How early can I file my taxes?

And how early should I?

Like spring and fall, tax season comes every year, and not everyone enjoys it as much as we do. It’s tempting to try to get it over with as soon as possible. So how early can you file your taxes?

You can often get it done a few months before that April 15^th deadline, but that may not always be the best move. The right timing comes down to your individual situation.

The basics

• The IRS begins accepting tax returns near the end of January (the 23^rd in 2023)
• But you may not receive all the necessary files – like K-1s or 1099s – until a month or two later
• It’s always a good idea to start preparing your taxes early, but that doesn’t mean you need to file right away

When’s the earliest I can file a tax return?

Typically, the IRS accepts tax returns starting in late January, but the exact date varies from year to year. In 2023, for example, January 23^rd was the first day the IRS accepted returns. This is generally true for both individuals and businesses.

However, just because the IRS’s mailbox is open doesn’t mean you’ll actually be able to file your return that early. Depending on what documents you need to file your return, it may be another month or two before you get all your ducks in a row.

In theory, you can expect to receive documents like W-2s, K-1s, or 1099s by January 31^st, but that’s not a guarantee. If those forms take some extra time to show up – and they often do – filing your tax returns will have to wait. And don’t worry, that’s normal.

Some commonly needed files

• Form W-2 reports wages earned as an employee. These are less likely to be an issue, but still worth mentioning.
• Form 1099 is for certain types of non-wage income, like earnings from independent contract work or investments.
• In particular, Form 1099-CON (meaning consolidated) can impact the time frame in which you get your taxes filed. These forms can include earnings from a variety of different types of investment, and because of their complexity, brokerage firms have until February 15th to send them out.
• Form K-1 is similar to a W-2, but reports income from sources such as a partnership or S-corp.

Should I file as soon as possible?

In ideal circumstances, sure, but that can be tricky to pull off. In reality, filing as early as possible isn’t always necessary or even good to do. It’s not like a homework assignment, and you won’t get docked a letter grade for being late. With proper planning – like seeking an extension from the IRS so you have more time to file – filing late is not a problem.

On the flip side, depending on several factors, filing early can be advantageous or cause you some unnecessary trouble.

Reasons to file early

• If you’re expecting a tax refund, the earlier you file the faster that money goes into your pocket. When you have specific plans for that money, such as clearing debt or investing in your business, the sooner the better.
• Occasionally, a form of fraud occurs in which somebody files a tax return under your name and pockets the refund themselves. Filing early can get your real tax return processed before any fraudulent activity can slip through, adding an extra layer of protection against identity theft. You may also want to consider using the IRS’s ID protection PIN system.
• Planning for your future requires the most accurate and up to date financial information you can get your hands on. If you want to buy a house or secure a loan, your finalized tax returns may be necessary to document your income. Filing early ensures that you can get those balls rolling as soon as possible.

Reasons to maybe wait

• K-1s and 1099s are often required to complete your tax return, especially for business owners. These are technically supposed to be sent out by January 31^st, but employers or financial institutions are often running behind. Other necessary documents might also take some time to reach you. If you file without all the necessary information, you may have an inaccurate tax return, in which case you’ll have to file an amendment later. Not ideal.
• Speaking of amending your tax return, it’s not uncommon for 1099s to contain inaccuracies that must be corrected later. If your tax return Is complex, especially if you have a lot of investment income, there’s a good chance you’ll have to amend your tax return if you file too early.
• If you’re filing extremely early, particularly if you’re claiming certain credits or deductions such as the Earned Income Tax Credit (EITC), this may raise a red flag with the IRS and increase your chance of getting audited.
• If you want to maximize any credits or deductions you’re able to take, the last thing you want to do is rush the process. If that’s a priority for you, slow down so you can nail the details.

Finding the right balance

Ultimately, you want to file your tax return as early as possible, but only if you’re absolutely sure it is accurate and complete. That way, you can gain some of the benefits of filing early, while avoiding the potential drawbacks. Here are a few more tips for hitting that balance.

• Prepare early. The sooner you get started, the better. Gather and organize your financial documents and get ahead. That way, you can take your time and double-check things. You don’t have to file right away, but preparing early keeps your options open.
• Communicate. Keep in touch with any institution you may need to receive tax-related forms from. Know when to expect those forms to be issued and plan your tax preparation accordingly.
• Consider your individual situation. Weigh your immediate financial needs against any long-term goals. If you have a specific reason you may want to secure your refund as soon as possible, consider filing right away. But if your priority is avoiding audit risk, or if you think you may need to amend your return later, it’s probably better to file later in tax season.
• Finally, consult a tax professional. Particularly if you have competing goals, complex deductions, or other unique needs, working with a qualified professional is the single best way to ensure that your tax filing goes as smoothly as possible. They can also help you make the right call on things like filing tax extensions.

The bottom line

There are so many factors that go into your tax situation that it can be hard to make a one-size-fits-all recommendation. There are advantages to filing as early as possible, like faster refunds and potential fraud detection. But there are also risks, and it may be better to wait until you can be absolutely sure your return is thorough and accurate.

Need help finding the right balance? Working with a CPA can get you there faster and with more confidence. Call DiMercurio Advisors and ask how our tax team can help you stay on the right track.