When January rolls around there are a lot of things to think about. You’re often working out your resolutions and goals for the new year. However, one thing that may not be at the forefront of your mind in January is your taxes. And you may not have even been aware that the first day to file taxes for 2020 was January 27th.
Filing taxes is something that every working American has to do. Whether you’re in an office nine to five or are an entrepreneur with your own business, your income has to be filed with the IRS each year. Getting a head start on filing your taxes can take away much of the stress as that April 15th filing deadline rolls around. So, when should you file your taxes?
The importance of filing taxes on time
Filing your taxes on time is important for a number of reasons. For starters, the sooner you file, the sooner you know how much you will get back on your return or how much you owe to the government. Filing on time is also important to avoid paying unnecessary fees.
When you submit your taxes late, the IRS charges interest and fees at its discretion. If you owe money on your taxes, you may be looking at paying a 5 percent penalty charge on the taxes you owe for every month late on your return. If your return is filed over 60 days late, the minimum penalty is $210 or 100 percent of your unpaid taxes, depending on which is less.
People receiving refunds aren’t exempt from late filing consequences. While you won’t receive a penalty charge, you may not receive your refund either. After three years, unclaimed tax refunds are turned over to the U.S. Treasury.
The final date for filing taxes is almost always the same: April 15th. If the 15th happens to fall on a Friday, the final day to file is the following Monday. If the 15th falls on a Saturday or Sunday, the final day to file is the following Tuesday. In 2020, the final day to file and pay taxes is Wednesday April 15th.
Filing taxes early
Your tax documents should be made available to you by mid-February. Once you have those documents in hand, you are all set to file.
Why should I file taxes early?
There are lots of benefits to filing your taxes early. For starters, filing early will allow you to prepare your taxes calmly. If you start the process of preparing your documents in February, you’ll be able to double check things and seek help if you need it. This becomes more difficult if you wait until those last few weeks. You’ll be short on time and may not be able to get the help you need to complete your documents well.
Another perk to filing early is getting your refund early. Tax refunds are sent out about 21 days after you file. That means if you file in February, you’ll be seeing your refund by some time in March. If you’re not getting a refund, filing early will give you more time to pay your taxes. Your tax payment is due by April 15th. If you wait until that date to file, you won’t have any time to save to pay what you owe. Filing early will give you time to make payments, if need be, so that you can have everything paid off by the 15th of April.
One last perk of filing early is keeping your tax return safe from identity thieves. If a person wants to file a false tax return in your name, all they need is your social security number. However, a person can’t successfully file a tax return in your name if you’ve already done so.
Tips for filing taxes on time
Inquire about your tax documents
Start to inquire about your tax documents in January. Employers have to send W-2s and 1099s out by January 31st. Knowing when you will receive your tax documents will give you a timeline for when you can file. If you haven’t received your tax documents by mid-February, check with your employer to see when your documents were sent out and to what address.
Put it on your calendar
Set reminders for yourself so that you get notifications about important tax dates. There are a variety of apps you can use like Any.Do and Google Keep to set up reminders. Some helpful dates to keep track of are the first day you can file, the final filing date and the date your tax documents will be available.
Take advantage of help
Every year, free tax preparation sites are made available to help people file. These sites are often set up at libraries and community centers in order to make them more accessible. There is Volunteer Income Tax Assistance (VITA) that is set up to help people with disabilities, limited English, or with income of $56,000 or less. Tax Counseling for the Elderly (TCE) is another program set up to help taxpayers aged 60 years or older. TCE also offers tax help for people outside of this age range. To find help in your area, you can use the VITA/TCE locator tool.
If you feel comfortable completing your tax documents by yourself, file online. You can file for free through the IRS’s Free File Portal. There you’ll find fillable forms and resources to help you complete the filing process. If your income is below $69,000, you will also have free access to tax preparation services through providers like H&R Block and TaxSlayer.
Request direct deposit
If you are eligible for a tax refund, your refund will be sent to you within 21 days of filing. However, if you would like to receive your refund a bit faster, you can request a direct deposit into your checking or savings account. This means you won’t need to wait for a check to arrive in the mail, and also avoids the possibility of your check being lost or stolen in transit to you.
Apply for an extension
If your tax documents don’t arrive in a timely fashion or you foresee not being able to file by April 15th, you can file for an extension. You can get an automatic six month extension to file (not to pay) by filing a paper Form 4868 or using IRS e-file (electronic filing). U.S. citizens that live and have their main place of business abroad are afforded an automatic two month extension without any added paperwork. Military and naval service members on duty outside of the U.S. also get this automatic extension.