IRS has announced that the first day they will accept 2013 individual Form 1040 income tax returns will be Friday, January 31, 2014. That is the date you or your tax preparer will be able to e-file your return. However, many taxpayers will have their W-2s and all other necessary documents and information available to prepare their returns sooner. The following are reasons you should have your return prepared before January 31st or as soon as possible thereafter.
Get your tax refund faster. Obviously if the IRS owes you money, you should get it as soon as possible. If your return is prepared early, it will be among the first returns to be e-filed on January 31st and you will be among the first people to receive your refund.
Budget your tax liability if you owe IRS. Even if you expect to owe the IRS, you have the option of filing early and waiting until the April 15th deadline to pay what you owe. Knowing what you will owe will give you more time to budget for that expense. You will also have the option of arranging an installment payment plan by April 15th.
Avoid the last minute rush. If you file early, you won’t have to wait for an appointment with your tax preparer. Your tax preparer will also be able to spend more time with you when he/she is not swamped with clients.
Use your tax refund to fund an IRA. You and/or your spouse can increase your tax refund by deducting a contribution made to a traditional Individual Retirement Account (IRA). The IRA contribution does not have to be funded until your tax filing deadline (April 15th for most people). Assuming your Federal and Virginia marginal tax rate is typical at 30.75% (25% Federal and 5.75% VA), every $1,000 you invest in an IRA would increase your refund by $307.50. Therefore, it would cost you only $692.50 for every $1,000 you save for retirement. By filing early, you will be able to use your enhanced refund to fund your IRA contribution on or before April 15th.
Having your tax return may help in getting financing. Banks and other lenders, especially small business lenders, often require current tax returns to be submitted with loan applications. If you have children applying for college financial aid, your tax return information may be required for the financial aid form.
Reduce the possibility of errors. Preparing your return early will enable you and your preparer adequate time to review the return before filing without feeling rushed. A careful review will reduce the possibility of errors or omissions. At Peoples Tax all returns are checked by a tax preparer other than the one who prepared the return, regardless of how knowledgeable the preparer may be. Anyone can make a mistake and this policy greatly reduces the possibility of errors.
Minimize your risk of identity theft. By filing early, you will provide less time for someone to file a false return to obtain a refund using your identity.