Nobody likes doing taxes (except for tax professionals), and that’s probably why lots of people procrastinate on doing them. Some people even BS their way through their tax filing and pay little attention to the small details—they don’t care about maximizing their tax deductions, or about whether or not they’re accurately reporting all their income.
But if there’s one thing that the Tax Man has taught us over the years, it’s that you’re way better off when you file your taxes as soon as possible, and with as much attention to detail as possible. Here are 5 reasons why you should give a little more time and attention to your tax filing.
1. You Can Avoid Late Fees
First, let’s talk about promptness: why is it important that you don’t procrastinate on your tax return? The short answer: you don’t want to file your taxes late and incur IRS penalties.
The IRS will fine you if you get your taxes filed late, which can add a significant amount of money to the taxes you may already owe. Furthermore, you may also have to pay interest on the outstanding amount. It’s worse when you’re filing taxes for your business—your company’s main goal is to make a big profit, so hefty penalties may dramatically affect your bottom line.
If you don’t think you’ll be able to get your taxes done in time, be sure to file an extension with the IRS so you can get the time you need and avoid any needless fees.
2. You Can Avoid an Audit… or Worse
Lack of diligence and promptness when filing your taxes can lead to very severe consequences.
First, let’s talk about an IRS audit. An audit is when the IRS very thoroughly reviews all of your financial documents and records. They’ll get access to your bank account statements and will be able to see exactly where you earn your money and how you spend it—it’s an intrusive process, to say the least.
The IRS conducts audits if they suspect that something about your finances is fraudulent, or if there are glaring errors on your tax return. But they also audit at random. The best way to avoid an audit is to accurately report your financial information—list all sources of income that you have (i.e. freelance work or side hustles) and don’t try to hide anything—the Tax Man can find out.
Now let’s talk about what can happen when you take too long to file your taxes. If you have any outstanding taxes that you just won’t pay forward to the IRS, the IRS may decide to take it by force. They can impose a tax lien on you, which essentially gives them the ability to seize your property and assets in order to pay off your debt.
They may also order a bank levy, which freezes your bank account and enables them to take money from it. You would need to secure a bank levy release, which is a difficult thing to negotiate. While it can be a major headache to pay your taxes, remember that a tax lien or bank levy are far worse. If you can’t pay your tax debt, contact the IRS and set up an installment plan or take out a loan.
3. You Can Fix Errors
Sometimes you may accidentally put a wrong piece of information on your tax return. The IRS may notice the error and request that you amend it in order to complete your filing. When you start working on your taxes earlier, you’ll have more time to detect errors that came from poor data or typos. Whether you’re filing for yourself or for your business, filing an accurate return can prevent you from having to spend valuable time fixing errors. Protect your productivity by being meticulous.
4. You Can Reap Tax Savings
You can maximize your tax savings by claiming deductions for any number of things, including:
But if you wait until the last minute to file your return, you might run out of time to pore through your receipts and find all your deductible transactions. Get started on your taxes early so you have time to boost your tax savings.
5. You Can Have Peace of Mind
The best part about doing your taxes early and thoroughly is that you can enjoy peace of mind; it’s nice to know that you won’t face IRS penalties, or that you’re claiming lots of lucrative tax deductions.
Hopefully, this was motivational! Next time tax season rolls around, remember that diligence and promptness is the key to a stress-free filing.
Also published on Medium.