Tax Day is swiftly approaching.
If you’ve been dragging your feet or simply haven’t had time to file, don’t procrastinate any longer. There are many benefits to beating the April 15 deadline (or, April 17 for Maine and Massachusetts residents).
Here’s why you should get your taxes in before the due date—and what happens when you don’t file taxes on time.
1. Get your refund sooner
As of March 1, the average refund hovered around $3,068; that’s up slightly from $3,046 last year. In total, the IRS has already issued refunds worth $142 billion.
If you’re getting a refund, the sooner you file your taxes, the sooner you’ll get the money you’re owed. For small-business owners, whether you plan to pay down debt or make purchases, you know the difference cash flow can make.
Nine in ten refunds are issued within 21 days and you can check the status of your refund within 24 hours of filing. If you mail your return instead of filing electronically, prepare to wait a few weeks.
2. Give yourself time to pay
This year, taxpayers are facing unexpected liabilities due to the Tax Cuts and Jobs Act (TCJA)—the largest tax overhaul in the United States in 30 years. Some filers face tax bills because they didn’t adjust their withholding to account for those changes, like the child tax credit and the loss of personal exemptions.
Although you don’t have to make the payment until the deadline, filing your taxes on time is beneficial because it allows you to buy additional time to research payment options.
Direct pay: With the direct pay option, you can pay your tax bill directly from a checking or savings account. There’s no fee to pay this way and you receive instant confirmation once you make a payment. You can also schedule payments up to 30 days in advance and change or cancel a payment two business days before the scheduled payment date.
Credit or debit cards: If you choose to pay by credit card, prepare for a service fee of as much as 1.99% of your tax liability. If you use a debit card, you can expect to pay a flat fee, which starts at $2.50. Whether you pay by phone, internet or mobile device, note that fees vary by service provider.
Installment agreement: If you can’t pay your tax debt immediately, you might be able to make payments in monthly installments depending on your specific tax situation. Once you complete your online application, you’ll receive immediate notification if your payment plan has been approved.
3. Avoid penalties for not filing on time
If you or your business are owed a refund, there’s no penalty for filing late.
But, if you owe money, it’s a different story entirely. In fact, the consequences can add up quickly. Most commonly this includes …
- Failure to file (FTF) penalty: 5% of the balance owed for each month—up to a 25% maximum
- Failure to pay (FTP) penalty: 0.5% of your unpaid taxes for each month they’re left outstanding
Federal and State governments also assess underpayment fees that vary based on your filing status and situation as well as interest, which compounds daily until your tax bill is paid in full.
Not meeting the tax deadline could mean that you’ll have to deal with any combination of these fees. Lessen their impact or eliminate them entirely by acting now.
4. Protect yourself against tax identity theft
Tax identity theft occurs when someone uses your social security number to file a fake tax return and claim your refund.
While tax-related identity theft has been trending down in recent years, tax fraud is still the second-most common type of identity theft after credit card fraud.
When you file taxes on time—or better yet, submit your return sooner rather than later—you get ahead of criminals before they use stolen social security numbers to submit fraudulent returns.
5. Plan ahead for next year’s taxes
Tax season always requires a bit of balancing and adjusting between the previous year, this year, and next year.
By completing your taxes before the deadline, you’ll know the effects of TCJA and have a better idea of what you can do to reduce the amount you owe next year.
You’ll also get a chance to create estimated quarterly payments you can begin to budget for personally and professionally.
The real reason to file taxes on time
Whether you have a windfall coming your way or end up owing, you won’t know until you file your taxes. Naturally, you can file an extension.
By getting them done by the deadline, you’ll give yourself peace of mind knowing what to expect and save yourself the headaches of figuring out how to pay, racking up penalties, and identity theft.