There’s more than one valid reason for getting your tax return submitted well before this year’s April 18 deadline.
Prevent Identity Theft: In one tax identity theft scheme, a thief uses a taxpayer’s personal information early in the filing season to file a fraudulent tax return and claim a bogus refund. The taxpayer discovers the fraud when they file a return, which is rejected by the IRS because a return with the same Social Security number has already been processed.
While the taxpayer should ultimately be able to prove their return is the legitimate one, tax identity theft is a hassle to straighten out and significantly delays a refund. Filing early may be your best defense.
Get a Potentially Earlier Refund: Another reason to file early is to put yourself closer to the front of the line. The IRS website indicates it expects to issue most 2021 tax year refunds within 21 days despite the massive pandemic-related delays, lack of manpower and aging technology. The IRS recently announced a backlog of 8.3 million unprocessed 2020 returns, more than 2 million unprocessed employer payroll returns and about 5 million unanswered taxpayer correspondence dating back to April.
The time to receive your refund is typically shorter if you file electronically and choose to receive the refund by direct deposit into a bank account. Direct deposits also avoid the possibility that a refund check could be lost, stolen, returned to the IRS as undeliverable or caught in mail delays.
Look for Your Documents: To file your tax return, you need your Form W-2s, Form 1099s (if you’ve worked as an independent contractor or “gig worker”) and Form 1099-Bs for brokerage transactions. January 31 is the deadline for employers to issue 2021 W-2s to employees and for businesses to issue 1099s to recipients of any 2021 interest, dividend, stock sales or reportable miscellaneous income payments.
If you haven’t received your W-2 or 1099, first contact the entity that should have issued it. If that doesn’t work, you can contact the IRS for assistance.
Don’t Wait: Some people on social media suggest not filing your 2021 income tax return until you receive your 2020 refund. That is NOT a good idea because failing to file your 2021 return will only lead to bigger headaches later, possibly even penalties. Plus, if you’re owed a 2021 refund, you may receive that money before your 2020 refund. But the only way to get it is to file!
