Why it Pays to File your Taxes Early

As soon as the clock strikes midnight on a new year, it also starts counting down to April 15—tax day. Whether your taxes are straightforward and you file them yourself or engage the help of a tax professional, it pays—sometimes, literally—to file your taxes early.

Avoid processing delays

The last few years, the IRS has had its work cut out for them come tax time. In June 2022, they issued a report to Congress that said they had a backlog of 21.3 million unprocessed paper tax returns, an increase of 1.3 million from 2021. Filing early—and electronically—helps to avoid these processing delays and gets your refund to you faster.

Net a bigger refund

It’s important to remember that any refund you receive isn’t “free” money—it’s money you have overpaid in taxes throughout the year. Ideally, you want a tax return as close to $0 as possible, but you also want to ensure that you receive any money owed to you. Data from the IRS shows that people who file their taxes early usually receive larger refunds—as much as $400 on average. It’s tough to say exactly why early filers receive bigger refunds; it could be because they’re expecting a refund and are motivated to file earlier. Or, it could be because they have more time to claim credits and deductions.

Pay any money you might owe

In the unfortunate event that you wind up owing money to the IRS, filing early gives you extra time to make a plan, come up with the money you owe to the IRS, and make the payment by tax day.

Obtain information you need for the year ahead

If you expect some big life changes in the year ahead—for example, you plan to buy a house—filing your taxes early gives you extra time to obtain information and forms you might need in the months ahead.

Prevent identity theft

In this digital day and age, it is all too easy for scammers to steal your identity. Your taxes are connected to your social security number, so when you file early, you ensure that a scammer can’t use your social later on. According to an IRS report, between 2015-2019, they stopped online scammers from making off with more than $26 billion (yep, “billion” with a “B”) through identity theft and tax fraud.

Ensure time with a tax professional

It’s not unusual to need help with your taxes from an accountant or other tax professional. The closer you get to tax day, the busier these people are. To ensure you get time with your taxes, it pays to start early.

Avoid the need for an extension

Nine times out of 10, waiting until the last minute to do anything results in a scramble. Waiting to do your taxes—and then discovering they are more complicated than you thought—might result in needing an extension or having to consult a busy tax professional.

Reduce stress

There is nothing like the feeling of accomplishment you get when you cross something big off your to-do list. Filing early is one less thing you have to do later on and eliminates so much of the stress that comes with doing your taxes. File early, get that refund and move on with your life. And, if you’re looking for a way to grow your refund, our personal bankers are here to help. Give us a call at 414-761-1000 or schedule an appointment at one of our convenient locations.

Sources: Ramsey, Intuit TurboTax.