Do you dread filing your taxes every year? Chances are, you’re one of the 66% of Americans who file their taxes manually, which is no fun at all. There are plenty of reasons why you should file your taxes early this year, however, including these five great reasons you might not have thought of before.
1) Tax Filing Deadlines Vary From Country to Country
The United States has a March 15 deadline for most people to file their taxes. That said, if you’re self-employed, you have until April 15 to file. If you need more time, you can file for an extension, but it’s important to note that this doesn’t give you more time to pay your taxes – it only gives you more time to file your return. So if you know you owe the government money, it’s best to pay as soon as possible to avoid interest and penalties.
Aside from tax filing deadlines, there are other important dates to consider as well. For example, you may want to file your taxes early if you need to claim a tax credit or deduction for education expenses for yourself or family members. For example, students who paid tuition during their school year might be eligible for a tuition and fees deduction. This could help lower your taxable income and reduce your tax bill at year-end. So if you’re anticipating educational expenses on your return, it might make sense to file earlier rather than later in order to take advantage of that opportunity.
2) Taxes Impact Every Financial Decision
No matter what you do in life, taxes will have an impact. From earning profits to reinvesting them back into your business, understanding how taxes work is critical to financial success. Filing your taxes early ensures that you have a clear understanding of your tax liability and can plan accordingly. Additionally, filing your taxes early gives you the opportunity to get any refunds you may be owed sooner rather than later. The government uses the revenue from taxes to fund important programs and services, so by paying your taxes on time, you’re helping to keep the government running smoothly. Finally, paying your taxes is simply the responsible thing to do – it’s one of the many ways we all contribute to society.
Income taxes are levied on your income by federal, state and local governments. You file a tax return annually with your country’s internal revenue service (IRS), reporting how much money you earned during that period. Some types of income are taxed at different rates, based on what type of income it is. Additionally, if you do business as a corporation or LLC (limited liability company), which we recommend when starting out to limit your personal liability, it may be subject to additional taxes depending on where you live.
3) Unpaid Taxes Can Affect Your Credit Score
Your credit score is one of the most important numbers in your life. It can affect your ability to get a loan, buy a car, or even rent an apartment. So it’s no surprise that unpaid taxes can have a negative impact on your credit score. Here are five reasons why you should file your taxes early to avoid any potential problems with your credit score.
When you don’t file your taxes or don’t pay your taxes on time, you can get hit with late fees or even tax liens. Both of these will stay on your credit report for seven years and can lower your credit score by a significant amount. It’s better to be proactive about paying your taxes than to get caught up in penalties because you forgot to file one year. To avoid any late fees or damage to your credit score, be sure to file and pay early!
4) The IRS Can Seize Earnings, Property and Bank Accounts
The IRS can legally seize your assets if you don’t pay your taxes. This includes your paycheck, bank account, investments, property and even your personal belongings. If the IRS thinks you’re trying to hide your assets, they could also criminally charge you with tax evasion, which comes with a prison sentence. So it’s not worth it to try and avoid paying your taxes.
A tax lien is a legal claim against your property to recover taxes owed by you. The IRS will first attempt to collect unpaid taxes from any refunds that you may be due, such as if you overpaid on your federal income taxes. If there are no refunds due, then they can legally seize private assets if it’s determined that you have underreported your income by 25 percent or more. This is why it’s so important to file your taxes on time and make sure that they’re accurate. Because while it’s one thing to owe money, it’s something else entirely to have your assets seized without warning!
5) You May Need To Pay Additional Penalties Even If You Didn’t Owe Anything
Even if you don’t think you made any profits, it’s important to file your taxes on time. The IRS may charge you a late filing penalty, which is 5% of the unpaid taxes for each month that the return is late, up to 25%. In addition, if you don’t pay your taxes on time, you may be charged a late payment penalty of 0.5% of the unpaid taxes for each month that the payment is late, up to 25%.
This means that even if you didn’t owe any tax at all when you filed your return, you may still be subject to penalties. This can occur if you underestimated your income, or if your tax return was inaccurate. The late filing penalty is assessed on a monthly basis, which means that it can quickly add up over time. For example, if your taxes are due by April 15 and aren’t filed until May 31, you could face two separate penalties for a total of 50% (5% X 5 months) of unpaid taxes owed.