A personal finance goal of mine for the month of February was to finish preparing my taxes.
I had gotten into a groove the past few years finishing taxes as early as possible because the numbers are used for the Free Application for Federal Student Aid (FAFSA) which determined the student loans that would be available to me.
But there are plenty of other reasons to complete (Note: Complete, but not necessarily file) your taxes early.
Here are some of them.
Apply sooner for financial aid and other things that require knowing your income
Let’s get this out of the way first since I already mentioned it. If you’re a student or parent applying for financial aid on behalf of a student, then knocking out your taxes lets you put a final number for your income on those forms.
Not only that, because the two websites are linked, submitting your taxes to the IRS automatically populates the pertinent data on FAFSA.gov (Unrelated but important note: FAFSA.com is the website for a private firm that will charge you to fill out the FAFSA and is not the same thing as FAFSA.gov).
Get your refund or know what you owe sooner
This should be pretty obvious for those of you who know you overpaid a bit over the year and are due back a refund. If the money’s coming to you, why couldn’t you possibly want it sooner rather than later? The sooner you file, the sooner you’ll receive your refund. And, if you file before the big crowds do, you’re also likely to see a shorter turnaround time between filing and actually receiving your refund from a less busy IRS.
But what if you’re on the other side of the table: what if you know that you’ll be required to send more money to the IRS?
Completing, but not filing, your tax returns as early as possible can still be a pretty good strategy. Doing so will give you a clear idea of the amount of money you’ll have to save to be able to pay that tax bill before the deadline.
And if it’s more than you anticipated, the target number can help you start a strict budget to adhere to for the next couple months to save up that payment.
One scam that’s been on the rise in recent years is tax return fraud. The M.O. of criminals who engage in this sort of thing is to hack into databases that contain social security numbers, and use these to file and collect refunds before the real taxpayer has a chance to.
So how can this be avoided? First, by safeguarding your personal data, but also, in part, by filing before these fraudsters get a chance to.
Get the stupid thing out of the way
Isn’t that reason enough? It is a fantastic feeling to cross a HUGE item off of your to-do list rather than letting it hang over you for a couple months.
And that’s why I’m doing them now. Hopefully, I’ll be done by the end of the long Presidents Day weekend.
How about you guys?