What are the benefits of doing your taxes early?
January 29 2019
Taking care of your taxes early is a great way to skip the stress, hassle and embarrassment of waiting until -- or even past -- this year’s April deadline. That said, there are some pros and cons to consider.
First, tell anyone who might be helping you that you want to get a head start on your taxes. They can assist you in gathering the proper forms, documents and other paperwork you’ll need. Filing the wrong forms early (or worse, forgetting some entirely) can lead to penalty fees.
Establish Your Priorities
Individual Retirement Accounts (IRAs) permit 2018 contributions in the first 3 1/2 months of 2019, so keep this in mind if maximizing your potential to save is a top priority. If you’re in the distribution phase of your financial plan, remember that you may have to take required minimum distributions (RMDs) from certain retirement accounts once you turn 70 1/2.
Whether you’re still saving or drawing down on your nest egg, make sure to optimize your contributions or distributions according to the appropriate IRS deadlines.
Consider Your Cash Flow
Filing early means that if you’re owed a refund, you’ll get it that much sooner. Consider taking advantage of compounding power by putting this sum to work in savings or investments as soon as you receive it.
Even if you end up with a tax liability, you may also benefit from early action. Coming up with the amount you owe is a bit easier when it’s spread out over a couple of months instead of just a few days.
Either way, getting started on your taxes sooner will give you more time to create an action plan. Have questions? Reach out anytime.
"Rule No. 1 : Never lose money. Rule No. 2 : Never forget Rule No. 1." Warren Buffett