6 Reasons Why You Shouldn’t Procrastinate on Your Taxes
Federal taxes aren’t due until May 17 in 2021, so you might be tempted to wait until the last minute to file. But putting off filing your taxes may not be the best decision. Here are all the reasons why you shouldn’t procrastinate on this yearly chore.
Something Might Come Up Closer to Tax Day
“If you wait until the last minute, you’re risking that something will come up that will put you in a bind to make the deadline, like an unexpected illness or a project at work that demands your time,” said Stephen Henley, CPA, senior managing director and national tax practice leader at CBIZ MHM. “This just amplifies your stress level.”
If You End Up Missing the Deadline, It Will Cost You
“If you procrastinate and actually file your return late, you’ll incur late filing and late payment penalties that could otherwise be avoided,” Henley said.
The “failure to file” penalty is 5% of unpaid tax required to be reported minus the “failure to pay” penalty amount for any month where both penalties apply. The “failure to pay” penalty is 0.5% of tax not paid by April 15; 0.25% during the approved installment agreement (if the return was filed on time); and 1% if tax is not paid within 10 days of a notice of intent to levy.
Your Accountant Will Be Less Busy
“If you start early, you get accountants before they become tired,” said Tatiana Tsoir, CPA and founder of Linza Advisors. “The truth is that we are all people and can make mistakes. If you come to us early, you may get the accountant to pay a little more attention to your business and what can be done better next year.”
You’ll Have More Time To Double-Check Your Return
“A really good reason to not procrastinate that a lot of people don’t think about is that by drafting your return early, you will have ample time to review it and make sure you’re not forgetting any deductions that you’re entitled to,” Henley said. “Maybe you forgot about that charitable contribution you made. You’d be surprised at the items you can easily miss if you’re rushing to meet the deadline and don’t have time to thoughtfully consider all the deductions you might be entitled to.”
In addition to missing out on deductions, you’re more likely to make errors if you’re in a rush.
“If the mistakes result in additional tax due, you may find yourself subject to interest and penalties as well for any late payments of tax that may result,” said Brandon Berquist, CPA, tax specialist at Personal Capital. “Given the many changes in 2020 to both tax rules and potentially your own personal situation, you may need some more time this year to consider rule changes and events that may have occurred in 2020 that may affect your tax situation.”
Procrastinating Means You’ll Lose Out on Interest If You Are Owed a Refund
“If you have a refund, by delaying the filing, you’re just letting the government keep your money interest-free,” Henley said. “Good financial management would dictate that you manage your affairs so that you receive the refund that you are due as early as possible.”
The earlier you invest your refund or put it into a high-interest-earnings savings vehicle, the more interest you will earn on it over time.
You’ll Have More Time To Come Up With the Money If You Owe the IRS
Finances are tight for many people this year due to the pandemic, so it may take a little extra effort to save up any taxes you might end up owing the IRS. It’s best to know how much you owe so you can start saving now.
Be Prepared: 16 Tax-Planning Issues for 2021
“If you owe, wouldn’t you want to have a little more time to come up with the money?” Tsoir said.
More From GOBankingRates
- Money’s Most Influential: Where Do Americans Get Their Financial Advice?
- Don’t Miss Out on Nominating Your Favorite Small Business To Be Featured on GOBankingRates — Ends May 31
- ‘Rich Dad Poor Dad’ Author Robert Kiyosaki: You Should Never Say ‘I Can’t Afford That’
- Everything You Need To Know About Taxes This Year
Last updated: April 15, 2021