The lure of filing early
The IRS will accept tax returns as early as January, and if you go ahead and send yours in, you'll reduce the risk of potentially missing the deadline and racking up additional interest and penalties. Although you're probably not going to get any return you're entitled to faster, having that money in your pocket a few weeks or months ahead could make a big difference in your budgeting and cash flow, possibly preventing the need to take out loans or pay interest on a credit card. And if you mail your return, filing early lets you escape long post office lines, too. Lastly, some people enjoy the psychological boost they get from knowing the job is over and done.
Why an early return might not help you
Despite the benefits of getting your taxes completed soon in the year, waiting has its rewards, too. The first big consideration is that certain types of financial institutions have extended deadlines for sending out tax forms to you, and complexities in gathering information can cause delays in processing. Both Forms 1099 and K-1 can be late, and even if yours come on time, organizations aren't perfect. They make mistakes. Waiting to file your return accommodates entities that either miss the deadline for getting documents to you or that need to amend your paperwork, cutting the odds you need to take extra time to make corrections to your own filing. Amending your return may increase your audit risk.
Technically, if you do get a 1099 or K-1 after you file, you're not obligated to send in an amended return. The IRS simply will use their computers and your Social Security Number to compare those forms (as reported by the issuing agencies) to your Form 1040. But if you didn't pay enough in taxes to accommodate the income the IRS found associated with you through the forms, you'll end up with a liability. The IRS will send you a bill for your balance, and you'll owe additional interest and, possibly, penalties, too. Additionally, if you happened to get a return and spent it prior to finding out you actually owe, you'll have to find a way to repay the money the IRS sent you. Similar to amending your return, failing to report a 1099 bumps up your risk of an audit.
Then there's the tax forms themselves to consider. If you use software to do your taxes, it usually won't finalize your return until current forms are ready for the year, anyway. Updates occasionally are made to tax forms prior to tax deadlines during tax season, as well. Waiting to file ensures you have the right form with all the updates based on new legislation.
And here's a final benefit to waiting: If you send in your return later, money used on your taxes can stay in your own accounts longer. That means it's working for you, drawing interest or yielding other perks.
What you can do next
Filing taxes early can have plenty of upside, but holding off might be the safer move. Just don't wait till the last minute—plan for taxes to be a spring thing, not a winter job. And because everyone's situation is different, you may want to talk timing with a tax pro.