It is human nature to procrastinate things that we fear, don’t understand, or don’t like. For many people, income taxes meet those criteria. They often wait until the last minute even though it is not in their best interest. Today we will dive deeper into the pros and cons of filing your income tax returns early vs late. First, let’s define late. When we refer to filing late we are not referring to past the tax deadline (or extension deadline). If you are past those dates you are in a separate tax issue resolution situation. When we refer to filing late, we are referring to within 4 weeks of a deadline or into extension season — that puts you firmly in crunch mode.
Let’s walk through the most common reasons why people procrastinate or wait to file until the last minute and address them.
1. I am afraid I’ll owe a lot in taxes. We understand that this can be scary. However, if you think this is the case wouldn’t it be better to know sooner rather than later? The earlier you know, the more time you have to figure out your payment strategies. The more time you have, the better off you can be and the less stressful the payment approach can be. You also don’t end up having to make super quick financial decisions that can adversely affect your overall financial situation.
2. I am due a refund and it doesn’t matter. If you are certain you are due a refund you may not be as worried about filling early. However, the longer the government has your income tax refund the longer you are giving them an interest free loan. That doesn’t sound so great any more, does it?
3. I am not sure how they will end up and fear the unknown. You may have no idea how your tax situation is going to end up and that can be scary. That’s still no reason to avoid it. Regardless of where you end up, items 1 and 2 indicate there is a benefit to filing early regardless of whether you owe or have a refund. Having a qualified tax professional on your side should help alleviate some of the fear.
4. It’s difficult to pull everything together. We admit that in this day and age there is a lot of information that has to be pulled together before you can file your income taxes. It can be a hassle, but an experienced tax professional should be able to give you a list that you can work through to make it easier to be sure that you have everything that you need.
5. I can’t find all my tax documents. You may be fearful that you will discover that you don’t have all your necessary tax documents. However, if you discover this earlier vs later you have more time to track down the missing data.
Our goal today was to educate you on the benefits of filing your income tax returns early. If you have follow-up questions on this topic or income taxes in general, feel free to reach out to us.
Caroline Montgomery, CPA (NC License Number 39017), MSA, is tax manager and partner of Adam Shay CPA, PLLC. The most rewarding part of what she does is helping business owners and individuals achieve their goals, all while working with a dynamic team that is growing quickly. The firm focuses on a proactive approach by encouraging clients to minimize taxes via income tax planning and projections, or by focusing on other areas of their business as part of the firm’s Virtual CFO services. The firm also offers tax preparation, fraud and forensic accounting and tax issue resolution services. She moved to Wilmington in 2014 and started at the firm in 2015. Caroline graduated with her her undergraduate and graduate degree in 2010 from East Carolina University. She is actively involved with NourishNC as their Treasurer and enjoys volunteering with various organizations throughout New Hanover County. In her free time, Caroline enjoys spending time with her husband, Mike, and dog, Mason, as well as travelling and going to the beach