The best time to file your tax return
The best strategy to avoid penalties, interest, and refund theft, is to file your taxes as soon as you have your paperwork.
Timing is everything, especially when it comes to filing your tax return. Miss a deadline by a day and you could be in for a world of hurt — and penalties. It’s never good to be late, but there are advantages to filing at different times depending on what you’re trying to accomplish.
Objective: avoid penalties and interest
Best time to file: by the annual April deadline. Missing the tax-filing deadline leaves you open to a late-filing penalty of 5% of the amount due for every month or partial month your return is late. You can get an extension, but you have to request one by the April deadline. And don’t be one of those people who mistakenly think they don’t have to pay their taxes in April if they get an extension. If you don’t, you’ll owe interest, and the IRS might also assess a late-payment penalty, which normally costs 0.5% of the outstanding tax per month.
Objective: avoid refund theft
Best time to file: The minute you have all your paperwork. Tax-identity theft is a growing problem. Between 2010 and 2013, the number of taxpayers affected annually shot up from about 271,000 to 2.4 million, according to a 2015 report from the Treasury Inspector General for Tax Administration. It generally happens when a criminal accesses your personal information and files a tax return under your name to pocket the refund. Click here to learn what to do if you’re a victim. But if you file before a criminal does, there’s no refund to steal — in theory, at least.
To beat the criminals to the punch, file as soon as you have your W-2s and other paperwork. That could mean completing your return in February or even earlier — the IRS typically begins accepting tax returns in mid-January, and employers usually send out W-2s by the end of that month.
Objective: file as cheaply as possible
Best time to file: before March 15. Tax software providers tend to raise prices during the 30 days before the April deadline. And we’re not just talking about the price of the software going up — the fees to file state returns and e-file often head north as demand peaks.
Keep in mind that you might be able to score free tax software, especially if your taxes are uncomplicated or you fall into a middle- or low-income bracket.
Likewise, if you’re hiring a human tax preparer, avoid the rush. The average fee to expedite a return is $88, according to the National Society of Accountants.
Objective: get your refund quickly
Best time to file: anytime, as long as it’s electronically. If you e-file, the IRS will likely issue your refund within 21 days. To get it as soon as possible, have it direct-deposited into your bank account. Old-school paper returns are typically processed more slowly, and refunds can take six to eight weeks to arrive.
E-filing gives you a better idea of where your return stands, too. After you e-file, the IRS notifies you when it receives your return, when it approves your return and when it sends your refund.
Tina Orem is a staff writer at NerdWallet, a personal finance website. Email:email@example.com.
This article first appeared at NerdWallet.
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