Don’t wait until the last minute to file your taxes

Americans are skipping the usual filing procrastination with their tax returns this year.

Data from the U.S. Internal Revenue Service (IRS) shows that over 13.5% more taxpayers have filed their returns by February 3, 2023 compared to the same period in 2022, when the IRS had received 16,685,000 federal tax returns.

Filing early can mean faster tax refunds, extra time to pay any taxes owed and less deadline stress to deal with.

Is it good to wait to file your taxes?

In general, procrastinating on your taxes provides you less time to maneuver your finances and correct mistakes, which can have huge financial repercussions.

“Last year, taxes were due Monday, April 18,” said Robert Persichitte, CPA at Delagify Financial in Arvada, Col. “[One client] waited until Friday, April 15 to get her information to me.”

Right away, an error popped up. 

“She maxed out her 401(k) at both jobs, which is not allowed,” Persichitte said. “You only have until April 15 to correct the mistake. She tried calling both banks, but they were too busy to process the distribution request on the same day. ”

That year, taxpayers faced doubled taxes on any over-the-limit contributions. 

“That means she had to add back almost $20,000 of income in 2021 and she will have to claim the distribution as income when she takes it out of the account,” Persichitte said.

When does it make sense to wait to file?

Waiting to file tax returns until the last minute is typically highly inadvisable, yet, in some rare scenarios, it’s okay — maybe even encouraged. 

“You should wait if you are missing information,” said Persichitte. By law, not all tax forms are required to reach you by Jan. 31. For example, the IRS 1099-B form that shows income from brokerage accounts is typically due only in March. 

“Request that [data] as soon as possible, and if you’re going to come closer to the deadline, file an extension right away. There is no penalty for filing an extension, so it’s a no-brainer,” said Persichitte.

Additionally, if the IRS gives any type of recommendation or guidance about filing your return — for example, if they say to hold off for some reason, hold off on your tax filing. 

“It’s likely in your best interest to adhere to those instructions to avoid processing delays,” said Mark Jaeger, vice president of Tax Operations at TaxAct, in Cedar Rapids, Ia. 

Early in 2023, you may have been advised to hold off on filing your taxes if you had an account at crypto hedge fund FTX, which filed for Chapter 11 bankruptcy amid fraud charges from the U.S. Securities and Exchange Commission.  

When should you file early?

“It’s always in a filer’s best interest to file as early as possible,” Jaeger said. “For many, it will allow them faster access to their refund. And for others who owe, it allows for more time to make a plan for payment.”

There’s more.

Having the stress of beating the deadline when you’re down to the wire is not fun for most people. 

“When you’re racing the clock, you’re at a higher risk for typos, inputting inaccurate numbers or overlooking a mistake,” Jaeger added. “Filing early in the season allows for the completion of a tax return to be as stress free as possible.”

You should also be ready to pay any projected tax liability.

“That way, you don’t face any IRS “Failure to Pay Penalties” violations,” said Brian Hershman, founder of BSH (Buck Stops Here) Accounting in San Diego. 

If funds are tight when you file, you may be able to qualify for a payment plan with the IRS. 

How long does it take to file taxes?

While every taxpayer’s experience is unique, the length of any tax filing situation depends on specific financial circumstances and the means in which a taxpayer chooses to file.

“If you opt to use tax filing software, the process can be quite quick and efficient as the software does the math for you and helps guide the input of your information in an easy-to-follow, step-by-step process,” Jaeger said. “Plus, many DIY software providers also offer access to tax experts to help answer questions when you need help.”

Some services, like IRS Free File, even offer that help free of charge. “That’s a huge value when it normally costs hundreds of dollars elsewhere to get professional help,” Jaeger said. IRS Free File is available for filers with an adjusted gross income of $73,000 or less.

By and large, a simple tax situation with only a few sources of income and deductions may only take a few hours or less to complete.

“However, if you have a more complex situation with multiple income sources, investments, and business income, it could take several days to file your taxes,” said Richard Lavina, chief executive officer at Taxfyle.

Advice to file your taxes faster 

To avoid tax procrastination, take advantage of these tips — hopefully sooner rather than later.

Gather your documents

First, make sure you have all the necessary documents and information you need before you start. “This can include W-2s, 1099s, receipts and other financial records,” Lavina said. 

Organization is critical whether you’re going to self-prepare or hire a professional. 

“The reason most returns take longer is we are waiting for clients to give us data or information,” Hershman said. “Basically, they’ve not done the best job organizing all of their documents in the right place or using our systems to get us their information if it’s requested.”

Consider using tax preparation software

Tax preparation companies like TurboTax, H&R Block, TaxSlayer and more can streamline the filing process, taking some weight off your shoulders. 

“These programs can help you identify deductions and credits you may be eligible for, and they can also help you avoid errors and mistakes,” said Lavina.

Many firms offer a free version of the software and tiered pricing for taxpayers who need more than the basic filing options. 

Get professional tax help if you need it

A trusted tax professional can steer you through complex tax situations and make sure your return is completed and filed correctly.

“Getting to connect one-on-one with experts that can answer your questions when you need them will not only help you feel confident in completing your return but also help you to complete it in a timely fashion,” Jaeger said.