By Edward “Ed” V. O’Neal, Vice President and Manager, Retirement Plans
Once again, it’s that time of year when we all have to start preparing for tax season. Tax season can often cause angst and evoke a number of concerns from taxpayers, with one common question being the pros and cons of filing taxes early. Unfortunately, there is no clear “right” answer to this question, with every taxpayer having a unique tax circumstance. In general, filing early works best for individuals anticipating a refund. But additionally, filing early could be beneficial for:
- Taxpayers that owe money to the IRS, as it may give additional time for taxpayers to fully understand how much they owe and arrange for payments.
- Taxpayers anticipating a big life changing event (such as purchasing a home or attending college) by helping to obtain important information needed for college financial aid or home purchases, in a timely manner.
- Avoiding tax return identity theft. Filing early can lessen the time and opportunity for an identify thief to fraudulently file for you – and steal your refund!
Conversely, delaying your tax filings could make sense for:
- Taxpayers that may be delayed in receiving all of their tax information (i.e. schedule K-1s, etc.). An incomplete or inaccurate tax return could result in needing to file an amended tax return. Amended returns have also been known to invite IRS audits.
- Allowing additional time to use tax advantaged strategies, such as making tax deductible IRA contributions for the previous calendar year if eligible.
Lastly, 2018 will be the first full tax year for the changes created through the Tax Cuts and Jobs Act (TCJA); which included major changes to both standard and itemized deductions. Given all the changes, remember to consult with your tax advisor in weighing all the advantages and disadvantages of filing early and how they relate to your filing situation.