You may wonder if, in the three-ish months you have to file your tax return (assuming you don’t file for an extension), there is an advantage to filing earlier, later, or sometime in the middle. It depends on what your goal is: to save money, to thwart identity thieves, to receive your refund ASAP?
To save the most money…
…file before March 15.
There are a couple of considerations that go into this target date. Tax software providers often change their prices in the lead up to and through tax season. Prices will typically be highest in the 30 days before April 15. You might have access to software discounts if you belong to a credit union, have a simple tax situation, or have less than $69,000 of adjusted gross income. To take advantage of these, start your research early. Finally, if you use a tax professional (like a CPA), they may give you a discount if you book and send in your forms early.
To avoid late penalties…
…file by the April deadline (usually April 15 or the closest business day to that date).
Filing late could result in a late-filing penalty of 5% of the amount due for every month or partial month your return is overdue (up to a maximum of 25%) plus interest charged on the amount. If you file 60 days past the deadline, the minimum penalty is $210 or 100% of your unpaid tax, whichever is less. You can get an extension, but that only means you have extra time to submit your return; you still need to estimate your tax bill and pay as much as possible by April 15. If you pay at least 90% of your tax liability by the April deadline and the rest with your return, you may not have to pay the late penalty.
To deter tax identity theft…
…file as soon as you have all the necessary paperwork.
In 2018, the IRS received roughly 199,000 reports of tax-related identity theft. Criminals look to access or intercept personal information so they can file a fake tax return and steal the refund. However, you can beat them to the punch if you access tax forms online (sometimes you can download them before the company mails them) and file as soon as possible. Once the IRS has received your return, it will reject any other returns electronically submitted in your name.
To get your refund as quickly as possible…
…file electronically in mid-January.
Did you know you can file your federal tax return as soon as you have all the relevant documents? If you’re ready to go by January 11, then by all means, file your taxes electronically right then! The IRS usually doesn’t begin processing returns until mid- to late-January, but your return will be at the top of the pile! However, if you’ve claimed certain tax credits, filing early won’t guarantee a faster refund.
Refunds for electronic returns are issued within 21 days, which is faster than the six to eight weeks for paper returns. Choose direct deposit for your refund so the money can go directly into your account. You can check your refund status on the IRS website to see how your return is progressing.
To see if or how much you owe the IRS
…file as soon as possible.
The sooner you know how much you’ll owe the IRS, the longer you have to budget for the payment. Just because you file your taxes early doesn’t mean you’ll need to pay your bill before the April deadline. If you discover you will owe the government, there can be an advantage to avoiding early payment: the money could be earning you interest in the right account!