Why You Should Prepare Your Taxes Now

Note, I didn’t say prepare and file your taxes. But, I have already prepared and filed my taxes. Why? Well, I filed because I am getting a refund. Which I really don’t like – because I gave the government an interest-free loan over the last year. But I like to do a “dry run” of my tax preparation, to determine where I stand, as early as possible, when I have received all of the financial documents from my employer (W-2), savings accounts (1099’s), etc. I like to do this early, for two reasons:

1.) If I am getting a refund, I file right away, because I like to get it back from Uncle Sam as quickly as possible, instead of waiting till April 15th, and put it to work for me, instead of the government. It also gives me an opportunity to decrease my withholdings for this year now, so I don’t lend Uncle Sam as much money this year.

2.) If I owe taxes, it allows me to figure out what I owe now. If the amount is significant, it allows me to budget the money over the next 2 1/2 months, so I am not surprised a couple of days before the April 15th deadline. Also, it allow me to increase my withholdings (assuming I am going to be in a similar financial situation next year) if necessary, to minimize the amount of my tax liability next year.

As for me, I am going to take my refund and pay down debt. If you are looking for ideas on what to do with your refund, check out Single Guy Money’s 4 Part series, Suggestions for your tax refund.