Filing Early Can Have it’s Consequences…
The holidays are over and the bills are rolling in. Why not file your tax return now and get any refund due to you as soon as possible? Think again. Filing early can have its own complications.
First of all, are you sure that you’re due a refund? If not, it could mean that you’ll have another bill due. And if you made a mistake, you could also have penalties and interest added to that bill. Of course, you do have until April 15th to pay the IRS.
In addition, if you’re in a hurry to file your tax return, you could make a mistake in the midst of all the rushing. Think carefully about everything you did this past year that could require documentation. Donations, investments, tuition, loans, your mortgage, and so much more. You could also forget key documents, or simply file before all of the final paperwork has been sent to you. Sometimes year-end documents are sent out, and then a corrected document is sent out a few weeks later. Most tax forms, such as W-2s and 1099s, have to be sent out by January 31st each year. Waiting until mid-to-late February, could save you from filing without key documents, or from filing with incorrect information.
If you do file with incorrect information, it could mean you will need to file an amended tax return. Not the end of the world, but it’s one more thing to do. Although filing an amended return does not increase your chance of an audit, amended returns are processed differently and may receive closer scrutiny by the IRS. While you may be completely on the up-and-up, it’s just something to consider…and could be completely avoided if you wait for everything to arrive, and make sure you’re not forgetting anything before you file. If you are expecting a refund from the amended return it will not arrive very soon; it can take up to 16 weeks for the IRS to process an amended return.
There are also last-minute things you can do to limit the amount of taxes you may owe. You could contribute to an IRA for yourself or your spouse. Did you know you have until April 15th, 2020 to contribute and take the deduction for 2019? Self-employed individuals can set up SEP IRA accounts and make deductible contributions by their return due date (including extensions)
Filing your tax return is not something that should be rushed. Take your time, be sure to gather all of the necessary information, familiarize yourself with any new tax laws and thoroughly review the return before it is actually filed.