. April 15 is also the deadline for making traditional and Roth IRA contributions linked to the previous calendar year. Preparing your return pronto can reveal whether you’d benefit by contributing to a traditional IRA, a Roth IRA or a backdoor Roth IRA. These contributions must be reported to the IRS, so in such cases, you shouldn’t file until you’re able to include these transactions on your return.
6. You’ll thwart potential identity thieves. Identity thieves who get their hands on your personal information could try to steal the tax refund by filing a fake return in your name. Filing your return as soon as you have all your paperwork can prevent this potential headache, as the IRS will not accept any “duplicate” returns.

Should You Wait Until the Deadline To File Your Taxes?

If you owe money to the IRS, you might be inclined to hold off as long as possible before filing your taxes. But waiting until the last minute is unwise.

For one thing, you might have to rush, which could lead to costly errors. You might overlook money-saving deductions, for example.

Or you could run out of time while preparing your return, miss the deadline and file your tax return late. That could cost you even more, as the IRS may levy penalties against you.

Penalties for Filing Your Taxes Late

If you miss the mid-April filing deadline, the IRS could charge you a failure-to-file penalty equal to 5% of the unpaid taxes for each month (or part of a month) that your return is late. This penalty maxes out at 25% of your tax bill.

Also, the IRS may impose an additional failure-to-pay penalty if your payment is late. That amounts to 0.5% of the tax balance for each full or partial month the bill remains unpaid, up to a maximum of 25%. Plus, you’ll pay interest on the amount you owe.

So What’s the Best Time To File Your Taxes?

If possible, you should always file by the mid-April tax deadline. That said, your decision on exactly when to send your return may depend on whether you owe the government money.

• If you expect a refund, filing well before the tax deadline will get your refund cash into your pocket faster. For best results, you can e-file and have the refund directly deposited in your bank account.
• If you owe money to the IRS, you might prefer to prepare your return early and wait until mid-April to file it. Filing and paying on or just before Tax Day, rather than months in advance, lets you keep your money in the bank, earning interest, until the due date.

What If You Can’t Meet the Deadline?

You can easily get a six-month tax filing extension if you can’t meet the mid-April filing deadline. You can request this through your tax software or by completing and mailing the extension application form, Form 4868, to the IRS.

An extension will postpone the due date for your tax return until October 15 or the next business day.

Remember, a filing extension only gives you extra time to prepare and submit your tax return; your payment is still due by the tax deadline. And, if you fail to pay on time, you’ll be hit with a failure-to-pay penalty each month until you’re paid up.

You generally don’t have to file a separate extension form for your state tax return, though some states, such as New York, require this step.