Reasons to File an Early Tax Return

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Reasons to File an Early Tax Return
Additional Standard Deductions for 2021 and 2022
Filing Status2021 Additional Standard Deduction2022 Additional Standard Deduction
Single & Heads of Household
65+ or Blind$1,700$1,750
65+ and Blind$3,400$3,500
Married Filing Jointly & Married Filing Separately
65+ or Blind$1,350$1,400
65+ and Blind$2,700$2,800

Sources: Internal Revenue Service

The sooner you start working on your tax return, the sooner you will know which option is best for you.

SALT Tax Deduction Limit

The 2018 tax rules also restrict your total state and local tax deduction (SALT) to $10,000. If your SALT deduction is more than the new maximum and you don’t have many other deductions, this ceiling may be an additional incentive to take the standard deduction.

Getting a head start on your taxes may help you prevent unpleasant mistakes on this critical aspect of your tax return.

File Early for a Faster Refund

By filing early, you may prevent procrastination, offer yourself peace of mind, and cross this key task off your to-do list for the new year. When the IRS announces it will begin processing returns, why not submit yours and finish this unpleasant task?

The IRS provided refunds to 129.8 million taxpayers for the 2020 filing season, average $2,815 per refund. There’s no need to let the government retain your money for any longer than necessary if you have it due to you. Because the IRS will not be as busy early in the tax season as it would be in April, filing sooner means a speedier refund.

Some individuals rely on their income tax returns to cover large expenses. Filing early gets you the money sooner and may save you from taking out a costly short-term loan to meet those charges, which is particularly important if you’re still paying off your holiday obligations.

File Early to Avoid Identity Theft

The earlier you file, the less time an identity thief has to file in your name and steal your return. This may cause havoc, particularly if the thief claims bogus deductions, fails to declare income, or otherwise taints a tax return filed in your name. It might take months to clean up a mess like this.

Filing early reduces your vulnerability to identity theft significantly. You will file before an identity thief may file in your name.

Unfortunately, you may not realize you’ve been a victim of identity theft until the IRS contacts you about a probable problem with your tax return. According to the IRS, you should be on the lookout for tax-related identity theft if:

  • The IRS sends you a letter enquiring about a suspicious tax return that you did not submit.
  • You are unable to e-file your tax return due to a duplicate Social Security number.
  • You get a tax transcript that you did not seek.
  • You get notification from the IRS that an online account in your name has been established (which you did not create).
  • When you haven’t taken any action, you get an IRS notification that your existing online account has been accessed or deactivated.
  • You get notification from the IRS that you owe more tax or that your refund has been offset, or that measures have been taken against you for a tax year for which you did not submit a tax return.
  • According to IRS records, you got pay or other money from an employer for which you did not work.
  • You were given an Employer Identification Number (EIN) without having requested one.
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If your Social Security number has been stolen and you feel you are a victim of tax-related identity theft, contact the IRS immediately at the number shown on the notification. Complete IRS Form 14039, Identity Theft Affidavit, if your e-filed return is denied owing to a duplicate filing with your Social Security number. Visit IdentityTheft.gov to learn about the immediate measures you should take to protect yourself and your bank accounts.

File Early to Avoid the Tax-Season Rush

Filing early allows you to fully comprehend any changes in tax legislation or cope with life circumstances that may affect your filing status. Last-minute mistakes might result in audits, which can result in fines and interest. Given the TCJA’s revisions, this argument is more essential than before.

In January and February, your certified public accountant (CPA) or other tax preparer will be less busy than in April. Early access means your CPA will have more time to properly analyze your case and assist you with your tax return.

If you’re looking to purchase a house or return to college (and apply for financial assistance), you’ll need information from your most recent tax return. When you do your taxes early, you will have access to the most up-to-date information.

Avoiding Amended Returns

Starting early allows you to submit an accurate return. An incorrect return will almost certainly be rectified. Amended returns are subject to audit. Here are some things to keep an eye out for as you strive for precision.

  • Errors in official papers Incoming statements, including W-2s, 1099s, interest statements, and everything used to substantiate a deduction, should be scrutinized. Mistakes are made by businesses, banks, and financial organizations. Before you file, catch them.
  • Late-arriving forms Early filing may result in the loss of paperwork, such as a 1099 or K-1 that comes late. Before you click “send” or put your return in the mailbox, be sure you have all of the necessary documents.
  • Amendments that are incomplete. If you must make changes to your return, don’t only make changes that benefit you. Correct anything that is incorrect.
  • The tax form is changing. The structure of Form 1040 changed as a consequence of the Tax Cuts and Jobs Act (TCJA) of 2017. Indeed, if you previously utilized Forms 1040-EZ or 1040-A, those forms have been phased out. In addition, if you are a senior citizen, you may now utilize the new “U.S. Tax Return for Seniors,” 1040-SR.
  • Updates on tax law. Legislation enacted prior to April 15 may not be implemented into paper tax forms or outdated tax software. Keep up with the news. Keep an eye out for any alterations that may have gone unnoticed. You may submit an updated return if required.
  Tax Expense

Private mortgage insurance (PMI), for example, was not originally an itemized deduction for tax year 2017. A tax reform reintroduced the deductibility of PMI for taxpayers with less than $100,000 in taxable income on February 9, 2018. Form 1098, Mortgage Interest Statement, had already been sent to taxpayers by their lenders at that moment. Lending institutions were required to send out an altered Form 1098 after the tax law change. Qualifying individuals who had already filed their taxes were required to submit an updated return to take advantage of the increased deduction.

The American Rescue Plan Act (ARPA), passed on March 11, 2021, exempted taxpayers with a modified adjusted gross income (MAGI) of less than $150,000 from receiving up to $10,200 in unemployment compensation in 2020. Some taxpayers had already submitted their tax returns when ARPA was passed. However, the IRS subsequently indicated that such individuals would not have to submit revised forms because the IRS would calculate the right taxable amount of unemployment benefit automatically.

Shifting Tax Burdens

You’ll have more time to estimate capital-gains distributions, harvest losses, contribute to a 529 savings plan, or make last-minute charity donations if you get an early start before December 31. You may also use this chance to transfer deductible items, like as property taxes, business costs, or even mortgage payments, to the year that makes the most tax sense.

Contributions to a business 401(k) and/or any individual retirement account (IRA) programs, as well as deposits to health savings accounts (HSAs), may still be maximized through April 15 of the year after your tax return date.

Time to Save

If you owe the IRS money, filing early allows you to save up. Remember that you are not required to pay until the filing date. Waiting to find out you owe more than you planned might make a serious dent in your budget. To prevent an unexpected tax bill, the IRS recommends monitoring your withholdings and tax payments in the fourth quarter of the year.

The IRS provides a Tax Withholding Estimator tool to help you verify you’re withholding correctly.

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The Bottom Line

Most specialists think that you should begin your comeback as soon as feasible. If you are getting a refund, the choice to file early may be influenced by the intricacy of your return. To ensure that your return is correct and comprehensive, consult with your financial or tax professional.

Should You E-File Your Taxes?

Filing your tax return early helps you avoid traffic and a busy post office. It’s better to get it done and save yourself the trouble. Of fact, e-filing is often preferable than mailing a paper return. Here’s why, according to the IRS:

  • It is the quickest method to get a refund.
  • It is safe. (To secure your information, e-filing employs cutting-edge encryption technology.)
  • It’s convenient
  • You will get prompt notification from the IRS whether your return has been approved or refused.
  • It is often free (many people can use the IRS Free File tool)
  • If you owe taxes, you have numerous payment choices.

When Is the Earliest You Can File Your Tax Return?

You may begin preparing your return as soon as you get your W-2s, 1099s, and other tax paperwork. Employers are required to deliver W-2s and 1099s by the 31st of January following the tax year, so yours might come as late as early February. If you get your tax paperwork sooner, you will be able to submit your tax return when the IRS begins accepting them, which is usually around the final week of January. Each year, the IRS publishes a notification announcing the first day to file taxes in early January.

The tax season for the 2021 tax year starts on Monday, January 24, 2022, which means the IRS begins receiving and processing 2021 tax year returns on that day.

What Is the Deadline for Filing a Tax Return?

Individual income tax returns are typically due on or around April 15 of the year after the tax year. Most people’s 2021 tax returns will be due on April 18, 2022, one day later owing to the District of Columbia’s Emancipation Day holiday on April 15th. Due to the Patriots’ Day holiday in both jurisdictions, the deadline for anyone residing in Maine or Massachusetts is April 19, 2022.

If you are unable to file by the deadline, you may apply for an automatic six-month extension by submitting Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. Submit your extension request before your return’s due date. Remember that an extension does not extend the period to pay tax, therefore you will owe interest if the tax is not paid by the original due date of your return (usually April 15).

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