Telling Tips is a series of articles from local experts to help you save money, make better decisions and plan for a better future.
1. Prevent theft of your refund. Millions of Americans are victimized every year, and many of those have their tax refunds stolen. If a thief has your Social Security number, a false tax return can be prepared in your name and a refund issued to them before you file. Once you have your paperwork, file immediately. If your Social Security number and refund have been stolen, it will take months to get your money. At an accounting meeting several months ago, every tax preparer said that at least one of their clients was a victim last year.
2. Reduce your stress. What will you owe? Many taxpayers wait until April to file because they owe, or think they owe. If you have a balance due, you will have time to gather the funds you need to pay. Tax law doesn’t demand you pay immediately. You can still wait until April 15 to pay (although you may be hit with a penalty). You can even prepare your return and tell your preparer not to file it until April 15. And don’t be so sure you owe, or what amount it might be. Several of my clients who were sure they owed, to their surprise, actually had refunds.
3. Need money? If you have a refund, you’ll have it much sooner. For example, if you haven’t funded your IRA, you can file early, and take the refund for your IRA. Remember, you have until April 15 to make that 2012 IRA contribution. Or you can use the refund to pay off that December credit card bill.
4. It’s your money. Why let Washington hold it for you? No, you are not going to get much in interest, but you can make a choice as to what you want to do with it. By the way, if you are getting a large refund, you should increase your exemptions at work so that you’ll have more each week. It’s not that our government really needs the money. They just print it. What do you do?
5. Looking for a tax preparer? Don’t start looking come April. They’ll be busier than a one-armed paper hanger. It’s much easier to find and interview a preparer earlier in the season, and if you are missing any paperwork, you’ll know about it and won’t have the stress of going onto an extension.
6. Error on your 2009 tax return? If your (new) preparer sees an error on your 2009 tax return, which was due April 15, 2010, you only have until April 15, 2013 to request a refund. Don’t think that an amended return can be completed if your current tax appointment is April 10.
7. Some changes can only be made before the April filing date. Find an error after filing? Or change your mind about filing jointly? You can’t change from joint to separate after filing your tax return, unless it happens by April 15. In addition, some penalties can be avoided by filing an amended return and paying the balance by April 15. Rushing to judgment in April can be a big mistake.
8. Married filing separately? If an overpayment from a prior year was applied to the current year, or if estimated tax payments were made jointly during the year, and now you are filing separately, the IRS will apply these payments to the one who claims them first. And although there are rules for the claiming of dependents, filing early will save you extra correspondence if you are entitled to the deduction.
9. Your tax preparer needs the money. See him early. Don’t make him wait. Also, many preparers charge more in April because of their demand. Just as important, in February and March, your preparer is less stressed, tired, and worn out.
10. Peace of mind. By filing early, you won’t have to worry that the government might not have enough to send you your refund.
Joseph Reisman, of Joseph S. Reisman & Associates, has been serving tax prep and business accounting expertise from his Coney Island Avenue office for more than 25 years. Check out the firm’s website.