Why You Should File Your Taxes as Soon as Possible

IN RESPONSE TO THE coronavirus pandemic, the IRS announced relief for taxpayers, including extending the federal tax deadline to July 15, 2020. Although the extended tax deadline, as well as the deferral of 2019 federal tax payments, applies to all taxpayers, there are many reasons to file your taxes as soon as possible and not wait until the July 15 deadline.

Here are a few reasons to file your taxes now:

  • You’ll get your tax refund sooner.
  • You may get a bigger refund than you think.
  • There’s more time to watch your refund grow.
  • You may leave out important information.
  • You’ll have more time to do what you love.

This is just a small example of some of the tax credits you may be able to claim. Don’t forget the standard deduction ($12,200 for single filers, $24,400 for married filing jointly) that almost 90 percent of taxpayers are estimated to now take versus itemizing deductions.

There’s More Time to Watch Your Refund Grow

Since the IRS expects to process tax refunds as it normally does, you could have your refund in hand soon, so you can invest a portion of it.

If you have always wanted to invest in stocks but haven’t before, now may be the time to invest some of your refund since stock prices may be lower.

If you didn’t invest as much as you would have liked before, you can make a 2020 contribution up to $6,000 ($7,000 if 50 and older) to your IRA and lower your taxes for 2020 since your contribution may be tax-deductible when you file your 2020 taxes. The IRS also extended the 2019 IRA contribution deadline in line with the tax extension deadline to July 15, 2020, so you can make a 2019 contribution before that date to reduce the taxes you owe and reap the benefits of a tax refund now.

You May Leave Out Important Information

Tax procrastinators who wait until the last minute to do their taxes tend to leave out key information, such as that provided on the Form W-2 or Form 1099, which report income or even receipts for expenses that may be tax-deductible. If you start gathering your documents now, you can sit down and finish your taxes without rushing and better avoid the risk of accidentally leaving anything out.

You’ll Have More Time to Do What You Love

With your taxes done and out of the way, you will free up time to do what you love, whether it’s spending time with family or sitting down to read a book. Even if you owe taxes, you can file your taxes before the extended deadline and have it all behind you. And you don’t have to pay what you owe until the July 15 tax deadline. If you do owe money, preparing your taxes earlier will also give you time to figure out how you’re going to pay.

You’ll Get Your Tax Refund Sooner

The biggest reason to file now is you could have a tax refund waiting, especially since the majority of taxpayers receive a tax refund. According to statistics from the IRS, about 72% of taxpayers received a tax refund of close to $3,000 last tax season. If you file soon, you could be that much closer to your refund, which could help your finances right now. The IRS still expects to issue 9 out of 10 tax refunds within 21 days or less of acceptance with e-file and direct deposit.

You May Get a Bigger Refund Than You Think

You may be holding off on doing your taxes until the last minute because you think you owe money. However, by the time you account for and take advantage of all of the tax deductions and credits for which you’re eligible, you may be getting a tax refund.

You would be surprised by how many tax deductions and credits you may get for things that happen in your everyday life. For instance, if you paid for college courses for you, your spouse or your kids, you may be eligible for the American opportunity tax credit (up to $2,500 for the first four years of college) or the lifetime learning credit (up to $2,000 for even one class).

If you have children, you may be eligible for big credits that boost your tax refund, such as the child tax credit (up to $2,000), the earned income tax credit (up to $6,557 for a family with three kids) and the child and dependent care credit (up to $1,050 for one child and up to $2,100 for two or more kids).

https://money.usnews.com/ Lisa Greene-Lewis, Contributor, May 4, 2020, at 9:43 a.m