News & Trending Tax News

4 Times Filing Taxes Early Is a Bad Choice (And 3 Times It Makes Sense)

Knowing the right time to file can help you lower financial stress and avoid unnecessary hassles.

By Adam Palasciano

Edited by Chris Kissell

Updated Feb. 7, 2025

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.

Steal this billionaire wealth-building technique

The ultra-rich have also been investing in art from big names like Picasso and Bansky for centuries. And it's for a good reason: Contemporary art prices have outpaced the S&P 500 by 136% over the last 27 years.

A new company called Masterworks is now allowing everyday investors to get in on this type of previously-exclusive investment. You can buy a small slice of $1-$30 million paintings from iconic artists, all without needing any art expertise.

If you have at least $10k to invest and are ready to explore diversifying beyond stocks and bonds,see what Masterworks has on offer. (Hurry, they often sell out!)

1. A tax form might arrive a little late

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.

Want to learn how to build wealth like the 1%? Sign up for Worthy to get ideas and advice delivered to your inbox.

2. You might rush and make a mistake

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

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.

Get a free stock valued between $5 to $200

Secret: You don't need thousands of dollars to buy thousand-dollar stocks or create a diverse portfolio.

Robinhood offers a method of investing called “fractional shares.” On its own, one share of a single stock could cost a lot of money, making it difficult to diversify. Robinhood allows you to buy pieces of stock instead, so you have the option to build a diverse portfolio quickly.

Let’s say you want to invest $250, as an example.

With that amount, you could build a relatively diverse portfolio with an investment of $50 in a big tech stock, $50 in a retail stock, $50 in an energy stock, $50 in a manufacturing stock, and $50 in a bank.¹ This content is for informational purposes only, you should not construe any such information as legal, tax, investment, financial, or other advice. To get stock reward, new customers need to sign up, get approved, and link their bank account. Stock rewards shares cannot be sold until 3 trading days after the reward is granted and the cash value of the stock rewards may not be withdrawn for 30 days after the reward is claimed. Stock rewards not claimed within 60 days may expire. See full terms and conditions at <a href="https://robinhood.com/us/en/support/articles/open-account-pick-your-stock/">rbnhd.co/freestock</a>. Fractional shares are illiquid outside of Robinhood and are not transferable. Not all securities available through Robinhood are eligible for fractional share orders. For a complete explanation of conditions, restrictions and limitations associated with fractional shares, see the Fractional Shares section of our Customer Agreement. Robinhood Gold is offered through Robinhood Financial LLC and is a membership offering premium services available for a fee.

Even better news? Add a Robinhood Gold membership, and you’ll get access to 4.25% (as of 11/15/24) APY² Annual Percentage Yield. Rate valid as of April 12, 2024. To earn interest, a cash balance is needed. If you have a margin balance, there is no cash balance to earn interest. Interest rates for cash sweep and margin investing can change at any time. Fees may reduce interest earnings. on your uninvested cash³ Interest is earned on uninvested cash swept from your brokerage account to partner banks. Partner banks pay interest on your swept cash, minus any fees paid to Robinhood. As of Nov 15, 2023, the Annual Percentage Yield (APY) that you will receive is 1.5%, or 5% for Gold customers. The APY might change at any time at the partner banks' or Robinhood's discretion. Additionally, any fees Robinhood receives may vary and are subject to change. Neither Robinhood Financial LLC nor any of its affiliates are banks. All investments involve risk and loss of principal is possible. Robinhood Financial LLC (member SIPC), is a registered broker dealer. and the ability to buy and sell stocks 24 hours a day, 5 days a week.

Open and fund a Robinhood account and earn up to $200 in stock

4. You might increase your risk of an audit

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

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.

1. You might get a refund faster

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.

Grow Your $$: 11 brilliant ways to build wealth after 40

2. It might protect you from identity theft

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

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

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.

More from FinanceBuzz:

Invest in Paintings by Basquiat, Picasso, Banksy

Masterworks Benefits

Invest in art like a millionaire for a relatively low cost
Art investments have outperformed the S&P 500 by over 131% for 26 years
Purchase shares of artwork by top artists
Hedge against inflation and diversify your portfolio

Visit Masterworks