Congratulations, you’ve finally made it to the best time in the entire tax season to file your return: now!
What makes it the best time? A few things, actually.
Tax Filing Season Begins January 24
Maybe you did your taxes yourself with online software or by working with a tax preparer as soon as you got your W-2 this year.
So your return is already being processed, right? Unfortunately, that’s not the case.
That return you filed doesn’t actually get processed until after the Internal Revenue Service (IRS) system officially opens on January 24.
Now that processing is gearing up, it’s a great time to start preparing your return and file as soon as possible. The several advantages are below.
1. You’ll Get Your Refund Sooner
Note that “sooner” may be a relative term this year. The IRS says that, if you file electronically and opt to get your refund via direct deposit, you’ll likely get your refund within 21 days. But it also says it’s experiencing “enormous challenges” due to staffing shortages because of the COVID-19 pandemic and budget cuts, and that could delay some refunds.
Note that refunds claiming the Earned Income Tax Credit or the Additional Child Tax Credit are automatically delayed, as the IRS is required to hold your money.
2. You’ll Beat the Tax Refund Thieves
Tax return identity theft continues to be a problem. That’s when someone steals your Social Security number and files a false return in your name. The IRS then rejects your tax return when you go to file it because they think you’re the impostor.
One way to help prevent someone from filing a tax return using your information is to sign up for an Identity Protection PIN (IP PIN). It’s a six-digit number that you use to verify your identity with the IRS, and it doesn’t cost anything to get one.
3. You Can File Your Taxes for Free — No Matter Your Income
The IRS Free File program offers free tax prep for people with adjusted gross incomes (ACGIs) of $73,000 and below.
If you earn more than that, read Team Clark’s guide to free federal and state filing options to see which service you can use to file this year.
4. Filing Helps You Decide About Future Withholding Adjustments
It may seem like “found” money, but getting a big refund every year isn’t really a good thing. It means you’ve made a loan to the government during the past year and now Uncle Sam is paying you back — but without interest.
Try reducing your withholding amount instead. You’ll see a bump in your take-home pay. And that beats having to wait once a year to get it in one lump sum.
By lowering your withholding, you won’t get a big refund next year. But you can put that extra money to work all year long for you instead of the government.
Use the IRS Tax Withholding Estimator to get started. While it’s too late to do anything about the past tax year, at least you can make sure you’re not having too much withheld out of each paycheck going forward.
5. You Can Get On With the Rest of Your Financial Life
Filing taxes is a big undertaking that dominates many people’s lives during the first quarter of every year.
Getting it done early means that you can focus on other tasks that will put you on the path to building financial security and peace of mind such as checking your credit report, getting term life insurance or creating a will.