As we’ve been talking about taxes this week, I’ve given you plenty of reasons to think about getting your tax return in sooner rather than later. To name just a few, the risk that a scammer could file before you and steal your tax refund, and worries that another government shutdown could delay refunds.
But let’s pause for a second.
There’s a big difference between not procrastinating on filing if you have everything you need, and rushing to get your return in early. The former can help you get your refund in hand faster. The latter could lead to trouble.
Why might you want to wait at least a little longer?
For starters, you might not have all the right documents in hand. Some of those investment-related 1099s we talked about this week aren’t set in stone. If you had a lot of transactions, the bank might send out an amended version later in the season.
Then there are a set of tax breaks called “tax extenders.” Congress needs to renew these, retroactively making them effective for 2018. It has not done so yet. Until it does, breaks like mortgage interest and college tuition and fees aren’t an option on the paper forms or in your tax prep software. If you want to claim them, you’ll have to wait.
Sure, you could file fast and then amend your return after. Be careful with that.
If you think tax time is, well, taxing, then you’re gonna love filing an amended return. Take it from me: I had to do this once, and for me, it was right up there on the fun scale with getting my wisdom teeth removed in high school.
The actual process of doing so isn’t that bad, although you will need to submit your changes on paper. The painful part is the wait. Amended returns take a backseat to original returns in the system.
To compare: If you’re owed a refund on your original return, the IRS says it will turn that around within 21 days in most cases. With an amended return, its estimate is eight to 12 weeks. And some state deadlines are even longer, to the tune of five or six months.
So rushed tax returns are definitely a case where haste makes waste, for your time and money.
To figure out the right time to file, get organized. Last year’s tax return is a good guide to making a checklist of documents you need (like 1099s and W-2s), and expenses that might be eligible for tax breaks. (Make sure your list accounts for any changes, like if you opened a new investment account or switched jobs.) Then you can more easily see when you’re ready to start.
Here are some other key tax takeaways from this week to help you grow your knowledge:
- RAC-ing up unnecessary fees: Before you file, brush up on products your preparer might pitch you related to your refund. So-called refund anticipation loans (RALs) and refund anticipation checks (RACs) can be high cost, and with planning, you might not need them.
- Free-for-all: Or at least, for 7 in 10 of us. Free tax prep is a sweet deal that most of us miss out on, even though we qualify. We’ve got the scoop on where to look.
- Refund regrets: The IRS expects to send out fewer refunds this year—2.5 million less than last year. Why? It has to do with how the new tax rules interplay with your paycheck.
- Extra credit: Or is it a deduction? We explore the differences between a credit and a deduction, and an above-the-line and below-the-line deduction.