Avoid IRS Penalties & 6 More Reasons Not to Wait Until the Last Minute to File
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The last day to file your 2020 federal tax return is May 17, 2021.
If you’ve procrastinated on completing your taxes for the year, don’t put it off any longer. Here’s why you should not wait until the last minute to start filing taxes.
Avoid the last minute tax filing scramble
Unless you kept accurate track of the forms you need as they arrive in the mail, you may very well find that you are missing some important documents when you sit down to complete your taxes. If you wait until the last minute, you may not have the time you need to find whatever forms you are missing.
Businesses and employers are required to send you your 1099s and W-2s by January 31. Ideally, you would have notified your employer if you hadn’t received your forms by early February. However, if you still haven’t filed your taxes, the first thing you should do is make sure you received all documentation of your income.
If you believe you have not received your income documents, there are a few things you can do. First, search through your email to make sure you didn’t receive a digital copy of it. While most companies don’t email it due to security concerns, many post it in a secure company portal and send out an email notifying you that it is available.
If you still can’t find it, reach out to your employer to see if they can reissue the form. If your employer mails forms, make sure they have your most up-to-date address on file.
Lastly, if you are still having problems locating your W-2, call the IRS. You can reach them toll-free at 800-829-1040. You will need to provide personal information, such as your address, Social Security Number, and your employer’s name and address. The IRS can then contact your workplace to try to locate your missing documents.
While it is possible to file your tax return without the proper tax forms, by doing so, you are taking a risk. There is no way to ensure you are completing an accurate tax return without the correct forms. That heightens the likeliness of errors, which the IRS does not like. In fact, making errors on your tax return can have dire consequences, including fees, penalties, and in severe cases, even jail time. Eliminate the risk by completing your taxes sooner rather than later.
Get your refund sooner
If you are hoping for a tax refund, the sooner you file your taxes, the sooner you can receive your money.
While there is no guarantee you will receive a tax refund, it certainly doesn’t hurt to know earlier rather than later. And if you have money waiting to be claimed, why wait to get it? Once you receive your money, you can put it to good use by paying down debt or investing it.
On the flip side, if you end up owing taxes, it’s also a good idea to know that as soon as possible.
Prepare for your tax bill
Tax bills are never a welcome thing, but they are the reality for many tax filers. Especially this year with all of the tax reform changes. Because many individuals received a boost in their paychecks throughout the year, there’s a good chance some of those filers may end up owing money if they didn’t adjust their withholdings appropriately.
In any case, it’s always best to know how much you owe as early as possible so you can make arrangements to pay the bill. If you don’t have enough money stashed away to cover the cost, you may need some time to pull the funds together. That’s why filing before the last day of the tax season is critical. The more days you give yourself to formalize a plan, the better.
Fortunately, the IRS offers short-term payment plans to ease the burden of paying all at once. The quicker you can start paying, however, the less you’ll have to pay in interest fees on the amount you still owe after the April 15 deadline.
Eliminate the stress
Perhaps one of the most motivating reasons to file your taxes today is to avoid the stress of waiting until the very last minute! Because let’s face it, the April 15 tax deadline comes just at the start of spring. The yard needs attention, the house could use a good spring cleaning, and the kids are starting up practice for summer sports. Who wants to be stuck inside completing their taxes during the first bit of spring? Not to mention, any task becomes more stressful when it’s left to the last minute. Things you wouldn’t expect oftentimes go wrong.
For instance, if you use tax software to file, you may have a question and find it hard to get immediate answers. A few extra days allows you time to get help. What if something else comes up? Like a work obligation or your child gets sick? That may completely throw off your schedule for the day and compromise the time you had available to devote to filing.
Take a load off your shoulders and complete your taxes as early as possible. Your future self will thank you.
Reduce the risk of identity theft
Sadly, tax fraud and identity theft are all too common. In some cases, thieves use your personal information to file a fraudulent tax return in your name. In turn, they receive your tax refund.
Then, once you go to file your actual tax return, it is likely to be rejected by the IRS – because, according to their records, you already submitted a return. While the IRS will work with you to sort out your case of identity theft, it can be a major stressor. Further, it can drastically prolong the amount of time it takes to receive your tax refund.
Fortunately, by filing early, you can save yourself that headache. Even if someone tries to file a phony tax return in your name, if you already filed one, theirs would be rejected and potentially investigated. Protect yourself by filing as early as you can.
File an extension
Clearly, filing your taxes before the tax deadline has many benefits. But if you find yourself still waiting until the very last minute, don’t forget you can always file for an extension on the deadline. To file an extension, individuals must complete Form 4868, which will give you six more months to complete your tax return. You can use TaxAct to file an extension for free. In that case, your new deadline is Oct. 15.
It’s important to note, however, that a tax extension only provides you with more time to complete your tax return. You must still estimate and pay any taxes you owe by the April 15 deadline. If you come up short and pay less than what you actually owed, you will incur interest fees and penalties.