Most people over the age of 25 are familiar with their taxes. For some, they have been doing their taxes for years. For others, it has been a couple years since that they have been separate from their parents' return, but they have had enough experience. By now, you would know if you are the type to file your taxes early or late. For those who like to wait until the last month, please consider the following reasons why filing in February is better. (For those who like to file ASAP, please understand the good reasons behind that preference.)
#1. The taxes you pay today are the same as what you pay later.
While it may make sense to delay paying your taxes now if you owe, more people get refunds than not, and they are owed an outstanding balance. That refund you file to get today will be the same refund that you file to get in April.
While many of us say that we got money back from the government, the more accurate phrase would be that "we got our own money back from the government." It's a subtle but important difference. Although I do not fully agree with the J.G. Wentworth commercialized slogan, "It's my money; I want it now," in the case of a tax refund, that mentality is perfectly fine!
#2. Better planning for taxes in the new year.
I said these reasons would be why you should file your taxes early, but there are occasions where you may want to start preparing now, but file later. Certain tax breaks, including contributions to IRAs or HSAs (if eligible), can be effective for the prior year's taxes up until April 15th. If it benefits you to put a few thousand dollars into a tax-deferred account on this year's return, then it might help to have several weeks to set aside that money rather than a few days if you start preparing taxes in April.
Furthermore, preparing your tax return could pinpoint subtle changes in your income that you may not have noticed during the year. Although you cannot do anything about it for the prior year's taxes, you can still make changes for the current year's taxes, which (as sure as the sun will rise) will be due next year. Missing a few weeks of this new year will have almost no impact by December 2017, but making the changes a few months into the new year may require overcompensating for the delay or even falling short of the ideal benefits again this year.
#3. Tax Fraud protection.
Here is how the most common form of tax fraud works nowadays: criminals file a slew of fake tax returns for the highest possible refund amount under random social security numbers. If enough of the information matches up, the Internal Revenue Service pays out the refund. Now when you arrive in April to file your return, it could indicate that you already filed and you received your refund. You are not entitled to a refund until the IRS squares away the conflicting returns, which often takes more than six months.
While there may be only limited ways to prevent this tax fraud from affecting you, the surest method is to file as soon as possible, thus narrowing the window of opportunity during which you could be a victim of this tax fraud. Another method to prevent it from delaying your refund would be to ensure that you owe a small amount. While the prior year's taxes are going to have limited flexibility at this point, reducing your tax withholding with your employer now could be done now (and only changed once, bypassing the issues raised in the prior reason of delaying a change to your tax situation).
Aside from these three reasons, there are other benefits that may be more or less important to you as individuals. First, it is far less stressful. You have about 60 days to complete returns that are started before February 15th. If you often victimize yourself by procrastinating, then this benefit may be better than any of the three aforementioned reasons.
Furthermore, we are only a month into the new year. If your original New Year's Resolution has fallen through already (or if you never actually made one), then you could challenge yourself here and make filing your taxes in February your resolution. That way, you can enjoy the next 10 months knowing that you fulfilled your new year's resolution (or at least you won't be tormented beyond April about failing to achieve it anyway).
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