Why file your taxes early through e-File?

Why file your taxes early through e-File?

On 12th February 2021, the IRS opened up the tax season for the year 2020 and now the process of e-filing is going on.  It is a common scenario where taxpayers wait till the end of the tax season for filing their tax returns. But, there is no significant reason as to which one should wait till the end for filing their tax returns.

Undoubtedly, tax refunds would have an impact on your finances and if you have a refund due from the IRS then it is even wiser to file your returns soon.

Let us have a look at the main reasons to file your tax returns early

1.To obtain the refunds soon

The pandemic COVID-19 has been the main reason for affecting the finances of millions of Americans. Many have become unemployed and many have been furloughed. In such adverse financial situations, tax refunds would be helpful and you would like to have your refunds as soon as possible. According to the IRS, every 9 taxpayers out of the 10 taxpayers filing their tax returns would receive their tax refunds within 21 days of e-filing or even faster than that. Moreover, there are a large number of tax deductions and credits available which would make your refund amount a bigger one. So, why not file for your tax returns early and get your refunds soon.

2.More time to pay your taxes   

Even if you have taxes to be paid to the IRS, you still can file your tax returns early. In case you file your tax returns early there would not be the necessity to pay your taxes due by the mid of April which is the deadline for tax payment. If you are filing your tax returns early, you will have ample time to understand and figure out how to pay your taxes. Moreover, you would also have the option to make contributions to the IRA in 2020 and can even avail the benefits of additional tax deduction.

3.Avoiding tax extension

If you are filing your taxes early, then you are going to avoid the chances of filing for a tax extension. Tax extensions are mainly not due to financial needs but due to disorder or disarrangement. Many people who are waiting until the last minute to file their tax returns are in the need of extra time to find out about the deductions or find out the receipts. 

If you are filing for a tax extension and you are not able to pay whatever you owe, you will be charged with interest and penalties on your outstanding debts. If you are preparing your tax returns early, you can be able to avoid this situation.

4.Financial Information

In case, you are in a phase where you are expecting that you will be purchasing a house, you would be starting your studies again, etc. then you must start filing your tax returns early. By this, you can get the essential information soon. College-going students would be able to use the information provided in Form 1040 for financial aid and if you are a home buyer then you can also show your completed tax return as your household income’s proof. When your tax returns are done early, then the paperwork for these processes can begin early.

5.Preventing tax refund fraud

By filing your tax returns early, you may not be able to eliminate the threat of identity theft. However, it will help protect your tax refund. It might happen that before you file your tax return, someone else has already filed a tax return using your Social Security number (SSN). This is tax refund fraud or scam and usually, it occurs early in the tax season before most taxpayers have filed their returns. So, you should try to keep your SSN a secret and make an attempt to file your taxes early. 

6.Less competition 

It is quite tough to get good and expert tax professionals that would help you in your tax return preparations. If you have not taken an appointment, it is difficult to get one now. Some tax professionals would even charge more when the tax filing deadline approaches closer.  So, the best way is to avoid all troubles by filing your tax returns early.

7.Avoid tax deadline stress

Most of the taxpayers are always stressed about filing their tax returns. It is a complicated task and it is better to get rid of the difficult things soon. Once, your tax return filing is done you can just sit back, relax and wait to receive the refund.

Conclusion

Hence, it is good to file your tax returns early to utilize the various advantages of early filing offers. So, if you have not filed your tax returns you must plan to do it soon.