When tax time comes calling, you have the option of putting things off. You can procrastinate, treating your taxes like a paper from your high school days. Many financial experts, though, will tell you that this is precisely the wrong thing to do. There are many reasons why it makes good sense to file your taxes right now. From avoiding penalties to freeing up some of your mental energy for more important tasks, the benefits of filing now are many. As you choose how to handle your tax situation, you should keep in mind these five very good reasons to put tax filing behind you as soon as possible. Most years, you can start filing your taxes at the end of January, so the time to act is now.
1. Getting your money back as soon as possible
The time value of money suggests that it's always better to have your money as quickly as possible. It should be obvious that you can do things to make your money grow, but only if that money is in your hands. When the government is sitting on it, you lose the ability to invest, to save, to earn interest, or even to spend that money on something that might enrich your life.
Not only does filing as early as possible mean that you'll get your return right away, but it also speeds up the process. People who file early will typically get their tax refund in around three weeks. Those who wait until closer to the filing deadline will see their wait time expanded well beyond that. In some cases, because there are so many people filing around April 15th, you may have to wait four to six weeks to get your cash back during that period. The wise financial decision-maker will get the ball rolling on the process as soon as he can.
2. Facilitating the financial aid process
Any person who has tried to put a child through school will understand just how arduous the FAFSA process can be. This is the federal application for student aid, and it determines whether your child is eligible for grants, subsidized student loans, and a host of other potentially helpful government aid products. In order to go forward with the application process, you will have to have a good bit of information on your hands. Having your completed tax forms will allow you to explore all of the potential aid options.
While it may still be possible for you to get the maximum aid benefit by waiting until the last minute, it's those students who apply early that tend to do the best with grants and the like. Whether you're a parent going through this process with your child or you're an older graduate student who must account for his own earnings during the last year, filing your taxes right away will put one more hurdle behind you so that you can focus your energy on reaping all of the rewards that are due to you.
3. Very real identity theft concerns
You may not know this, but tax time is a very active time for identity theft. There are many crooks that lie and wait each year, filing tax returns in the names of strangers. The idea is to claim the tax refund before the person in question knows about it. Experts say that there are lots of different ways that you can reduce the risk of this happening to you. One of the best strategies is to file your return right away. When you file your return, no one else will have an opportunity to do so in your name. You can rest easy in knowing that you'll be the only one getting the benefit of the return that you've worked so hard for over the course of the year. There are, of course, more ways to ensure that this does not happen to you. Filing early is a safe and easy way to facilitate the process, though.
4. Tax filing can be tricky and may take time
Depending upon your situation, your businesses, and your family, your tax situation may be very complex, extremely simple, or somewhere in-between. You might find that in order to file your return, you are going to need a specific form that you have to send off for. You might find that you need information from a renter or an employer that has since relocated or has shut down entirely. These are the normal issues that pop up when people are trying to file their taxes in an efficient, legal manner. The earlier you start, the longer you will have to correct any mistakes or run down information that you might need.
This is very important to do, of course. The IRS is notorious for working with people who are struggling or who are late with their returns. However, you may end up paying interest or penalties if you are late filing your return. This is a cost that you should avoid if at all possible. By getting an early start, you will give yourself the leeway necessary to be on top of the process.
At the end of the day, it pays to get going as early as you can with your tax filing. You'll get money in your hands earlier, you'll be better protected from theft, and you'll gain some advantages if you happen to be a student.
