Tax season is upon us, with tax forms flooding inboxes and mailboxes. Tackling your 2023 tax return may seem like a daunting task, but starting early can make the process less stressful and potentially save you money. Whether you’re anticipating a refund or preparing to meet your tax obligations, there are compelling reasons to get a head start on your taxes this year.
1. Beat the Scammers
Filing your tax return as soon as possible is a powerful defense against tax-related identity theft. By submitting your legitimate return before criminals can file a fraudulent one in your name, you reduce the risk of falling victim to such scams. If you suspect your account has been compromised, continue filing your legitimate tax return and pay any owed taxes promptly. Remember, the IRS will never contact you via phone or email, and caution should be exercised when sharing personal information.
2. Fix Mistakes and Make Adjustments
Starting early allows you to address delays in receiving necessary tax documents promptly. Proactively request documents from employers, financial institutions, charities, or any other relevant sources. This early access provides ample time to identify and rectify common mistakes, such as basic math errors, unreported income, unclaimed credits, or overlooking investment losses. Utilize 1099 forms to reconcile short- and long-term gains and losses, potentially offsetting taxable income.
3. Take Stock for 2024 and Beyond
The beginning of the year is an opportune time to assess your financial situation. Reviewing tax withholding adjustments and addressing your tax return early enables you to make informed decisions about contributions to traditional IRAs, Roth IRAs, and health savings accounts (HSAs). With contribution limits adjusted for inflation in 2024, strategic planning can optimize your tax position. Self-employed individuals should also explore options like SEP IRAs, considering potential tax benefits from side gigs.
4. Avoid “Sticker Shock”
By starting your tax return early, you can prevent the unwelcome surprise of a substantial balance owed to the IRS. Waiting until the last minute may leave you with insufficient time to gather funds for payment, even if you file for an extension. This is especially crucial for those earning self-employment income, as quarterly estimated tax payments may be required. Early preparation provides the opportunity to address questions, lower your tax bill, and reduce the stress associated with last-minute filings.
5. Get It Done
Considered one of the most onerous financial tasks, completing your taxes early can alleviate the burden and make other financial responsibilities seem more manageable. Realistic time estimation, coupled with efficient document management throughout the year, can streamline the process. Focus on the potential benefits of early filing, such as saving money and minimizing stress, to stay motivated and on track.
In conclusion, starting your tax return early offers numerous advantages beyond the potential for a refund. From safeguarding against scams to strategically planning contributions and avoiding last-minute stress, early filing can positively impact your financial well-being. Embrace the opportunity to make tax season a smoother and more rewarding experience by taking proactive steps today.
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