There are always advantages to filing your tax returns as early as possible, and there might be even more upside this year.
Because of big changes to the tax code resulting from the Tax Cuts and Jobs Act (TCJA), and because of the 35-day federal government shutdown that recently ended, it’s unclear exactly how quickly the IRS will process tax filings and issue refunds this year. Furloughed IRS employees returned to work Jan. 28, which previously had been scheduled as the first day of processing tax returns.
Before the shutdown ended, limited staffing at the IRS was expected to result in slower processing and delayed refunds. Last year, the IRS — with a full staff — processed 6.1 million returns in the first week of tax season and 13.5 million in the second week; no estimates have been given for this year.
The reasons to file early outweigh the reasons to wait:
- In a common scam, thieves use victims’ personal information to file fraudulent tax returns electronically and claim bogus refunds. This scam is typically carried out early in the tax-filing season. A victim typically discovers the fraud after he or she files a tax return and is informed by the IRS that the return has been rejected because another return with the same Social Security number has already been filed for the same tax year. The IRS then must determine who the legitimate taxpayer is. But if you file first — before a scammer gets the opportunity — the fraudulent tax return filed by the potential thief will be rejected by the IRS instead of yours.
- If you expect a refund, filing early likely means that you’ll receive your refund sooner. In past years, the IRS has expected more than 90 percent of refunds to be issued within 21 days of filing.
- If you owe money on your returns, it still helps to file early because your payment deadline will still be April 15. Preparing your Form 1040 early will give you a better idea of where you stand and exactly how much you might owe.
- Having your tax forms completed early can give you a head start if you plan any big life changes this year, such as buying a new house or applying for financial aid for college. Having completed tax forms can make that process easier because they serve as proof of income.
- You’re more likely to not need a tax extension if forms are started as early as possible. Tax extensions often are the result of disorganization more than financial troubles. Getting an early start can help ease that stress.
Returns can be submitted as soon as your W-2, 1099 and other relevant tax forms are received. Those forms are required to be issued by employers and businesses by Jan. 31; if you haven’t received all tax forms by mid-February, reach out to the employer or the IRS for help.
E-filing and requesting a direct deposit refund generally will result in a quicker refund and can be more secure. If you have questions about tax identity theft or would like assistance filing your 2018 return early, please contact your KraftCPAs tax advisor.