Filing a tax return involves a good deal of preparation, and preparation takes time. You want to file an early tax return, especially during the pandemic.
You can expect the 2021 tax season for filing 2020 tax returns to be different from past tax seasons, mainly because of all the restrictions regarding physical contact and in-person meetings.
What Is Different This Tax Season?
Meeting with tax professionals or expert accountants requires additional steps and safety precautions due to the restrictions and other COVID-19 issues.
For instance, you need to follow COVID-19 safety guidelines and schedule an appointment with professionals or even the Internal Revenue Service (IRS) before you can head to their offices.
The Best Time to File Your Tax Return for 2020
When is the best time to file your tax return for 2020? The short answer is: as soon as possible. The earlier you can file your tax returns, the better it is for you. Even before the coronavirus pandemic, filing your tax returns early has a lot of benefits.
You also have the option to file your tax return electronically. It is fast, it avoids mailing delays, and it eliminates the need for you to physically go out and mail your files out. This way, the IRS can receive your tax return faster and you can get your refunds earlier.
Understanding the New Standard Deduction
It takes time to understand which method is right for filing your tax return. The earlier you start your preparations, the sooner you can decide what works for you.
For example, you need to make an important decision about whether you want to take the new, larger standard deduction.
What is the New Standard Deduction?
The standard deduction is a portion of your income that is not subject to tax. You can use this to reduce your tax bill. You can take the standard deduction if you do not itemize your deductions using Schedule A of Form 1040 to calculate taxable income.
Your standard deduction will depend on your filing status, age, and whether you are claimed as a dependent on someone else’s tax return.
For 2020 taxes filed in 2021 the standard deductions are as follows:
- $12,400 for single taxpayers
- $12,400 for married taxpayers filing separately
- $18,650 for heads of households
- $24,800 for married taxpayers filing jointly
- $24,800 for qualifying widow(er)s
Preparing early gives you time to put these things into consideration.
Reasons to File an Early Tax Return
If a faster refund is not enough for you to put this task on the top of your priorities, here are more reasons that you should consider:
You can protect yourself from identity theft.
Filing an early tax return gives identity thieves less time to file under your name and take your refund. Believe it or not, some people steal identities to take someone else’s money.
Identity theft can cause significant damage to your record, and fixing this can take months.
You can avoid delays due to mailing congestion.
You are not the only person who would be trying to beat the deadline this tax season. If you mail your tax return at the same time as everybody does, then you can expect mailing delays due to congestion.
You can also expect a crowded post office, and you know full well why this is not a good idea in this pandemic. However, you can file your tax electronically to avoid going out altogether.
You will have access to CPAs and tax professionals.
Filing your tax return needs to be accomplished by April 15 (the deadline for this tax season). Preparing early guarantees that you will have access to certified public accountants or other tax professionals.
You can expect these professionals to be extremely busy around the deadline. You might end up working on your tax return on your own if you wait until the last minute.
You can avoid errors on documents.
People tend to make mistakes when rushing, and you are not an exception. Preparing early gives you to check all incoming statements, including W2s, 1099s, interest statements, etc.
Find errors early and fix them before you file your tax return.
You have the opportunity to check opportunities for shifting tax burdens.
You have limited time to consider things when you are in a rush. Filing an early tax return gives you the time and opportunity to estimate capital-gains distributions, harvest losses, or make charitable contributions.
You will have the opportunity to shift deductible items like property taxes, business expenses, or even mortgage payments to the year that makes sense tax-wise.
You will have the time to save for what you owe the IRS.
Not everyone owes the IRS, but filing an early tax return is a good idea for people. It will give you time to save up the money since you will find out how much you owe sooner than later.
Keep in mind that you do not have to pay until the filing deadline. So until then, you can save up the money for what you owe.
How to Avoid Amended Returns
Even the best of us make mistakes, but one can try to avoid them by being careful and thorough. Again, preparing early gives you the time to file an accurate tax return– so you should work on it as soon as possible.
Mistakes or inaccuracies on your return can become an amended return. Depending on the severity of the error, it can invite audits.
Here are some things to keep an eye on to reduce the chance of amendment returns:
Errors in Official Documents
Keep in mind that companies, banks, and financial institutions can make mistakes. You need to review every document and rectify them before you file your tax return.
Although filing early tax returns have many benefits, it may cause you to miss forms that arrive late such as a 1099 or K-1. Make sure that you have all the required documentation before you send your files for your tax return.
Tax Law Updates
You need to be on the lookout for changes or updates regarding tax laws. Paper tax forms or tax software may not be updated with legislation passed before April 15.
In a Nutshell
Time is an important ally when filing your tax returns. The earlier you prepare, the better it is for you. It gives you more time to review your documents and make quick fixes for any issues that you may encounter.
You also get to have access to accountants or tax professionals without fighting for a time slot. Tax returns can be complicated, and you need all the help you can get to avoid mistakes.