Tax season is off to a late start this year, but that doesn't mean you should wait to file.
The IRS just began accepting tax returns last week, February 12. Usually, tax season begins in late January, but the agency pushed back the date following some tax code changes in December prompted by the second wave of stimulus checks.
The IRS so far has not indicated it will delay the April 15 deadline. So, since filers have less time this year to get their documents in order, experts say the best time to get started is now.
In order to "make things as easy as possible, give yourself plenty of time to file," says Brandon Berquist, a CPA and tax specialist at Personal Capital. "It is important to organize your information and understand all events that occurred in 2020 that will be reflected in your return."
The biggest benefit of filing your taxes early is that if you're eligible for a refund, you'll get that money faster. Last year, nearly three in four taxpayers got refunds, and the average payout was a bit more than $2,500.
That money could be crucial, considering many Americans are still financially hurting in the pandemic. The IRS expects nine out of 10 taxpayers will get their refunds within 21 days of filing, as long as they have direct deposit set up and filed their taxes electronically.
Another advantage of filing soon: avoiding scams. Tax scams and fraud have been a big source of consumer angst in recent years. The IRS said it found $2.3 billion of total tax fraud during the government's most recent fiscal year. That was up from $1.8 billion from the year before.
And while tax scams happen year-round, they tend to spike during tax season.
Video by Stephen Parkhurst
If someone steals your identity and files a return in your name, it's on you to prove otherwise to the IRS and provide the correct information, which will delay your return — and your refund.
Even if you owe money, filing as soon as possible can give you more time to prepare for that tax bill.
The prospect of a large third stimulus check may also give taxpayers more incentive to file early.
Lawmakers are aiming to pass a new Covid stimulus package by mid-March. They have not finalized terms yet, but consider this: The amount of stimulus money a household receives is likely to be based on your most recent tax return at the time the IRS begins processing payments. If your income fell in 2020, filing soon could boost how much stimulus money you qualify to receive.
The Biden administration is pushing for payments worth up to $1,400 for individuals with an adjusted gross income of up to $75,000 in 2019 or 2020, and $2,800 for married couples earning up to $150,000.
"With the likelihood that a third round of stimulus payments will go out in March, it is in the best interest for many filers to complete their returns as soon as possible to help ensure they get the correct amount of stimulus money owed to them," says Mark Jaeger, director of tax development at TaxAct.
"For example, individuals who had a baby or adopted a child in 2020 or experienced a reduction in income should consider filing now to make sure the IRS has their latest tax information." Without that, the IRS will default to using 2019 tax data to calculate an individual's payment."
Video by David Fang
Whether you're filing early or tend to procrastinate until mid-April, don't rush through your tax prep. Before you file, check that you've included everything and filled out your information correctly.
"Mistakes often happen when a filer is rushed to complete their return," says Jaeger. "So giving yourself enough time to file helps eliminate that worry."
Mistakes can be expensive, says Berquist: "If the mistakes result in additional tax due, you may find yourself subject to interest and penalties as well for any late payments of tax that may result."
And if you do discover that you're missing documents or need to change something after you file, amending your tax return can be a headache, Jeffrey Levine, a CPA and chief planning officer at Buckingham Wealth Partners, told Grow. "Having to file an amended tax return is a time-consuming and potentially costly process."
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