Our days are finally starting to get a little longer, and we are no longer de-icing our cars every morning. That means that springtime and tax season are just around the corner! Tax professionals know all too well how quickly these 3-and-a-half months vanish. In addition to minimizing the stress of a looming deadline, here are several really good reasons to get in and file your taxes early.
Avoid Identity Theft
If your Social Security Number ends up in the hands of an identity thief, one thing they might try to do with it is file a fraudulent return. This is most often done through the E-file system. If you have filed early, the identity thief will be rejected by E-file and forced to move on to their next victim.
When you file early, an identity thief has a smaller window of time to make use of your private information. If you do discover that a fraudulent return has been filed using your information, you will have to paper file. Read more about Tax Return Identity Theft and how to avoid it here.
Know What You Owe (And Maybe, What the Government Owes You!)
When it comes to taxes and finances, most people don’t like to be surprised. If you will owe taxes or fees for your 2015 tax return, filing early will allow you more time to plan for the financial hit and avoid late payment penalties. The momentary ouch factor often pales in comparison to the anxiety of feeling like you will probably owe, and waiting until the last minute to find out exactly how much. On the other side of this, if you are owed a refund filing early means you get that check sooner!
Claim your Dependents Before They Claim Themselves
A social security number for a Taxpayer can only be used once if E-file detects that there is a duplicate SSN on a return it will be rejected. The following situation is one a lot of parents run into after their children leave the nest. If you are financially supporting your adult child under 25 as they go to school or they are still living with you at home, you will likely be able to claim them as a dependent (give us a call to find out exactly what those requirements are). If your child files their own return and erroneously claims themselves before you are able to, you are either out of luck, or in for the hassle and added expense of amending returns. Don’t let them take away your hard-earned education credits just because they want to do their return by themselves.
If you have a child applying for college, your most recent tax return is required to complete the Free Application for Federal Student Aid (FAFSA). File early and have this info ready to go when your student is shopping for schools and figuring out how to finance their education. If your income is changing substantially compared to last year, you’ll need a good estimate of 2015 income and taxes in order to make sure you get the best aid and loan package before all the funds have been allocated to other families.
One tax savings technique that is most common is the Individual Retirement Account or IRA. If you haven’t made your contributions already, you’ll have a better idea of the impact these contributions for 2015 could have on your taxes. Perhaps this could be the year you do a Roth IRA instead, or maybe you need to ramp up your deductible IRA contributions to lower your income threshold to qualify for a healthcare-related Premium Tax Credit.
Just remember, knowledge may be powerful, but only ACTION is actual power. Knowing all of the reasons to file early won’t help you if don’t take the next step to make it happen.
Give us a call at 253-234-5732. We are currently scheduling appointments. Reserve your spot today and get ahead of the tax season rush!