6 reasons you might want to file taxes early this year

Wouldn’t it be fun if more of us enjoyed filing taxes, if gathering documents and reading new tax law left us tingling? We’d call friends to share new deductions, and at parties, we’d brag about withholding the perfect amount last year. Sadly, this fantasy could not be further from the truth. Per IRS data, about 30 million of us wait until the last two weeks before taxes are due to file our returns.

According to the IRS, it's a good idea to get your taxes in sooner rather than later this year. Here are six reasons why.

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1. Faster refund

The IRS says it expects processing delays this year. In a "normal" year, the IRS can typically issue refunds within 21 days, but the agency says it could take longer this year.

Here’s why:

• Unprocessed returns: The IRS still has 6 million unprocessed 2020 returns, most with taxpayer errors.
• Amended returns: As of Jan. 1, 2022, the agency was also dealing with more than 2 million amended returns.
• Unemployment corrections: The IRS continues to process corrections for taxpayers who overpaid 2020 unemployment insurance taxes.
• Pandemic issues: COVID-19 has lingered, and the agency remains short-staffed in some areas of the country.
• Many one-time changes: Due to 2021 one-offs, like the third stimulus payment and Child Tax Credit payments, it’s taking more time to verify returns.

Given all these factors snaring up the system, filing early -- and filing electronically -- could be your best chance at a faster refund.

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2. Less stress

A TaxSlayer survey from 2018 revealed that around 52% of us find the entire tax-filing process stressful. And let’s face it, anything we put off until the last minute -- whether it’s getting on the road to work or buying a birthday present -- is more stressful when we’re under a time constraint. The earlier you file, the more relaxed you can feel as the tax filing deadline approaches.

3. Protection from identity thieves

No one suggests that you file taxes before gathering all the documents you need to do the job properly, but the risk of identity theft is one more reason to get it done as soon as possible.

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Here’s how tax identity theft can play out:

1. You file your taxes.
2. The IRS rejects your paperwork and informs you that your Social Security number has already been used to file.
3. The agency tells you a refund has been deposited into "your" bank account (it's really the fraudster's account).

Fortunately, you can still file your taxes, but not until you’ve gotten the situation straightened out. There’s no way to know how long that will take, especially with the current IRS backlog.

So, the earlier you get your taxes filed, the less time the bad guys have to file a fraudulent return using your personal information.

4. Less competition for tax pros

If you plan to have your tax returns done by a professional, the earlier, the better. Waiting until later in the tax season means competing with the millions of other taxpayers who have also waited.

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5. Extra time to plan for taxes owed

Let’s say you do your taxes in February. You learn you underpaid in 2021 and now owe $2,000. Most taxpayers have until April 18 to file a return or extension this year. That gives you two months to come up with the amount due without taking the funds out of your emergency fund.

6. You have your financial data organized

One often overlooked benefit of filing early is how it forces you to get your financial documents in order. If you decide to buy a home or car later this year, you’ll have almost everything you need to apply for a loan in one place.

Another advantage of getting your taxes done early is that you get to sit back and relax while the world around you is scrambling to meet the deadline.