In response to the unprecedented COVID-19 pandemic, the US government has announced changes and updates to provide relief to taxpayers. Most notably, the April 15 deadline for filing taxes has been moved to July 15. This applies to both individuals and businesses.
With the additional time that taxpayers now have to get their taxes filed, the temptation for procrastination becomes that much more enticing, but my perspective from the teller line is that you don’t want to wait.
Here are a few reasons why I believe you should file your taxes as soon as possible:
- Extra time to pay back taxes you owe
If you owe money to the IRS for either your federal or state return, you may still have a good reason to file your tax return as soon as you can. Filing earlier, rather than later will give you ample time to arrange payments as needed.
The IRS has several options for people who can’t afford to pay their entire balance at once. Depending on your situation, you may be able to set up a payment plan, reduce your balance, claim uncollectible status, or explore other options.
- Avoid late fees
The IRS charges higher penalties for filing late as opposed to paying late. If you file late, the penalty is 5 percent of your balance each month, but if you file on time and pay late, the fee is just 0.5 percent of the taxes you owe.
Taxpayers should file even if there are concerns about paying back what is owed, as the penalty for filing late is significantly more than for paying late, and as mentioned previously there are many options to help with payments for those who need it.
- Filing Early = Bigger Returns!?
According to the IRS website, those who filed in February in previous years received on average a $400 larger refund than those who waited until May to file.
The larger refunds may be linked to the extra time and attention you receive from tax professionals when you file early. Tax professionals also tend to get stressed at this time of year, and if they’re working on a last-minute return, their attention may be distracted and as a result they could make mistakes with your return.
- Combat Tax Fraud
Even though tax-related scams have seen drastic drops in recent years, it is still a very prevalent threat. If a scammer steals your identity and files first, it can take the IRS a long time to resolve the issue. You may be stuck trying to prove that someone stole your identity along with trying to get the IRS to correct mistakes to your return. This will delay your refund. By filing early, you can eliminate this headache altogether.
Overall, filing at the last minute can add stress to an already time-consuming task, even if you have a tax professional. Check out the latest information on tax deadlines and updates related to COVID-19 here.
Written by James Fleet, Member Relationship Specialist.