For millions Americans, there’s no need to get around File annual tax return. Last year, due to the COVID-19 epidemic, the IRS gave everyone to file their tax returns by July. Although a similar extension has not been announced for this year, you will not be required to submit your forms by 15 April. What’s more, for those requesting an extension, it may take up to October 15 to complete the form, although any tax due is still due in April.
This year, early February means filing. The IRS 2020 will begin accepting returns for the tax year on February 12, 2021. Just because you can wait to file, doesn’t mean you should. Faster filing means more accurate returns, more time Pay a tax bill And a lower chance of being a victim of tax-related identity theft. Also, for people with simple tax returns, there is really no reason to wait.
“There is no point in filing your returns early,” says Jeff Donham, a wealth adviser at the Colony Group in Richmond, Virginia. He adds that any filing in February is usually considered early.
Continue reading to find out why you should consider filing early, what documents you will need and how early tax filing can prevent identity theft.
Benefits of filing tax early
There are several reasons for completing tax returns early rather than waiting until the completion of tax day:
- Potentially more accurate returns Large refunds.
- Less competition for appointments with tax preparations.
- More time for tax payment plans.
- Less likely to tax fraud.
“Obviously, if you have a refund, you’ll get it already,” says Paul Joseph, a lawyer, and CPA with Joseph & Jose Tax & Payroll in Williamson, Michigan. For many, this may be the only reason to file early.
Those who file early may also queue up for larger refunds. This may be because those filing near the tax deadline often rush to complete their paperwork and may miss valuable deductions or credits. “If you do it in a hurry, you often overlook things,” Joseph says.
For those paying money to the IRS, completing tax forms early provides time for a plan to pay the bill. Even though the tax return is filed early, the payment is not made till the tax day, which is April 15 this year.
Appointment with tax professionals It may be difficult to arrive during the final weeks before the tax filing deadline. Making an initial appointment may mean that you can meet at a convenient time, and your returns will not have to compete for your taxpayer’s attention.
However, one of the biggest reasons to file as soon as possible to avoid tax fraud, says Marianela Collado, CEO and senior wealth advisor at Tobias Financial Advisors in Florida.
Fraudsters use Social Security numbers to create phoney returns and file them early in the tax season. If they are not flagged for review by the IRS, a refund is processed and a refund is issued. Then, when the legitimate taxpayer tries to file their return, the system rejects it. The result can be a lengthy process in which an affidavit must be completed, documentation provided and a paper return filed.
When can I file my tax return as soon as possible?
Although the IRS 2020 will begin accepting returns for the tax year on February 12, 2021, not everyone will be able to file then.
Employers have until January 31, 2021 to mail the W-2 form, which records labor wages, tax withholding and other data that is important for tax filing. The same time limit applies for 1099 forms that are sent. Independent contractors Or used for non-sources of income such as interest or disbursements from retirement accounts. Meanwhile, those who pass through entities such as partnerships or S-corporations may not receive tax forms for their business income until March.
“We usually tell our customers to wait until the end of February or until March to file,” Donham says. Many of his firm’s clients have brokerage accounts, and tax statements from investment firms are often not matched until mid-February. According to Donham, a return can always be amended, filing a change can be costly and time consuming.
What do I need to file tax quickly?
Depending on the complexity of your income and tax situation, you may need, among others, the following documents before filing your return:
- W-2 forms from wage-earning jobs.
- 1099 forms from independent contractor or gig work.
- 1099 forms from retirement, brokerage or dividend income.
- Mortgage and property tax statements to itemize deductions.
- Charity donation receipts and copies of medical bills to cut donations.
- Schedule C business expense receipts for business deduction.
- K-1 form for partnership income.
Eric Bronenkant, head of tax for online consulting firm Betterment, suggests people ask themselves the question: “Where do I have all my money and where did I generate (income)?” Answers will help determine which tax forms are coming your way.
For users Tax software, If all documents have been received, there is no reason to wait for input information to begin before February 12. “You can get everything there, but it’s not going to be dispatched (until 12 February),” Collado says.
How to avoid tax fraud
Although the IRS has taken steps to curb tax-related identity theft, the practice is still prevalent. Fortunately, those who cannot file early may have other options to prevent fraud.
The IRS provides a transcript service that lets taxpayers review activity on their records. This method does not prevent identity theft, but it helps taxpayers overcome problems rather than detect fraud when filing their returns.
using the Identity security pin Provides another layer of protection against fraud. In the past, the federal government issued PINs only to those who were victims of tax identity theft and who lived in specific states. However, starting in 2021, anyone can join the program. Keep in mind that after requesting a PIN, you should use one to file every year.
If you do not want to use a PIN, filing as early as possible is the best way to avoid being a victim of tax identity theft.