You made it through the holidays! You’re now firmly entrenched in the doldrums of mid-winter, doing your best to stay warm and stay out of trouble until the spring. Of all the things you need to take care of in the new year, I’m sure there’s a good chance that filing your tax returns isn’t at the top of your to-do list.
But it should be.
Yes, you’ve got months to submit your return, but you can complete your return right now and there are at least six compelling reasons why you should do so. What are those reasons? Glad you asked!
- Your refund isn’t earning interest. As long as the government is holding on to your extra cash, it isn’t doing you any good. And it certainly isn’t earning interest or paying dividends. If you know you’ve got a refund coming, grab it right now! You can invest it, use it, or put it in a savings account. Any of those options is better for you and your money than just leaving it where it is in No Man’s Land.
- You can build a more accurate budget for the year. Does part of your yearly budget include anticipated tax refund money? If so, get that money now so you know exactly what you’re working with and can put together a solid budget for the year. And if you’ve got to pay taxes you can also work that expense into your budget.
- Pay off debt sooner and save on interest charges. If your tax refund is earmarked towards paying down debt or paying off your holiday purchases, the sooner you pay off that debt the better. By not waiting until April you can save yourself three months’ worth of interest charges. And if you made holiday purchases with deferred interest you can permanently defer those charges by paying the debt off immediately.
- Take your time, avoid errors and maximize your deductions. Some of the most common errors people make on their tax returns on relatively simple: incorrect Social Security number, math errors, entering information on the wrong line, etc. Simple errors like these are usually the result of rushing and operating under pressure. So relieve the pressure of having a tight deadline by completing your returns now, while you’ve got plenty of time to review for errors. And by giving yourself more time you can also make sure that you’re not missing out on any important tax deductions.
- Save yourself from unnecessary stress. Nearly 60 percent of Americans find filing their taxes to be stressful, with a third of those folks finding it very stressful. Procrastination certainly doesn’t help. So do yourself a favor and get it over with right now. Waiting three months will only make it worse.
- Avoid the risk of paying penalties. If you miss the deadline for filing your taxes and you’ve got a refund coming it’s not exactly the end of the world. You’ve actually got three years to file your return before you forfeit your refund. If you owe money, however, missing the deadline can be costly. You’ll be charged a late payment penalty of five percent of your unpaid balance for every month it remains unpaid. If you owe taxes don’t even risk it. Pay it now and be done with it.
So yes, you’ve got plenty of time. But what else are you doing right now? And trust me, besides a nice wool sweater and a freshly stoked fireplace, there’s nothing quite as warming as the feeling of getting your taxes done in January. Think of it as a little post-holiday gift to yourself.