Tax return season is the unofficial holiday season – everyone does their best to be good and get their returns in early, in the hopes they get their return quickly. There are good reasons for doing that – but there are good reasons to wait, too.
Reasons to hurry
1. Get your money ASAP
That’s a no-brainer. If you need the money now, the sooner you file the better. Filing early means the process will be closer to the average time – 21 days – between filing and refund.
If you can wait to get the money, you should — some tax preparation services offer refund anticipation loans, which sounds like a great idea, but they have steep fees that eat into your refund.
2. It can help with financial aid
Experts say parents getting tax information in early can help their college-age children get the maximum amount of financial aid. There is a direct link between the Free Application for Federal Student Aid form and the IRS, so your tax information is sent directly to the financial aid form without you having to provide it yourself.
3. It may help if you are facing marital difficulties
It’s generally a good idea to not involve the IRS in these issues, but it can come into play. Sometimes divorced people don’t agree on who claims the children as a dependent, even though there may be a court order and an agreement. Whoever files first can claim the child, and the other ex-spouse may be out of luck.
4. Avoid identity theft
If you’ve lost your license recently, you might have more issues than needing to get a new one sent to you. Criminals can break into a home or car, steal identification and then file taxes in that person’s name, scoring a refund that doesn’t belong to them. Filing early could fend this off.
Also, get your refund via direct deposit so criminals can’t have it redirected to their address or steal it from your mailbox.
5. There’s more time to catch potential mistakes
If you dig into the files early, it gives you more time to figure out you’re missing important paperwork, and, if you have to pay, find the money for it.
If you owe the IRS money, there’s really no financial advantage for you to give it to them any earlier than April 15, but it always feels good to check something off your to-do list earlier than later.
Reasons to wait
1. Measure twice, cut once
The best way not to have to deal with amending your taxes is to file your return correctly the first time. You sign it under penalties of perjury, which means it should be accurate and complete. Filing hurriedly to get a refund and telling yourself you’ll amend later is a mistake.
Give yourself time to consider all the surprising items the IRS says you must report.
2. Allow for slow 1099s
1099 forms are supposed to be issued by the end of January, and generally trickle into mailboxes the first week in February. The trickle can last through February if businesses aren’t on top of their game.
If you’re expecting them, you shouldn’t file your return until you receive the forms or can reasonably assume you won’t.
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3. Try to avoid amending
If you get a 1099 or K-1 after you submit your return, you are not obligated to file an amended return. The IRS will probably send you a bill based on the revised Form 1099 or K-1 once IRS computers match that form against your Form 1040.
Computer matches are why 1099s are so dangerous. No amendment should be undertaken lightly. Amended returns are much more likely to be audited.
4. Be accurate
Ask if the return you filed was accurate to your best knowledge when you filed it. If it was, you are probably safe in not filing an amendment even if you later discover a mistake or receive a late 1099.
Conversely, if you knew your return was inaccurate when you filed it, you should amend it to make it accurate without delay.
5. No cherry-picking
If you amend a return, you can’t cherry-pick and only make corrections that get you money back, but not those that increase what you pay out. If you amend, you must correct all errors, not just the ones in your favor.