As tax season begins, you may be eager to file your tax return for a faster refund and to check the annual task off your list.
For most filers, the tax deadline is April 18, and the IRS urges Americans to prepare before filing to avoid processing and refund delays, along with future IRS notices.
“You don’t want to race to the finish line with this,” said certified financial planner John Loyd, owner at The Wealth Planner in Fort Worth, Texas.
Lloyd, who is also an enrolled agent, prefers a mid-March filing date. Here’s why.
Why it’s smart to ‘tap the brakes’ and file in March
While you may want a speedier refund, experts say it’s critical to have all your tax forms before filing your return. Companies send a copy of these forms to you and the IRS every year, making it easy for the agency to flag returns with missing information.
Typically, skipping these details triggers an automated notice from the IRS, which may delay processing or take time to resolve, he said.
Most tax forms arrive by late January to mid-February, but others may be later.
That’s why Loyd targets a mid-March filing date, to make sure clients have all the necessary forms — including documents that may need corrections. For example, if someone discovers an error on their W-2 from work, it may take time to fix the mistake and reissue the form.
“For most of my clients, I’m really urging them to tap the brakes,” he added. Of course, you’ll still want to give yourself plenty of time to meet the April 18 deadline to avoid a late-filing penalty.
Avoid tax identity theft by ‘filing ahead of fraudsters’
That said, there’s no reason to wait once you have all your necessary forms. One reason to file promptly at that point is the risk of tax-related identity theft, said Eric Bronnenkant, a CFP and certified public accountant at Betterment, a digital investment advisor.
Tax-related identity theft happens when someone uses your Social Security number to file a return and claim a fraudulent refund. You may find out through a rejected tax return or IRS letter, among other warning signs, according to the IRS.
“Filing ahead of fraudsters is a good idea,” Bronnenkant said. But one way to protect yourself is by signing up for an identity protection PIN, or IP PIN, he said, which is a six-digit password to file your return.
The downside is you’ll need to keep track of a different IP PIN every year, which the IRS sends by mail or you can retrieve online.