By A.J. Gross, C.P.A., E.A.
It’s tax time again, your favorite time of the year! You are eager to gather all your tax documentation and giving it to your tax accountant. Ok, maybe this is not you. But, there are some benefits of filing your taxes early.
1) Get your refund early - You can get your refund quickly by E-Filing, selecting direct deposit and filing early in the tax season. There will be more people filing tax returns in April compared to February. Filing your tax return early may mean quicker processing times by the IRS. I also recommend E-Filing your tax return and select direct deposit for receiving your refund. You may get your refund directly deposited in your bank account in less than a week by following this tip.
2) More than one person can claim a child - This can be a complicated matter especially for divorced parents. Your divorce decree states that you can claim the kids on your tax return. But your ex-spouse files a tax return before you and claimed the kids on his or her tax return. If you file after your ex-spouse, the IRS will deny your tax return. You can go back to the IRS to get this adjusted but it is a pain and it can take the IRS up to a year to fix. However, if you file early then the reverse will happen. You will get the kids on your tax return and the IRS will deny your ex-spouse’s tax return.
3) Tax Accountants are less busy - The busiest time for tax accountants is between March 15th to April 15th. Tax accountants are a little less busy prior to March 15th. The earlier in the tax season you provide tax documents to your tax accountant, the quicker the tax accountant can prepare your taxes.
4) Need tax returns for FASFA - It is necessary to get your taxes done early when applying for college financial aid. You will need information from your tax return for the application. The Michigan deadline for filing for FASFA is March 1.
5) Reduce the chances of identity theft - This is a huge issue. Last year nearly $5 Billion of refunds were mistakenly paid out to identity thieves. Thieves are using stolen identities to file fraudulent tax returns to get a tax refunds. Filing early decreases the risk of identity theft as thieves generally file fraudulent tax returns near the end of the tax season.
A.J. Gross, C.P.A., E.A. is President of ALG Tax Solutions. A.J. Gross can be contacted at AJGross@algtaxsolutions.com or www.ALGTaxSolutions.com.
This column was printed in the January 11, 2015 - January 24, 2015 edition.