Though 2019 tax returns aren't due until April 15 this year, the IRS recently announced that it will begin accepting returns on Jan. 27. And if you have your paperwork in order, it pays to file your taxes at that point, or shortly thereafter. In fact, 67% of Americans intend to file their taxes in January or February, according to a recent FinanceBuzz survey. And that's a smart move you should consider for a number of reasons.
1. You'll get your refund sooner
The sooner you submit your tax return, the sooner you can anticipate your refund hitting your bank account. The IRS typically issues refunds for electronically filed returns within three weeks. For paper returns, the turnaround is about twice as long. But either way, having that refund sooner could save you serious money in the event you're currently sitting on debt (which is the case for a large number of Americans coming off the holiday season).
Even if you're not dependent on your refund to pay off a credit card balance or tackle a specific bill, the sooner that money is in your savings account, the sooner you can start earning interest on it. And if you put that money into a retirement savings plan, you can put it to work for you right away by investing it.
2. You'll have time to come up with a plan if you owe money
Though most tax filers receive a refund each year, you may land in a scenario where you owe the IRS money -- and the sooner you're made aware of it, the sooner you can scramble to come up with the cash to pay your tax debt.
Imagine you file your taxes a few days before they're due and realize you owe the IRS $1,000. You may not have that money sitting in savings, in which case you'll risk penalties for paying your tax bill late. On the other hand, if you discover in early February that you owe that $1,000, you'll have two and a half months to cut back on spending, pick up a few extra shifts at work, ramp up your side hustle, or do whatever you need to do to free up that cash.
Remember, you don't have to pay your tax bill the day you file your return, so if you submit yours in February, you still have until April 15 to come up with that IRS payment. Penalties on unpaid taxes don't apply until after April 15.
3. You'll potentially avoid fraud
If your personal information is hacked, one thing a criminal can do with it is file a tax return in your name and divert your refund to his or her bank account. Then, when you go to file your legitimate return, the IRS will likely reject yours, since it will already have a return with your Social Security number on file. The benefit of filing your taxes early is that you may beat criminals to the punch in this regard. And if your tax return is the one that gets into the IRS's system first, you won't have to go through the motions of proving your identity if someone tries to file a fraudulent one in your name afterward.
Filing your taxes early is a great way to get one potentially unpleasant task over with. If you have all of the documentation you need to complete your return, you might as well carve out the time to check it off your list.