It’s said that in life, timing is everything, so it makes sense that this old adage also holds true when it comes to deciding when to do your taxes. While the infamous ides of April is the deadline for filing without an extension, you actually have a range of alternative dates to choose from. When it comes to deciding which to use, however, the old adages fail us: on the one hand “the early bird gets the worm,” but on the other hand “fools rush in where angels fear to tread.” The truth is that each option has its own pros and cons depending on your situation. Here are some of the benefits (and drawbacks) of filing early, on time, and even late.
If you expect to get a tax return, chances are you’ll want to file early. After all, getting a nice chunk of change that can be either earning interest for you or paying off high-interest credit cards and loans is nothing if not a sound financial decision. In addition, getting to work on your taxes early will leave you plenty of time to hunt down any missing documents or other information needed to file an accurate return without the risk of missing the April 15th deadline. You’ll also have time to thoroughly check your return and catch any mistakes that could delay your tax refund as well. If you hire a professional to do your taxes, meeting with them early in the year may also be a good idea because they’ll be less frazzled than they might be closer to mid-April.
One drawback to filing your taxes as early as possible is that sometimes there are errors on the tax documents you’ve received from your employer, mortgage company, investment company, or school. If you’ve already filed your taxes, you’ll have to amend them based on the correct information. Not only does re-filing take more time, it could also have an impact on the amount of your return, leaving you owing money on the check you’ve already received, deposited, and spent. Waiting until the middle or end of March allows time for corrections to be made before you file. In addition, changes to tax laws and forms can occur during the tax season, all the way up until April 15th, and filing too early can result in using an out-of-date form or missing out on a new tax break.
If you expect to owe money to the IRS, there’s no benefit in rushing to pay them. While you certainly shouldn’t wait until the last minute to actually do your taxes, there’s no harm in waiting to file them. Once you’re aware of how much you’ll need to pay, set that money aside in a high-yield savings or other account and let it earn you some money before you fork it over to Uncle Sam.
Finally, some folks maintain that it’s best to file an extension and wait to file your taxes until the October deadline. Because the IRS has three years from April 15th to determine whether or not you’ll be audited, the theory is that the less time they have your return, the less likely your chances of it being audited. This is, of course, just a theory and no guarantee that your return will escape scrutiny.