Filing taxes early may sound like the perfect way to get ahead, especially if you're eager for a refund. However, rushing to file can sometimes lead to unexpected issues.
Before you hit "submit" on your return, consider these potential downsides to filing early. Taking a little extra time might save you money and lower your financial stress in the long run.
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1. A tax form might arrive a little late
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When you file early, you run the risk of missing critical tax forms that arrive after you've submitted your return.
Employers, banks, and other institutions are required to send tax forms such as W-2s and 1099s by specific deadlines, but delays can happen.
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2. You might rush and make a mistake
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Tax returns require careful attention to detail, and rushing through them can lead to errors.
From misreporting income to missing deductions, these mistakes can cost you time and money. They may even trigger a headache-inducing audit.
Filing early doesn't necessarily mean filing correctly. However, starting the tax process early and taking your time to thoroughly review your return — or seeking professional assistance — can help you avoid costly missteps.
3. If you make a mistake, you might have to file an amended return
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An amended tax return is essentially a redo of your original filing, and it's not a process you want to undertake if you can avoid it.
Amending a return requires filling out additional forms, which can delay any refund you're expecting and may trigger closer scrutiny from the IRS.
Filing later — when you've had time to review your paperwork and ensure accuracy — reduces the likelihood of needing to amend a return.
4. You might increase your risk of an audit
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Filing early can inadvertently increase your risk of an audit, especially if you need to amend your return later.
Amended returns can raise red flags with the IRS, prompting the agency to take a closer look at your finances. Additionally, rushing to file could result in errors that also catch the attention of the IRS.
Filing closer to the deadline gives you more time to double-check your work, minimizing your chances of an audit.
Reasons why you should file early
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While filing early isn't always the best move, there are valid reasons to consider it. Here are some of the best reasons to file early.
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1. You might get a refund faster
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Many people count on getting a refund so they can pay bills. Or, perhaps they simply want a little "fun money" in their pocket.
Filing early can help you get a quicker refund, especially if you're counting on that money to pay down debt or fund an important expense.
2. It might protect you from identity theft
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Filing early gets your return to the IRS faster. That might prevent identity thieves from filing a phony return in your name before you file the real deal.
So, it's possible that filing early can reduce your odds of becoming a victim to these fraudsters.
3. The odds of having to file an extension are likely to fall
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When you finally sit down to complete your return, you might discover a big issue that requires time to sort out or fix.
If you wait until the last minute to tackle your taxes, you might not have enough time to fix the problem before the April 15 tax deadline. That means you might have to file for an extension.
On the other hand, starting the process earlier gives you more time to sort out issues well in advance of the deadline.
If you're confident your paperwork is complete and accurate, filing early might still make sense for you.
Bottom line
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Filing taxes early can seem like a proactive way to tackle your finances, but it's not always the best strategy.
Missing forms, rushing through the process, or needing to amend your return later can create unnecessary stress and even increase your audit risk.
Taking the time to ensure accuracy and completeness can help you avoid pitfalls. That can boost your bank account as you keep more of your hard-earned money.
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