We get it, preparing your taxes is not the most exciting task. However, there are advantages to filing early which can create some beneficial planning opportunities for your financial situation. Here are some reasons why you should start your 2022 taxes NOW…
Planning for the future
By filing your taxes on time, you can start planning for future tax years. Recently the IRS provided tax inflation adjustments for tax year 2023 such as updated tax brackets and standard deduction amounts.
Additionally, Congress put into law the SECURE ACT 2.0 at the beginning of the year. This tax law change impacts retirement plan contribution limits, required minimum distributions , and more!
Filing your taxes on time and avoiding an extension creates a better opportunity to implement some of the new tax law changes into your plan for Tax Year 2023.
Fix mistakes and adjustments
Filing before the deadline gives you more time to review & understand your tax return.
Understanding your prior year tax return is one of the best ways to plan for your current tax year.
Giving yourself more time also allows you to make adjustments to your tax withholdings that could help lower your taxable income during the current tax year. It is important to take advantage of any tax deductions and credits you are eligible for in the current tax year.
You may also want to adjust current contributions to your retirement plans for 2023 based upon your overall financial situation.
Avoid surprises
Depending on if you owe any money to the IRS, you may want to give yourself time to raise cash to pay the overall tax bill. Filing last minute could create a situation where you don’t have enough time to free up cash for the payment and risk facing a penalty and interest.
Reduce Stress
Filing taxes can be overwhelming, tedious, and stressful – getting taxes done can help you move onto other financial items on your to-do list.
Completing your taxes can also serve as an accomplishment and ensure you receive a tax refund in a timely manner if eligible.
