5 Reasons You Should Never Rush Your Taxes, According To Tax Experts

Filing your taxes is an annual struggle for some. The task is largely straightforward for many, but plenty of Americans work more than one job, utilize investment tools to help fund their lifestyle, or engage in gig work. Plenty of quirks in the way a typical American earns their living have become increasingly common. As a result, filing taxes every spring is no longer a simple duty that requires a few documents and yields a tidy refund without much effort. There are plenty of reasons to slow play the obligations you face as an American taxpayer each year, including the potential to make a mistake simply because you didn't have all the necessary documents yet. Tax experts agree that maintaining a patient disposition as you prepare your taxes for the year is the best way to go about this important work. Hastily working through your filing can introduce errors, for instance.

Other reasons to avoid rushing to get your taxes in include the potential to be approached by a scammer looking to pressure you into giving up money of sensitive information, failing to fully utilize your IRA contribution limits, and becoming squeezed for time when calculating deductions or write-offs. Starting early is always a good idea, but a simple extension can do a lot of heavy lifting. These are some of the best reasons to patiently and diligently work through your tax preparation tasks without rushing, according to the wisdom of tax professionals.

Writing for a U.S. Army publication in 2018, Tammy Fink, a financial counselor, notes that taxpayers should remain on the lookout for roughly seven forms (give or take, depending on your specific circumstances). These should all arrive by mid-February, even though the IRS allows you to submit your taxes earlier. It might be tempting to get the job done as soon as you can, but filing early can lead to mistakes of omission simply because you don't have all the requisite paperwork to accurately complete the task.

She also suggests that tax filers should review their withholding status, especially if they plan to utilize tax return funds to pay off debts or fund a big family purchase that's been waiting in the wings for a while. "You don't need to wait until tax time to do this. I suggest you take the time and review your W-4 withholding," Fink states. This will reduce your monthly tax bill, putting more money in your pocket with each paycheck, although it comes at the cost of a larger tax refund. However, it's important to keep in mind that the refund you receive is already your money, the government has been holding onto it as an interest-free loan. Changing your withholding allows you to increase your refund if you want to bank those extra dollars for a big yearly payout, or minimize the figure to get more each month with your salary deposit.

Henry Yoshida, a certified financial planner suggested to MarketWatch the idea of weighing up a prior-year IRA contribution before finalizing your tax picture. Workers can still contribute to their IRA with a funds designated to the previous year for the first few months of the new calendar, an avenue that many might not have known about. "For folks who are due to receive a refund or owe taxes, you could do a quick evaluation to see if a [previous] year contribution to an IRA account may change the amount owed for taxes. Individuals are allowed to make a contribution to an IRA for the prior year up until the April 15 deadline. The potential benefits of this are due to the possibility of being able to deduct your IRA contributions for taxable income purposes," says Yoshida.

Offsetting your tax liability with the help of additional IRA contributions can be a major benefit. The traditional IRA, for instance, allows you to directly minimize your AGI figure, scaling back any potential tax obligations you might have for a particular year. If you are set to receive a refund or balance out on your liability, contributing to a Roth account might be the better approach. Utilizing some of the remaining cap from the previous year keeps your ability to contribute the full amount in the new year intact. These last few months leading up to tax day give you some extra leeway to make a positive impact on your present day tax situation or future financial needs.

According to Nicole Davis, the founder of a tax accounting practice in Georgia (who spoke with Fox Business in 2023), "Extensions are always a good thing. If you're going to owe, file an extension just to make sure you have all your income documented and reported." It's better to put off the actual filing task to be sure you have all your obligations accounted for rather than having to file an amended return later and complicating the whole matter significantly more. In fact, rushing to file by the deadline because you know you'll owe something is a great way to increase your odds of being audited by the IRS.

However, the IRS notes that a filing extension isn't also a payment extension. That means you should do everything in your power to understand at least the basics of your annual tax situation by the filing deadline, even if you aren't planning to complete the task by the mid-April cutoff. The best approach here is to at least create a basic outline of what you expect your obligation to look like. This way, you can pay that estimated tax burden on time and avoid the potential for penalties or added interest to start racking up on your account. If you're under by a bit, you might be able to call in and negotiate a compromise that limits your penalty exposure. The IRS has been willing to waive late fees in the past, and the goodwill of paying an estimated tax bill on time will go a ways to helping achieve that outcome.

In 2023, WAVE spoke to Carol Flynn, a tax accountant, who warned against early filing done too early. But she also noted the prevalence of scammers targeting taxpayers. She told the outlet that the IRS will never call or text you, and instead will only send correspondence to you through the mail. As a result, she warned taxpayers to never engage with anyone who contacts you through any other means while claiming to be from the IRS. "Don't do it. It's a scam," she says bluntly.

Any kind of contact of this nature should be treated with suspicion. Most importantly, scammers overwhelmingly seek to pressure you into rushing through a series of actions designed to limit your reasoning and critical thinking to part you with your money. The IRS won't threaten to arrest you or send agents to your home for any other purpose. You never have to supply the government with cryptocurrency or gift card activation codes, and sending a bank transfer of any sort because you've been instructed to provide details over the phone is equally out of the question. Don't act hastily just because you're being threatened. The real IRS does want you to pay your bill, and they will seek to provide payment options for those who owe back taxes. But the government won't contact you about this before tax day arrives, and any correspondence you do receive will be thoughtful, calm, and understanding of your needs and circumstances. There's no need to act rashly here.

Shelly Dunn Beber at Linda's Tax Service in Washington notes the importance of holding onto receipts. Those who work as contractors rather than salaried employees won't have their income taxed throughout the year, and therefore need to come up with their own strategy to handle tax season. It's a good idea to set money aside to support the inevitable tax bill, and Jennifer Lownsbury at CDS CPAs and Advisors notes that if you fall into this category you should "set aside 25% – 30% of your income for taxes." However, another crucial detail often gets overlooked. This income can be offset by your expenses as a gig worker, and keeping receipts allows you to maximize that benefit. "The IRS offers many valuable tax deductions and credits designed to reduce your tax burden and keep more money in your pocket," she writes. These include things like vehicle expenses, business-related mileage, and home office deductions for those who work at home.

The Cohan rule is another thing to keep in mind. It's based on the actor George Cohan, who reconstructed his tax write-offs with the help of a paper trail of playbills. These proved where he was at any given day throughout the year, allowing him to make a reasonable estimation of his expenses, travel, and more. If you have saved your receipts, you'll want to allow yourself a little extra time to go through them to ensure accuracy. If you haven't, even more time is likely needed to collect the evidence required.