Catching up at work or starting a new semester at school after the long holiday break may seem like good excuses to put off filling out and filing a tax return. You may even rationalize that the extended April 18 deadline this year is a better reason for procrastinating.
But before you push your taxes to the back burner, consider the benefits of starting the tax season early. Tax professionals says tackling your taxes early can save time, money and tears this tax season.
Here are a few things to consider:
1. Compile your 2016 expense sheet and begin anew for 2017
Whether you keep track of your payments through a ledger, a notebook or accounting software, Forbes writer Kelly Phillips Erb recommends taxpayers finish off 2016's expenses sooner rather than later and use a clean sheet for 2017.
Any deductibles from December should be recorded before they become forgotten. Erb stresses that taxpayers should record their expenses, rather than rely on bank statements. This is particularly important for expenses late in the calendar year.
"Financial and bank statements provided by third parties like your bank or broker will evidence your transactions when they are recorded or cleared, not when you made or initiated them," Erb writes.
2. Consider your refund
You can get a refund faster by filing your taxes early.
Last year, around 111 million out of 152 million returns resulted in refunds for the 2015 tax year. The average refund for the 2015 tax year was $2,857. If you are waiting for your refund, you can track it with the IRS website "Where's My Refund?"
3. File on time to save money
Filing your taxes on time can save you money.
According to TurboTax, the IRS penalizes individual late filers and calculates penalties and interest on a case-by-case basis. There is no penalty for filing late if you are getting a refund although, if you do not claim your tax returns within three years, the money is forfeited to the U.S. Treasury. Filing extensions and paying any owed taxes will not be penalized either.
A late filing penalty applies if you owe taxes and did not file a return. Late payment penalties are 0.5 percent of what you owe in taxes. For every month you don't pay the tax, the percentage you owe increases, according to TurboTax.
4. Start early to reduce or eliminate errors
Perhaps you noticed a trail of errors the last time you filed your taxes in a rush. Those can be avoided or corrected easily by filing early.
John Hewitt, founder and CEO of Liberty Tax Service, wrote about the most common errors he saw in previous tax returns. They include incorrect Social Security numbers, incorrect filing status and failure to claim credits or deductions. Filing early gives you time to review your form and edit any mistakes before the filing deadline.
5. Follow these tips if you're self-employed
If you are self-employed, paying taxes is different, as you will need to send quarterly estimated tax payments. If this is your first time being a self-emplyed taxpayer, seek help from friends or professionals who are also self-employed. They can help you figure out how much to pay and what to deduct without being penalized.
Freelance writer Reyna Gobel contributed to an Investopia article for self-employed taxpayers. She suggests freelance taxpayers organize their earnings by keeping track of their income and expenses on a separate debit or credit card.
In terms of quarterly income, Gobel recommends taxpayers overestimate a bit when paying taxes, to avoid penalties.
"You won't lose any money," she says. "You'll get the money you overpaid back as a tax refund when you file your annual tax return."
But before you push your taxes to the back burner, consider the benefits of starting the tax season early. Tax professionals says tackling your taxes early can save time, money and tears this tax season.
Here are a few things to consider:
1. Compile your 2016 expense sheet and begin anew for 2017
Whether you keep track of your payments through a ledger, a notebook or accounting software, Forbes writer Kelly Phillips Erb recommends taxpayers finish off 2016's expenses sooner rather than later and use a clean sheet for 2017.
Any deductibles from December should be recorded before they become forgotten. Erb stresses that taxpayers should record their expenses, rather than rely on bank statements. This is particularly important for expenses late in the calendar year.
"Financial and bank statements provided by third parties like your bank or broker will evidence your transactions when they are recorded or cleared, not when you made or initiated them," Erb writes.
2. Consider your refund
You can get a refund faster by filing your taxes early.
Last year, around 111 million out of 152 million returns resulted in refunds for the 2015 tax year. The average refund for the 2015 tax year was $2,857. If you are waiting for your refund, you can track it with the IRS website "Where's My Refund?"
3. File on time to save money
Filing your taxes on time can save you money.
According to TurboTax, the IRS penalizes individual late filers and calculates penalties and interest on a case-by-case basis. There is no penalty for filing late if you are getting a refund although, if you do not claim your tax returns within three years, the money is forfeited to the U.S. Treasury. Filing extensions and paying any owed taxes will not be penalized either.
A late filing penalty applies if you owe taxes and did not file a return. Late payment penalties are 0.5 percent of what you owe in taxes. For every month you don't pay the tax, the percentage you owe increases, according to TurboTax.
4. Start early to reduce or eliminate errors
Perhaps you noticed a trail of errors the last time you filed your taxes in a rush. Those can be avoided or corrected easily by filing early.
John Hewitt, founder and CEO of Liberty Tax Service, wrote about the most common errors he saw in previous tax returns. They include incorrect Social Security numbers, incorrect filing status and failure to claim credits or deductions. Filing early gives you time to review your form and edit any mistakes before the filing deadline.
5. Follow these tips if you're self-employed
If you are self-employed, paying taxes is different, as you will need to send quarterly estimated tax payments. If this is your first time being a self-emplyed taxpayer, seek help from friends or professionals who are also self-employed. They can help you figure out how much to pay and what to deduct without being penalized.
Freelance writer Reyna Gobel contributed to an Investopia article for self-employed taxpayers. She suggests freelance taxpayers organize their earnings by keeping track of their income and expenses on a separate debit or credit card.
In terms of quarterly income, Gobel recommends taxpayers overestimate a bit when paying taxes, to avoid penalties.
"You won't lose any money," she says. "You'll get the money you overpaid back as a tax refund when you file your annual tax return."
