An old adage says, “The only things in life that are certain are death and taxes.” There is some truth to this. Each year you have to file your return with the Internal Revenue Service. Some taxpayers start working on their forms early. Others wait until the last minute in order to give themselves the most time to get their funds together. When is the right time to prepare?
Filing season opens mid-January. However, for most taxpayers, they must wait until early or mid-February to file. That’s because you must have your W2 and/or 1099s sent to you from your employers. Most employers do not get this documentation in the mail until the end of January. Some businesses offer employees access to digital copies. However, you may need the physical copies in order to file your return.
There are great benefits to filing early. If you overpaid on your taxes during the last year, you are eligible to receive a refund. Those who file their taxes electronically can see the money in their bank account within 72 hours of the date when the IRS acknowledges receipt of the e-file. However, if for some reason, you have opted to file your return via mail, it could take three to four weeks before your check is deposited or sent to your address. The IRS occasionally delays paper refunds for as long as two weeks in order to ensure they were not filed fraudulently.
In addition to getting your refund quickly, you can also instruct the IRS to deposit any refund you get directly into a Health Savings account or IRA. If the contribution is made before the end of the period, typically by April 15, it can be deducted from the return you just filed. You simply need to use the correct form to indicate where you want your refund transferred.
By filing early, you can also use the completed form for other obligations. Those who are filing for financial aid for themselves, a spouse, or a child who is planning to or currently attending college must have the current forms filed. Those who are interested in purchasing a home also need to have these documents ready for mortgage lenders.
Getting the Extension
Each year you have four and a half months to get your taxes ready. In some cases, you will need to get an extension to file your paperwork. If this is the case, you must submit form 4868 by the April 15 filing deadline. This gives you five additional months to get your paperwork completed.
If you lose your W-2, you cannot file an accurate return. While your employer can send you a duplicate document, you’ll have to wait for it. In this event, it is best to request an extension just to make sure that you have all the information you need and avoid having to pay a penalty on corrections.
Unexpected life events-such as natural disasters, illnesses, or death in the family-can make it difficult to submit your forms on time. This is another instance in which an extension is necessary.
Filing your taxes on time, with as much payment as possible, will help you avoid penalties and interest later. If you can’t pay all you owe, contact the IRS, and they will set you up on a month payment plan.