The Benefits of Filing Your Taxes Early
Filing your tax return early doesn’t just get you a faster refund. It can actually help protect you from identity theft.
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Full Transcript below:
Speaker 1 (00:07):
Welcome back to 30 Minute Money. It's the podcast that delivers action oriented smart money ideas and bite-sized pieces. I'm Scott Fitzgerald here with Steve Wershing of Focused Wealth Advisors.
Speaker 2 (00:17):
Nice to see you Scott.
Speaker 1 (00:17):
Nice to see you too. Hanging out in our luxurious podcast studio at Roc Vox recording and production in Bushnell Basin just outside of Rochester. Would you like the coordinates we're talking about? It's that time of year where everybody's freaking out about getting their taxes done and getting their filing done, and we're going to talk about the benefits of filing taxes early.
Speaker 2 (00:38):
Yeah, so they're not freaking out yet, but I'm going to, they should just think freak out a little earlier. So, and there are all kinds of reasons. There are all kinds of benefits that come to you for filing early, but Les, do you think that you already know those and you're going to tune out early? There's a really big one at the end, so hang on with us because the one you really want to hear about is the end. What do they call that in your business? Cut. Is that a teaser tease?
Speaker 1 (01:03):
That's a tease. That's a
Speaker 2 (01:03):
Teaser.
Speaker 1 (01:04):
Okay. Very well
Speaker 2 (01:05):
Done, sir. So there, it's, thank you very much. I came up with that myself.
(01:09):
So there are all kinds of reasons to not procrastinate and to get your taxes in as soon as you can. One of the big ones is, and this is, people may not realize this, but you actually, if you get a refund, you'll get it faster. Yeah. Not just earlier. I mean, everybody, I'm sure listening would be saying, well, duh. But no, not just earlier but faster. Because if you're in on the early part, the IRS has not yet gotten inundated with tax returns. So they can process things a little more quickly. So if you want, if you're going to get money back, get it sooner. We
Speaker 1 (01:40):
Have it almost every year. We have our returns before most people have even before we reach the deadline. Yeah, it's great.
Speaker 2 (01:51):
So if you're going to get a refund, the earlier you can get it in the better. Although I will also say that if you're getting a really big refund, you might want to talk with your financial professional, because ideally you should balance, I mean, some people get deliberately over withhold because they want to get a big refund at the end of the year. They use it for their annual, that's like their annual vacation club. It's like the Christmas club at the banks used to be. But I mean, if that's not your intention, then once you've filed, you might want to talk with your financial professional about adjusting your withholding so that you're a little closer to balancing. But if you're going to get a refund, the earlier you file it, the faster you'll get it. Alternatively, conversely, if you have to make a payment, getting it in will give you a little bit of extra time to pay. You still have to pay by around April 15, but you don't have to pay when you file your tax return. Sometimes people don't realize that that filing your tax return and making the payment are not necessarily, they don't have to happen at the same time. So
Speaker 1 (02:55):
If I file on the deadline, if I get in on the deadline, then how long does it
Speaker 2 (03:00):
For? Well then you still have to make that payment the same day. Oh, okay.
Speaker 1 (03:03):
So it has to be paid on the Yeah, by the deadline. I see. So if you get it done earlier, you've got more time
Speaker 2 (03:08):
To pay. Exactly. You've got more time to plan on it. Now, I should also throw in there that the law is that you have to file by April 15, but if you know you're going to end up making a payment and you can't afford that payment, sometimes people will just not file. And that's a really bad idea because the law is not that you have to pay on time. The law is that you have to file on time. Now, if you don't pay on time, they're going to charge you penalties and they'll charge you interest, but you won't go to jail. And if you don't file at all for long enough, you could go to jail. So I'll just throw that out there that if you had setback financially and you're going to end up making a big payment and no, you can't afford it file anyway, you still want to get it filed, you'll end up paying some extra, but you will not be in violation of the law. That's important anyway.
(04:10):
Another reason for getting on this earlier is that you can get in to see your preparer more easily. For example, if you need to switch tax preparers or accountants and you wait until late in the season, there's a pretty good chance you'll call around and they'll say, no, sorry, I can't take you on as a client. There's just not time. Accountants and tax preparers get crushed the closer they get to those filing dates. And so if you want to get a time that you can choose, or if you need to choose a new one, the earlier you get in, the more likely it is, you'll find somebody who still has capacity and can see you. So waiting on that can actually prevent you from getting advice that you need. And sort of related to that is there's a pretty good chance that you'll get a more accurate return because a good tax preparer will take your information, they'll prepare, they'll prepare the return, and then they'll give it a once over just to check things out.
(05:11):
In some firms, and a fair number of firms actually, once one person has filled out the return, they'll give it to another preparer, another tax professional to review it just to make sure that they pick up any mistakes and contrast that with what happens at the very end of the season when everybody's just trying to get these things out the door. There's actually one story I heard that made my hair stand up, and it was that one preparer had so many returns to do, especially at the end of the season. They would have people bring in all their documentation. The preparer would type it into the system while the client was sitting there and they would spit out the printout and have them sign it right there. Oh gosh. I know, right? It's like you're asking for mistakes to be because nobody else is looking at it. You're not even giving it a second look. It's just give your information. I'll type it out. Here's the printer sign here, we'll send it in. I was terrified when I heard that.
Speaker 1 (06:08):
Just sort of speaking on getting your taxes done, personal people and finding an accountant and tax prepared and stuff. We used one person for a fair amount of years. It's always a recommendation. It's always like, oh, you got to use my tax guy. You got to use my account. And I convinced my wife that we needed to find someone else because she didn't do anything via email. Nothing was done by, it was all fax. And I'm like, there's a technology thing going on here. And it got me thinking. I'm like,
Speaker 2 (06:46):
How? The joke I tell about that is somebody says, I want to send you a fax. Where can I send it to him? And I say, I'm sorry, I can't receive a fax where I am. And they say, where are you? And I say, in the 21st century,
Speaker 1 (06:59):
Right? Right. Let me see what my email address or what my number was back in 94. But it's true, and it gets me thinking. So you're talking about how someone's typing it in right there, the amount of mistakes. Now technology in a lot of ways has helped to catch those mistakes, but can you imagine if someone isn't using the most latest technology in what's available, how much else will they be missing? If they can't, I can't email you all my stuff. I scanned everything. And she's like, can you fax it? I'm like, really? That's just, I don't know. That really bothered
Speaker 2 (07:37):
Me. Most of the tax packages, they have to be updated every year because they make changes to the tax code every year. So chances are if you're using somebody, they're typing it into a program that is updated every year. But it's a good point that you make because it's not that uncommon for a tax preparer to put everything in the system and say, there really should be this other document. Do you have it around? Can you find it? Can you send it to me? And if you're sitting right there with your shoebox full of papers in front of you, that's just a missed opportunity. And chances are there's a deduction that you missed or that you couldn't take advantage of. Or
Speaker 1 (08:13):
Now is there a way if I file my taxes and everything's done and then next year I go, I think we forgot something and I can I bring my taxes to someone and they can go through it and say, you know what? You missed this deduction and you still get more money back.
Speaker 2 (08:29):
Yes you can. And if you find that there's a mistake that's more than just a couple of dollars, it's worth doing that. It's called an amended return and you can file amended returns for years into the future. You want to avoid that if you can, because filing an amended return is more time, it's more expense. If you would've gotten a bigger refund, it's missed opportunity. You could have put that money to work a year or so earlier. But yeah, you can absolutely fix it. So it's not the end of the road. But the point is, we want to get things filed as accurately as possible the first time around. And so walking in at the last minute with a whole whole bunch of paperwork is not a great way to make sure you're getting the most out of it.
(09:19):
But there's one reason that you want to file as early as possible that overcomes all the others. The single most important reason that you want to file as early as possible is identity theft. And this is one of the fastest growing scams that's out there. The Department of Justice refers to it as the stolen identity refund is stolen identity refund fraud. And here's how it works. Someone steals your social security number and they make up a bunch of numbers and they fill out a tax return that shows that you should get a really big refund. And then they file that return with bank information on the return that says, send my return to this account, and it's their bank account, and they get a whole bunch of money back from the government on a totally fictitious tax return. Now, that's a problem because they're filing it under your social, and the way that most people find out about it is they go to file their taxes, and the IRS says, you can't file your taxes you've already filed.
(10:32):
Oh my gosh. And you say, no, I didn't. I just finished this with my accountant. And they're like, whoa. What do you call this right here? This looks like a tax return. And that can be really hard to work out. It gets bureaucratic, it gets difficult, and you've got all kinds of things. And frankly, you can avoid it a lot more of the time just by filing early because the earlier you file, the earlier you get the return in first. And so a potential scam artist, they run into the roadblock that you would have run into, and then hopefully they get caught. They do get caught a fair amount of the time, but there's just a volume problem, right? So in 2022, there were 7.8 million reports of suspicious activity. Oh my gosh. It's a big problem. You ask any accountant and they will know all about this because they're seeing it more and more often. It's a big problem because it's really not hard to log into the IRS website and just file a return. And so the key is they need to get your social because that's what they file it under. But the earlier you file, the more of that you can avoid.
Speaker 3 (11:43):
Your retirement is at risk, not from the stock market, not from inflation. Taxes are putting your retirement at risk. I'm certified financial planner, Steve Waring and I specialize in helping people create low tax retirements. Unmanaged taxes can take 30, 40, even 50% of your retirement income. Learn how to defend yourself against excess taxation. Our complimentary webinar will cover all the principles you need to know to protect your money for you and your family, and keep it away from the government. This free webinar will cover how taxes are different in retirement, the taxes you pay in retirement that you don't have to pay during your working life, how to move savings into a tax-free environment, the Widows Tax, the Secure Act, the Secure Act 2.0 and what they mean to you. The webinar is free, but you have to register to save your spot. So go to focused wealth advisors.com/webinars and find out more and sign up right there. Even if you're not planning to retire for the next five or 10 years, this information will be critical for you. The longer you have to put the strategies into effect, the more you can accomplish. That's focused wealth advisors.com/webinars to find out more and just sign up today.
Speaker 1 (13:08):
Well, you know what they say file early and file often, right? Is that No, I'm just kidding. Yeah. What's your 30 minute action item?
Speaker 2 (13:16):
30 minute action item is put tax preparation on your calendar to gather all your documents together so you can give it to your tax professional.
Speaker 1 (13:24):
And whatever you do, don't use fax machines. Thank you for joining us on 30 Minute Money, three zero minute dot money available on all the podcast platforms. Please share this show with your friends. There's a lot of useful information. We will catch you next time. 30 minute money. Thank you.