Tax season is in full swing and millions of Americans are scrambling to get their returns done. If you’ve got all your W-2s and you’ve added up those deductible expenses, there’s no reason to put it off until the last minute. But that’s something about 20% of taxpayers do, according to the IRS. When you owe taxes, you may be tempted to drag your feet if you need time to come up with the cash. If you’re getting money back, however, there are several reasons why you don’t want to delay your filing.
Check out our federal income tax calculator.
1. It can save you money if you’re in debt
Applying your tax refund to your credit card bills may not be the most exciting way to spend the money but it’s definitely one of the smarter options. If you’ve got a high interest rate to go along with that big balance, using your refund to pay if off can save you some big bucks in the long run.
For instance, if you’ve got a $5,000 balance with an 18% interest rate and you’re paying $200 a month, it’ll cost you about $1,300 in interest to wipe it out. If you’re expecting a $3,000 tax refund, which is the average amount taxpayers are getting in 2015, you could knock the balance down to $2,000. Assuming the same monthly payment, you’d get out of debt in under a year and pay less than $200 in interest.
2. You reduce the risk of having your refund stolen
An estimated 2.7 million taxpayers were victims of tax fraud and identity theft in 2014, according to the IRS. One of the ways that crooks are able to make off with your refund is by filing a false return using your information and claiming the money without your knowledge.
Sending your return in early cuts down on the likelihood that someone else would be able to file on your behalf. If someone does submit a duplicate return after you’ve filed, it’s automatically flagged as suspicious. On the other hand, if a thief gets their fake return in first, it could take you up to six months to have the IRS investigate and track down your refund.
3. You’re buying a home
Mortgage lenders typically need to see a mountain of paperwork before they’ll approve you for a home loan, including your tax returns. If you’re in the process of buying a property or you’re just starting to shop around for a lender, having your tax returns in order and ready to go can reduce delays during the process. Also, the extra cash from your refund can come in handy if you need it for your down payment or to cover closing costs.
Find out now: How much will you pay in closing costs?
4. You’re applying for financial aid
If you have kids who are headed off to college or you’re an independent student, you’ll need to get your returns done as soon as possible if you’re planning to apply for federal financial aid. While the deadline for submitting the Free Application for Federal Student Aid (FAFSA) isn’t until the end of June, many schools encourage students to apply earlier than that so you don’t run the risk of being so late that the aid has run out.
If you owe taxes
If you know you’re going to owe taxes, you can still file your return early but you don’t technically have to pay until the April filing deadline. You can request an extension if you need more time to get your documents together. But if you don’t get a check to the IRS by the middle of April, you’ll end up owing penalties and interest on the money.
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