Tax season has officially begun and most of us don't want to think about taxes yet, but it's important we don't wait until the last minute.
Local financial professional Jeff Bangerter, from Bangerter Financial Services Inc., is sharing four reasons to file early.
Time to Plan: So many of us are procrastinators; why do we need time to plan for our taxes?
Giving yourself plenty of time will cut down on mistakes and allow for any surprises with the new tax law changes.
Some of the most common mistakes on tax returns are missing numbers (like Social Security or bank account numbers for direct deposit), simple math errors and misspellings.
Most of the documents you need should start to come in the mail or even electronically. Designate a folder to collect all the paperwork.
Starting early also gives you more access to your tax professional. Get on their calendar now before the meeting times fill up, or set a deadline to when you’re going to email all of your documents to them.
If you are in a hurry and you do make a mistake, it could lead to penalties or even audits.
The second reason is to get our money back.
Most people filing their taxes each year are due a refund. Don’t wait to get your money back.
The average tax refund is more than $2,000. Here in California, the average refund is $2,811.
Filing electronically is generally the quickest way to get your money, and if you sign up for direct deposit, you may get your refund even sooner.
Once you get that refund, I recommend putting it toward your future - either paying down debt, or putting it away in savings.
If you don’t have an emergency fund, your tax refund could be a good place to start.
Filing early also means you will know what you owe.
If you’re used to getting a refund, you might be in for a surprise this year because part of the new tax law changes include changes to the withholding tables.
If you’re withholding too little from your paycheck, you will owe money to the IRS this year.
If you owe the IRS money, you have until April 15th to pay. If you don’t pay your tax bill in full, you’ll immediately start accruing interest and fees that will only cost you more in the long run.
Knowing how much you owe early will give you more time to set up a payment plan to put the money aside.
What we don’t want to see people doing is putting their tax bill on a high interest credit card that they aren’t able to pay off right away.
Lower the risk of identity theft: How does filing early protect us from identity theft?
Identity theft is a concern each tax season.
All identity thieves need to file a claim electronically is your name and tax ID number. By getting your tax return in early, the IRS is more likely to recognize a fake return being filed in your name.
One of the newest scams this tax season comes in the form of an email with a subject line or attachment labeled labeled “Tax Transcript.”
It might look like it’s coming from the IRS, but opening the attachment installs a device on your computer that captures financial information to be used to file fraudulent tax returns.
If you think you’ve been a victim of tax fraud, I have a few resources on my website bangerterfinancial.com to report a claim.
Q: How does filing early help our retirement savings?
Taxes don’t go away when you retire. In some cases your tax situation is even more complicated.
If you’re nearing or in retirement, you should be making decisions now that will help your tax situation next year, or even ten years from now.
It’s important to sit down with a financial professional who can over all of the options because each situation is going to be unique.