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This is a guest post by Jason Kane. Read more about him at the end of the post. Write for us.
When the calendar turns to a new year, it’s time to start thinking about doing your taxes.
Many people procrastinate on this process, waiting until close to the April 15th deadline to get going. There are many reasons why it’s a bad idea to wait to file.
The smart people get going as soon as possible, and they reap the rewards of early filing.
If you’re wondering whether you should get ahead of the crowd on your taxes, here are some pitfalls of procrastinating and a few reasons why it pays to get the ball rolling right away…
1. Mistakes happen when you’re rushed
Have you ever written a paper for school at the last minute? Maybe you passed, but there is a good chance that it wasn’t your best work. When you wait until the last minute, you will be working under pressure. You’ll be rushed, and you won’t have time to go back and review the things that you need to review. This increases the chances that you will make a major mistake on your taxes. If you get things started earlier, you will have a chance to go back and look at your paperwork with a fresh set of eyes after a few weeks. Just as this kind of editing and revising can help you with a major work of literature, it can help you get your tax filing just right.
2. A longer wait to get your money back
In most years, the IRS allows people to start filing their returns at the end of January. Most often, when you do so, you will take advantage of quicker response times from the agency. People who file early in the process usually only wait around three weeks to get their tax refund. People who wait until closer to the deadline can sometimes have to wait up to six weeks. The reason for this is easy to understand. Because more people file later in the process, there is more backup. This causes a traffic jam of sorts, and it can cost you valuable time.
3. The inability to put your money to work
Point three works in conjunction with the last point. When you file early, you get your money back and have an opportunity to put it to work. Whether you are the kind of person who puts your money in the stock market or you’re the one who invests in something like real estate, you have a chance to put that money to work for you.
The longer you wait, the longer you are lending your money to the IRS without charging the agency any interest. This is a bad move for you in the long term, depriving you of the benefits of your cash and compound interest. Even if you’re not an investor, it pays to have cash on hand, as you can spend it on something you want or just keep it for safety and security.
4. Less time spent with a tax professional
Depending upon how complex your taxes happen to be, you may benefit from more face time with a professional who knows precisely what he/she is doing. If you wait until the last minute, you will have a difficult time squeezing in meetings with your accountant or tax expert. More people will be competing for the time and energy of your professional, leaving you to beg for scraps. If you get started earlier, you and the professional can sift through things in order to ensure that you’ve found the greatest number of deductions, exemptions, and the like. This time can save you big money over the long haul.
5. Waiting longer increases your chances of being defrauded
Did you know that tax time is a popular time for fraudsters to steal your identity? In some cases, people will file a tax return in your name in order to reap the rewards of your hard work. The earlier you file your taxes, the better off you will be in this regard. Once your return is filed, no one else will be able to use your name in this way, giving you an added layer of security against this fraud. While the percentages suggest that this kind of fraud is not something that is likely to happen to you, it always pays to be safe rather than sorry with these situations.
At tax time, you’d be wise to get a jump start on your filing. There is no reason to follow the crowd in waiting until the middle of April to file. The earlier you file, the better your chances of avoiding mistakes that could potentially cost you hundreds of dollars in interest and penalties down the road. On top of that, you’ll have one less worry as you head into the springtime.
About the Author
Jason Kane is a professional blogger who focuses on personal finance and other money matters. He currently writes for Checkworks.com, a leading supplier of personal and business checks.
Photo Credit: MoneyBlogNewz