It’s that time of year.
Many of us wait until the last moment on April 30, or even later, to file our tax returns. While you need to take as much time as you need to complete your taxes accurately and fully, it can be beneficial to file earlier rather than later in the tax season. Here are five reasons why early tax filing is a good idea.
1. To beat the scammers.
Canada hasn’t made as much progress as we have wanted in reducing tax identity theft, payment fraud, and refund fraud problems leading to consumer complaints across the country. The CRA warns that even more scams are on the rise. The faster you get your taxes done, the less likely that you’ll fall prey to scammers that are poised to pounce after April 30. You’ll know that you have already finished the process, and you’ll have that return in the bank or be well on your way to paying off any overages.
2. To get your refund sooner.
Most people who file early do so because they're getting a refund, directly depositing it into your bank account. In doing so, you’ll be waiting less time than those who are expecting a paper cheque. You can then invest that money in something you need or want, including next year’s RSPs.
3. To figure out how to pay what you owe.
Many people delay filing because they know they owe taxes. But filing early actually can help here, because it will give you time to gather the funds you need to get your tax situation sorted. Do you need to raid an emergency savings account? Or borrow from a family member? Or set up an installment payment with CRA?
4. To start focusing on the new 2018 tax changes.
Most of us put off things because they are unpleasant. That's definitely true of filing taxes, even when you get a refund. But many new tax laws that took effect on Jan. 1, 2018, and this means that there may be some shifts in how you manage your money and your investments this year. You may want to make pre-planned estimated tax payments to cover expected federal tax shortfalls due to things such as investment earnings.
5. To beat other accounting customers in line.
If you can get your taxes done within the next couple of weeks, you're probably going to be in a better filing situation, if only for the fact that you won’t risk facing the queue at your accountant’s office. This is especially the case if you are self-employed or have had a challenging year (divorce? move? job change?) that may require more paperwork. Your accountants receive everyone’s files in a very short period of time, and if you want more attention paid to your taxes, get in right away, and benefit from fresh minds!