With tax season nearly upon us, it's vital that consumers know which documents to keep, and which they should safely shred.
Since many Americans don't find doing their taxes to be a particularly joyful way to spend their time, they put it off. Are they paying a price by filing late or are they on to something? Let’s look at the pros and cons of filing early versus filing late.
Why you might want to wait
There are some advantages to procrastinating. You have until the filing deadline—April 15 in 2019—to make a contribution to an IRA or a Health Savings Account for 2018. This contribution will reduce your taxable income for 2018, and thus the tax you owe.
If you are undecided about whether or not to make that contribution, or need more time to come up with the money, you can file just prior to the April 15 deadline. If you need even more time, you can get a six month extension and file by October 15. The IRS cautions, however, that this is extra time to file, not extra time to pay.
Another advantage of waiting is to make certain that all your 1099s have arrived. Unlike W2s, 1099s tend to dribble in over time. If you do consulting or freelance work, you may forget some small income that you earned, and without a 1099 to remind you, you wouldn’t include it on your tax return. If it shows up later, you will have to file an amended return, which makes it more likely that you’ll be audited. So, if you expect several 1099s, it’s in your best interest to wait as long as possible, to increase the chances that you have received all the 1099s you are going to receive before filing.
Why you might want to hurry
Perhaps the biggest benefit to filing taxes early is to get your refund before an identity thief could file a return in your name and get it first. In 2015, identity thieves filed fake returns for $14.5 billion in refunds. But they pocketed only $2.2 billion, because thousands of filers went through the hassle of proving to the IRS that the refund was due to them, not to the scammer.
If you use an identity protection service that offers tax refund monitoring, you may be alerted when the IRS receives a tax return with your Social Security number. Identity Guard has this kind of monitoring, but because we monitor only the returns filed with the leading online tax preparation service, if the return is filed by some other method, we unfortunately will not be notified.
If the subscriber receives an alert before they’ve filed their taxes, someone is trying to get their refund, and they need to contact us immediately. Identity Guard’s Recovery Assistance Team will then spring into action to help the subscriber resolve the situation and get their refund as quickly as possible.