Tax season is right around the corner, so it's time to start gathering your documentation and thinking about when you may want to get the process started. There are many important tax dates, but three in particular that you should be aware of -- the normal tax deadline, the tax deadline if you file an extension, and the date the IRS starts processing tax returns. Here's what you need to know about these dates as you get ready to file your 2015 tax return.
Normal tax deadline: April 18, 2016
In most years, the tax deadline falls on April 15, but in 2016 the Washington, D.C., Emancipation Day holiday (normally April 16) falls on Friday, April 15. So the tax deadline is pushed back until the following Monday.
The tax deadline is the date by which you need to file your 2015 tax return or request an extension. Keep in mind that even if you file an extension, April 18 is the day when any tax you owe is due, and if your tax isn't paid by this date, interest will begin to accumulate.
Extended tax deadline: Oct. 17, 2016
If you file a tax extension, this is the date by which you must submit your 2015 tax return. As I mentioned before, an extension doesn't delay the payment due date -- any outstanding balance must be paid by the April 18 tax deadline, or you may have to pay interest and/or penalties on any amount that remains unpaid.
Typically, an extension is automatically granted, provided that it is applied for by the regular tax deadline. You can apply by filling out IRS form 4868 and mailing it to the IRS, or you can E-file an extension through a tax service such as TurboTax.
The most important tax date: Jan. 19, 2016
The deadlines are important for obvious reasons, but I believe the most critical date to know is Jan. 19, the day the IRS begins processing 2015 tax returns on a first-in, first-out basis.
I say that this is the most important date because of the benefits that come with filing your tax return early, particularly in regard to identity theft. All a criminal needs to file a fraudulent tax return in your name is your Social Security number, but this scam is only successful if the thief files the phony return before you file your real one. So the earlier you file, the less chance you have of becoming a fraud victim. As anyone who has experienced it can tell you, tax fraud is not something you ever want to deal with if you can help it.
There are other benefits to filing early as well. To name a few, you should consider filing early for the following reasons:
- You'll get your refund earlier. The IRS processes tax returns on a first-come basis, and as you can imagine, can get a little backed up as the deadline approaches. If you're entitled to a refund, filing early gets your money in your pocket quicker.
- You have more time to pay. Even if you file early, any tax you owe isn't due until the April 18 deadline. Plus, if you file early, you'll know exactly how much you'll need to pay.
- You'll have your tax documentation in hand. I bought a house in March and had not yet filed my 2014 tax return. This created a delay and a rush to file my return in order to document my 2014 income. By filing early, you'll be able to document your income for a mortgage or any other purpose.
Many tax programs allow you to complete your return even sooner to get a place at the front of the line once processing starts. For instance, TurboTax begins stockpiling complete 2015 tax returns on Jan. 4.
Now, I realize that it's not practical for many people to file their returns so early. After all, most employers don't even mail out W-2s by Jan. 19. However, my point is that you should file your return as soon as you have all of your paperwork.
As long as you have all of the necessary documentation, it's generally a good idea to file your tax return as early as possible. Not only can you get a refund sooner, but you'll dramatically reduce the chance of identity theft, which can be a nightmarish scenario if it happens to you. Waiting until the last minute to do anything is rarely a good idea, and taxes are certainly no exception.