Tax season is upon us, and whether you view filing as a burden or an opportunity depends largely on your financial situation. Some taxpayers eagerly anticipate a refund, while others brace themselves for a bill. No matter which camp you fall into, getting a head start on your 2024 tax return can provide several advantages beyond just ticking it off your to-do list. Early filing can reduce stress, help you catch errors, and even protect you from fraud.
Here are five compelling reasons to begin your tax preparation as soon as possible.
1. Beat the Scammers
Tax-related identity theft is a growing concern, and one of the best ways to protect yourself is to file early. Scammers often attempt to file fraudulent returns using stolen identities to claim refunds before the rightful taxpayer submits their return. If you file first, any fraudulent attempts will be rejected by the IRS.
If you suspect identity theft, continue filing your legitimate tax return and paying any taxes due. You may need to submit a paper return instead of filing electronically and include Form 14039, the Identity Theft Affidavit. Also, be vigilant about IRS scams—remember, the IRS will never call, email, or text you to request personal information. Visit Identity Theft Central on the IRS website for more information on protecting yourself from fraud.
2. Fix Mistakes and Make Adjustments
Waiting until the last minute to file increases the risk of errors. If you haven’t received necessary tax documents from an employer, financial institution, or charity, you should proactively check for digital versions or request them. Filing early gives you time to address mistakes and make adjustments that could lower your taxable income before the final deadline.
Common errors include basic math mistakes, forgetting to report income, or failing to claim tax credits and deductions. One key area that taxpayers often overlook is investment-related taxes. Form 1099-B summarizes short- and long-term capital gains and losses from investment accounts. If you have net losses, you can offset up to $3,000 of ordinary income ($1,500 if married filing separately) and carry forward any excess losses to future years. Identifying these opportunities early can prevent costly mistakes and potentially lower your tax liability.
3. Take Stock for 2025 and Beyond
Tax season is an excellent time to review your financial health and make necessary adjustments for the future. Early filing allows you to assess your current tax situation and make informed decisions about tax withholding and contributions to tax-advantaged accounts like IRAs and HSAs.
- IRA Contributions: Contributions to a traditional IRA may reduce taxable income, potentially lowering your tax bill. The 2024 contribution limit is $7,000 ($8,000 for those 50 and older), and you have until the tax filing deadline in 2025 to contribute.
- HSA Contributions: If you have a high-deductible health plan, an HSA can be a powerful tax-saving tool. In 2024, the contribution limits are $4,150 for individuals and $8,300 for families, with an additional $1,000 catch-up contribution for those 55 and older.
- SEP IRAs: Self-employed individuals can use a SEP IRA to save for retirement while reducing taxable income. The 2024 contribution limit is the lesser of 25% of eligible compensation or $69,000.
By filing early, you can optimize your contributions and make strategic financial moves before it’s too late.
4. Avoid “Sticker Shock”
Many taxpayers underestimate their tax liability, leading to a surprise bill when they finally file. If you wait until the last minute, you may not have enough time to gather the necessary funds to pay your tax bill, which can result in penalties and interest.
This is particularly relevant for gig workers, freelancers, and those with self-employment income, who are required to make estimated quarterly tax payments. If you missed any payments or underpaid, you’ll want time to calculate and plan for the balance owed. Filing early ensures that you have time to make financial arrangements and avoid unnecessary penalties.
5. Get It Done
Taxes are often seen as one of the most daunting financial tasks of the year. Procrastination can make the process even more stressful, especially when you’re scrambling to gather documents at the last minute. The IRS estimates that the average person spends 13 hours preparing their tax return. Getting started early allows you to break this up into manageable chunks, reducing stress and improving accuracy.
If you struggle with organizing paperwork, consider using a system to keep track of receipts and tax documents throughout the year. Many taxpayers find it helpful to:
- Take photos of receipts and store them digitally.
- Maintain a dedicated folder (physical or digital) for tax documents.
- Keep a spreadsheet with key financial details to simplify tax prep.
By addressing taxes early, you eliminate last-minute pressure, reduce the risk of costly mistakes, and free up mental space for other financial goals.
Final Thoughts
Starting your tax return early isn’t just about getting it done—it’s about maximizing your financial well-being. From fraud prevention and error correction to financial planning and stress reduction, early filing provides a host of benefits that can save you money and give you peace of mind. Instead of dreading tax season, view it as an opportunity to take control of your finances and set yourself up for success in 2025 and beyond. So gather your documents, get organized, and start filing today!
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