By now, you should have received your W2 from your employer, any 1099s from other sources and 1095s pertaining to your insurance coverage. These are the last pieces you need to be able to complete your tax return or, better yet, to have a qualified tax preparer take care of your 1040 for you. Although the filing deadline won't come for two more months, there's no reason to wait until the last minute to file. In fact, here are five reasons to prepare your 2014 tax return as soon as possible:
#1 If you're getting money back, you'll get it sooner
If you're owed a refund, the sooner you file your taxes, the sooner your money will be back in your pocket and out of the government's. Setting up direct deposit to your bank account or to a prepaid debit card will get your money back even faster. Plus, you won't have to worry about someone stealing your refund check (a common fraud tactic this time of year). You may also want to change your paycheck withholdings so that, rather than having a refund, you have more money all year long.
#2 If you owe money, you'll have more time to pull it together
Because of changes to the tax code related to the Affordable Care Act, you may end up owing Uncle Sam money if your calculated subsidy was too high. You can also owe taxes if you under-withheld during the year, had a change in family circumstances that left you with fewer deductions or due to changes to the tax code. Knowing now that you need to scrape up some extra money is better than finding out on April 14th.
#3 If your return is complicated, you'll have more time to get help
The US tax code stands taller than the average adult page and is made of tens of thousands of pages. That's a lot to deal with and the code changes every year, so that makes it worse. If you're a DIY tax filer who files with software, an online app or just the paper instruction book, these changes can make the process much harder. Your return will be more complicated already because of the Affordable Care Act provisions but taking a crack at it now can let you know if you need to get help.
#4 If you need to talk to the IRS, you'll be left waiting
No one really wants to talk to the IRS, but sometimes you need to, particularly if you're trying to prepare your own return without an assist from a professional tax preparer. Due to budget cutbacks at the agency, there will be far fewer personnel to handle customer service calls and answer your tax questions. IRS Commissioner John Koskinen has estimated that the agency will only be able to answer about 53% of calls they get from taxpayers this year.
#5 If you're filing for a health insurance exemption, it takes time to process
Many of the changes to this year's filing relate to the Affordable Care Act. By law, if you didn't purchase insurance through the marketplace or have coverage through your employer, you'll be slapped with a fine unless you can claim an exemption. Some examples of qualifying exemptions include:
- The lowest-cost coverage cost 8% or more of your income
- You're a member of a federally recognized Native American tribe
- You're a member of a religious group with objections to insurance
- You live abroad
- You have a financial hardship such as unpaid medical expenses, bankruptcy, foreclosure, had a utility shut-off letter (click here for a complete list)