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The Best Time to File Taxes: Being Early or Waiting

File early or take it down to the wire? We look at the advantages and disadvantages of filing your taxes ahead of time versus waiting till Tax Day dawns.

Should I Wait to File Taxes? Pros vs. Cons

Filing your taxes well ahead of the deadline seems sensible, but are there reasons why it might pay to wait until closer to tax day? In this blog, we take a look at the benefits of knocking out your tax return early while also considering some reasons why you might want to wait, including the timing of your investments and changes in tax law. 

Advantages of Early Tax Filing

The best argument for getting your taxes done early is just to have them done. But are there actual advantages to getting them off your desk early other than just peace of mind?

Early Refunds

The Internal Revenue Service (IRS) processes returns in the order they are received. Filing early makes it more likely you’ll see your refund check sooner—sometimes as soon as 2-3 weeks after you file them if you’re ahead of the rush.

Know What You Owe

If you think you might owe money on your taxes this year, it’s better to find out earlier rather than later. Completing your return will let you know exactly what you have to pay and you’ll still have until April 15 to pay.

More Time to Address Complications

If your financial situation has changed it might make sense to give yourself a little more time to complete your taxes. Even if you’re fast at doing your return, events like divorce, serious illness or death, retirement, relocation, or a job loss could make things trickier this year.

Easier to Get Help

Tax professionals become very busy as the filing deadline approaches. Getting your return to them early means you get to pick their brains on deductions and benefits while they are still available and able to give your return their full attention.

Identity Theft

Filing a false tax return to claim a refund in your name is an increasingly common form of identity theft. If you’re concerned about this type of fraud (and even if you’re not) filing early means the IRS will red-flag anyone who might subsequently fraudulently file in your name.

Greater Accuracy

Taking your time on your tax returns allows you to double-check your sums and make certain whether you should do the standard deduction or itemize. Completing your tax return as tax day looms makes it more likely you’ll make mistakes that can cost you.

Avoid Late-Filing Penalties

Running it down to the wire makes it possible you could miss filing altogether. An unexpected personal crisis or discovering you are missing critical documents at the last minute may expose you to late filing charges or interest charges on outstanding payments.

Disadvantages of Filing Early

On the other hand, filing early does have some potential drawbacks, especially if you are relying on your employer or financial institutions to furnish you with timely, accurate information.

Missing Documents

While you could have the best intentions of filing early, you might have to wait for W-2 or 1099 documentation from your employer, or tax information relating to your bank accounts, loans, or investments. 

Corrected Documents

Filing early can also be difficult if financial institutions issue corrected versions of documents they have already sent you, or if you find errors you need to follow up with them. It might be best to wait until you’re sure you have the final version of all the documents you need in hand.

Maximizing Deductions

Similarly, it might take at least a few weeks to gather information about specific deductions such as work, healthcare, or education expenses. Information from service providers or vendors simply might not be available very early on in tax season.

Maximizing Individual Retirement Account (IRA) Contributions 

Contributions to Individual Retirement Accounts can be made until the tax filing deadline for that year. This means you have until tax filing day to make contributions that count towards your limit for the previous year. You may want to wait on filing until you are certain you have contributed as much as you can to your retirement nest egg.

Tax Strategy

Waiting longer to file gives you additional time to make strategic changes to your portfolio or make better decisions based on economic conditions. This might affect the types of deductions you claim this year, especially if you are a business owner or have significant investments.

Legislative Changes

Sometimes, legislation affecting taxation is still being decided as Tax Day approaches. In most cases, the IRS will apply any changes retroactively to tax returns it has already received, but taxpayers may choose to delay filing until they understand exactly how the changes will affect them.

Getting Advice

If you rely on a particular tax professional to advise you on complex tax issues, you may need to wait for them to review your return or discuss important information with you. Tax advisors are typically very busy handling tax return issues from early in the calendar year.

The Child Tax Credit and Your Taxes

Congress is still considering a tax bill that includes a sizable increase in the child tax credit that could affect the 2023 tax returns due on April 15, 2024. The bill has been passed by the House of Representatives but, at the time of writing, has stalled in the Senate as tax day looms.

If approved, the bill would make more of the current $2,000-per-child credit into a refundable credit, meaning many families would receive more money back on their tax return. The bill would also increase the refundable portion of the credit in 2024 and make it entirely refundable in 2025.

While taxpayers might want to wait to ensure they get the full benefit of the changes in the proposed tax bill, the IRS has advised that it will apply the changes retroactively to tax returns that have been filed already if the bill becomes law.

Should I Wait to File Taxes?

While there are clear practical advantages to filing your tax return sooner rather than later, there are some specific situations where it might pay you to wait. 

For most taxpayers, filing sooner provides clarity over what they owe and gives them time to get the money together to make their tax payment by April 15. If they’re expecting a refund, they’ll get it sooner if they file early.

However, if you’re a business owner or have significant investment or retirement assets, there are situations where it might help you to hold out on your tax return longer. In these cases, it’s best to talk to your tax advisor about exactly how you might benefit by holding out longer.

When Is the Earliest You Can File Taxes?

Tax season opened on January 29, 2024. This was the earliest date that the IRS began accepting returns for tax year 2023. 

While there is nothing stopping you from filing your return as soon as the IRS accepts it, most people need to wait to receive tax information about their earnings, investments, and loan interest. Employers are required to mail tax documents by January 31, but other documents might take longer to arrive.

It’s Never Too Late to Talk to Listerhill!

At Listerhill Credit Union, we offer our members all the tools they need to achieve more with their money from our Growth Checking, My Goal Savings, Good Start, and Explorer Rewards accounts, to our structured Money Market, Certificate, and IRA products. 

Please reach out to a Member Advocate for help with accounts that might help you take advantage of tax savings and read more about the tax-advantaged accounts that exist.

Tax-Advantaged Accounts You Should Consider

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