Why You Should File Your Taxes Early

January 23, 2017

Many Americans don't exactly find the task of filing their taxes to be the most engaging way to spend their time, and as such, many put it off for a few months. Some even wait until the absolute last minute, then try to cram their tax prep into a short window of time. But when it comes to going through this process, there are a lot of benefits to avoid procrastination and get taxes filed as early as possible.

Perhaps the biggest benefit to filing taxes early is increasing protections against identity theft, according to a report from Travelers. The way many forms of tax-related identity theft works is by criminals gaining access to some sort of identifying information - Social Security Number, date of birth, income data, etc. - and using it to file fraudulent tax returns so they can receive and cash refund checks before their victims realize they've been ripped off. As recently as 2013, the IRS issued about $3.6 billion in fraudulent refunds on several million bogus filings, and that number has been growing steadily - and sharply - in the past several years. From 2008 to 2012, the number of such incidents rose well over 1,200 percent, according to Travelers.

Get out in front of the threat

With this in mind, the obvious reason to get a head start in this race to file is to beat would-be fraudsters off the blocks, the report said. If people can get their tax returns submitted to the IRS by, say, early February or before, they'll be more likely to avoid having crooks swoop in and beat them to it. Conversely, the longer they wait to file, the larger the window of opportunity for criminals who may have gained access to their personal information.

In addition, if consumers have been affected by this type of fraud, filing early can serve another benefit, the report said. Even when they've been beaten to the punch, filing as early as they can will allow taxpayers to learn of the ID theft more quickly, and start the process of identity restoration so they can get back to square one as quickly as possible. This is also important because once people have been victimized by Social Security theft, it becomes easier for criminals to use that information to apply for other programs in victims' names.

An example of why filing early is vital

One reason people may not be on board with filing early is that they have the misconception that even a month won't make a huge difference. However, that's just not the case, according to a report from the consumer finance site Wise Bread. For the 2016 filing year, the IRS found nearly 32,000 fraudulent returns had been submitted in the first two months of the filing period. Less than a week later, that number hit 43,000 - an increase of about 33 percent.

With all this in mind, it might be wise for consumers to make sure they're getting all their tax-related documentation sorted for their filing efforts in December or early January so that they can actually complete the process within the first few weeks of the new year at the latest. Once they've compiled everything in the right place, taxpayers will have a chance at a stronger defensive stance to help protect themselves from tax fraud.

Credit monitoring is a great tool for detecting identity theft, because it’s an ongoing review of credit accounts and credit inquiries associated with your personal information. Identity Guard offers direct data feeds from all 3 credit bureaus can rapidly track account inquiries and activity to provide near real-time alerts. Help yourself by signing up for identity theft protection today.

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