As the old saying goes, there are only two certainties, death and taxes. Like a birthday, taxes are due the same day every year (well, almost). Yet, people still wait until the due date to send in their tax return. Read on to find out why you should be different.
To most people February means snow, mid-winter vacations, fireplaces and skis. For tax professionals like myself, it means busy season. However, most clients procrastinate their tax return appointments to the last minute. According to the IRS, more than two thirds of tax returns are filed in the last 6 weeks of the filing season. Some of the reasons people state for delaying their tax return filing are:
- I owe money so I want to delay paying it
- It is a lot of work to gather all those pesky medical receipts and charitable donations
- I am getting a refund, so there is no rush, I will get to it eventually
- I am afraid of finding out I might owe money
- I have no idea where to turn to get my taxes filed
If you relate to these or have another excuse of your own, you are not alone. According to the IRS, nearly half of the 2014 Federal Income Tax Returns filed in 2015 were filed in the final four weeks before the due date. However, you may be causing yourself a lot of pain by procrastinating. Here are 5 reasons why you should gather your papers and head straight to your accountant’s office:
- Tax return fraud has become a huge business for identity thieves. According to the IRS “In calendar year 2015, through November, the IRS rejected or suspended the processing of 4.8 million suspicious returns” and “that’s a total of $10.9 billion in confirmed fraudulent refunds protected”. Fraudsters will file batches of hundreds of returns electronically using stolen identity information and some of these will get accepted by the IRS allowing the fraudster to monetize on a refund. The taxpayer finds out about the fraud when their own return is rejected because a return was already filed for their social security number. It can take many hours to rectify the issue with the IRS and will delay a tax refund for a considerable amount of time, sometimes years.The best way to prevent this from happening to you is to file early. By doing so, you limit the window of time for a fraudulent return to be filed with your social security number. Once you file your return, other attempts to file with your social security number will be rejected automatically.
- When you meet with your tax professional, they may very likely find ways to help you save on taxes that may require additional information or documentation. It may take additional time to produce this documentation causing you to be unable to file as quickly as you had hoped. Beginning this process too close to the deadline may force you to file an extension, thereby, costing you more in fees to your accountant, delaying your refund (if you owe taxes, they still must be paid at the time of filing the extension) and dragging out the process even longer.
- Accountants are busy people from January 19th through April 15th (this year in 2016 the date is April 18th). Imagine if all of Walmart’s customers in a single day showed up 10 minutes before closing. You would have a stampede, massive lines and probably not get the attention of any staff members should you need it. Getting your tax bill to the lowest amount possible within the confines of the tax law is an art that takes time to run various calculations and scenarios and ask many questions. If you join the last minute mad rush, it is almost guaranteed that less effort will be made on your return and without knowing it, you could be paying more taxes than necessary. That is IF you are able to get an appointment at all.
- If you anticipate a refund, filing early will get that refund processed more quickly. Not every taxing authority processes refunds in the same manner. Last year, clients of mine waited until June to receive a refund from the State of New Jersey. The later you wait in the filing season the more likely it is for a problem to occur such as a backlog, computer glitch or simply errors on both ends. Additionally, don’t you have something you would like to do with this refund? You can’t do anything with it until you get it.
- If you anticipate owing money on your taxes, you should know that you can e-file today and schedule an electronic payment to process on the due date or if mailing a check, mail it on the due date. Filing and paying your taxes are two independent actions and you do not need to delay filing just because you are not ready to pay yet. Wouldn’t it be helpful to know two and half months before the due date that you owe a significant amount of tax? Most of my clients who did not anticipate owing money on their taxes, when filing within the last few weeks of the due date, end up requesting a payment plan. This causes increased fees and interest payments that may have been avoidable had they filed earlier.
The bottom line is file early, keep the thieves at bay, pay the least amount of taxes and get an early refund or leg up on your taxes owed.