Tax filing season officially begins Friday. Here's why you should file as soon as possible
Tax season can be a pain but submitting your return to the IRS as soon as you're able may be extra important this year.
That's because the coronavirus pandemic has led to changes in the tax code that will impact individual returns and refunds.
The season is also shorter than usual this year. The IRS will start accepting and processing tax returns on Friday, Feb. 12, and so far, has made no indication that it will also delay the April 15 filing deadline — an additional incentive to be on top of filing taxes, especially if you're going to work with a tax preparer.
"If you are seeking the help of a professional tax preparer or a CPA to file your taxes, they may be super-bottlenecked [in April]," said Sheneya Wilson, CPA and founder of Fola Financial in New York.
Stimulus checks can mean bigger refunds
Of course, many Americans received a stimulus check based on their tax returns. The IRS is urging people who don't usually file taxes as well as those who should have gotten more money to file because of a change in circumstance, such as having a child or seeing a significant drop in income from 2019 to 2020.
The only way to get the payment you're owed now is to file a tax return and claim the recovery rebate credit. This could lead to a larger return than usual, if you don't owe the IRS.
Having an updated return on file could also help you get future payments, according to Elaine Maag, a principal research associate at the Urban-Brookings Tax Policy Center. It will smooth the process for those who generally don't file by establishing with the IRS where to send payments.
It could also help some become eligible for payments or a bigger tax break. If you had a drop in income in 2020, you may be able to get stimulus payments you weren't eligible for based on 2019 earnings.
You may also be able to claim different tax credits meant to aid middle- and low-income Americans, such as the earned income tax credit and the child tax credit, which can be worth hundreds or thousands of dollars depending on income and family size.
Filing early can protect against fraud
Filing as soon as possible can also help protect you from tax fraud, according Kelley Long, a certified financial planner, CPA and member of the American Institute of CPAs' Consumer Financial Education Advocates.
If someone has stolen your identity and files a tax return in your name to claim a refund, you will run into trouble when you submit your actual information, she said. Then, it's your responsibility to prove to the IRS that the return filed in your name was fraudulent and give them the correct information.
The agency will investigate, which will delay you getting the return you're owed.
"You don't want to worry about that extra step of proving that someone stole your identity," said Long.
Fastest way to get a refund
Many Americans may be eagerly awaiting a tax refund, which could be the biggest windfall they see all year. The fastest way to get that refund is to file your taxes as soon as possible, Maag said.
"There's no benefit to waiting," she said.
And, if you find that you owe money, filing earlier gives you time to make payments to the IRS before the April deadline, after which you could be subject to penalties, said Anjali Jariwala, CFP, CPA and founder of FIT Advisors in Torrance, California.
It also allows you some time to adjust your withholding so that you don't have a tax bill in the future.
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"People really hate writing big checks to the IRS at the end of the year," she said.
To be sure, as Congress continues to work on coronavirus relief, there could be additional changes to the tax code that would impact 2020 returns. But experts say that's not a reason to delay filing your tax information, or at least starting the process of filling out your return, as it's not clear when another package will become law.
"I think it's more prudent this year to get everything situated," said Jariwala, adding that if legislation is passed that would change your return, you can file an amended one later.
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