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The Pros and Cons of Filing Your Taxes Early

By Alison Wardle

For those looking to file their taxes early, the official start date for tax filing season began on Monday, January 27, 2025. While some individuals prefer to wait to file their tax returns, others choose to file as soon as possible. There are many benefits to filing early, but there are also some drawbacks to consider before determining the best time to file your tax returns. Below is an overview of the pros and cons of filing your taxes early. 

There are numerous benefits to filing your tax returns early. Here’s what they are: 

Minimize the Risk of Identity Theft

Filing early will not eliminate the risk of identity theft completely, but it will minimize the risk tremendously. The sooner you file your tax return, the less chance there is for someone else to file fraudulently using your name. Identity theft involving a tax return can lead to numerous tax reporting complications, and resolving the issue with the IRS can take months. 

The IRS has identified several warning signs that may indicate a fraudulent return has been filed in your name, including: 

  • Your return is rejected due to a duplicate Social Security number. 
  • You receive an IRS notice that your return has already been filed. 
  • You receive an IRS notice of changes to your online account that you did not make.

To protect yourself, you should never share your personal information unless you are certain the requesting party is legitimate. Additional safeguards to avoid identity theft include obtaining an Identity Protection Pin, creating an IRS tax account with multifactor authentication, and regularly monitoring your financial and tax accounts for suspicious activity. 

More Time to Plan 

Getting a head start on filing your taxes gives you more time to estimate capital gains distributions, harvest losses, make additional charitable contributions, contribute to a 529 savings plan, and estimate what you will owe on your return. 

Filing early provides more time to set aside funds for any income tax liability, since payment is not due until the April 15th filing deadline. This will help you avoid having to take out any short-term loans to cover your tax bill. 

Avoid Tax Extensions 

Filing your return early can help eliminate the need to file an extension on your return. Extensions of time are typically needed because of a lack of organization, missing essential paperwork required to file, or more time is needed to gather additional deductions. If you wait too long to file your taxes and the deadline is approaching, you are increasing your chances of filing extensions. 

While an extension may seem beneficial because it provides more time to file, it does not extend the time to pay any taxes owed. Payment is still due by the April 15th filing deadline. If you fail to pay on time, the IRS will charge a failure-to-pay penalty, including interest and fees, for every month—or part of a month—the balance remains unpaid. 

The earlier you file your return, the more time you’re allowing yourself to save and plan, alleviating some of the stress during the busy tax season. It also makes it easier for you to contact tax professionals and file your return without having to file an extension unnecessarily. 

Although filing early can relieve stress, you may be giving up certain advantages that come with waiting to file. While being proactive reduces the time constraint, waiting to file can offer the taxpayer some unique benefits. 

Here are a few key points about filing later to keep in mind:

Greater Chance of Filing Completely and Accurately

Whether you are an employer or an employee, everyone needs to receive tax forms from a third party. Employers could make errors in the W-2 forms that they send to employees, which can lead to mistakes on the employee’s tax return. Additionally, independent contractors and self-employed individuals require 1099 forms from each of their clients.

Coordinating the timely receipt of all these forms is nearly impossible, so filing early could result in missing information. If forms are missing or incorrect, the taxpayer would need to amend their tax return—an additional task that adds to the stress of tax season. Waiting to file could reduce your overall workload by giving employers and clients more time to correct errors and provide all required forms.

Decreased Risk of Being Audited

The IRS is more likely to scrutinize returns that are amended after they’ve been officially filed, so submitting your return too early may increase the chance of an audit. If a taxpayer files before all forms are complete or accurate, any later amendments could draw additional attention from the IRS.

More Time to make IRA and HSA Contributions

Delaying your filing gives you additional time to contribute to your individual retirement accounts (traditional, Roth, or SEP) and health savings account. By doing so, you can lower your taxable income and potentially reduce your overall tax liability.

This information has been prepared for informational purposes only, and is not intended to provide, and should not be relied upon for tax, legal, or accounting advice. If you have any questions about filing your return, please do not hesitate to contact us at Lear & Pannepacker.