1. PERSONAL FINANCE

Should You File Your Taxes Early This Year?

Should You File Your Taxes Early This Year?
BY Sara Korn
Jan 7, 2021
 - Updated 
Oct 1, 2024
Key Takeaways:
  • If you expect a tax refund or to qualify for COVID stimulus money, file your taxes as soon as possible.
  • Filing online could get your money to you faster.
  • Even if you owe the IRS, filing early can save you interest and penalties.

If money is tight in your household right now, it may be helpful to file taxes early this year. Let’s look at some of the benefits of filing early, how soon you can file, and things that might delay your tax refund. We’ll also go over how the CARES Act stimulus payments and charitable contribution benefits could affect your 2020 taxes.

How and when to file taxes

If you’re new to filing taxes or just want a quick refresher, here are the essentials.

Tax filing deadlines

The most common deadline for filing taxes is April 15. That is the deadline for individual and C corporation returns. Partnerships and S corporations must file a month earlier, by March 15. Any individual or business can file an extension that will extend the filing deadline to October 15, but you must fill out an extension request by the normal filing date. More on that in a bit.

How to file your taxes

There are two ways you can file your taxes:

  • Mail. You fill out physical tax forms and mail them to the IRS. The IRS estimates that it takes about 6 weeks for a return to make it through the postal system and then be entered into the IRS system.

  • E-filing. You file your taxes electronically using either the IRS Free File system or a commercial software like TurboTax, and your return is delivered immediately to the IRS. This method also allows you to set up direct deposit of your refund into your bank account.

Standard deduction vs. itemized deductions

When you file taxes, you can claim deductions (expenses) that lower your taxable amount. Basically, your income, minus deductions, equals your taxable income, and then you are taxed on a percentage of your taxable income. You can choose to either list out all your deductions—charitable donations, healthcare expenses, etc.—or you can choose to take the standard deduction, which is a flat rate.

Now that the basics are covered, let’s get to that very important question …

How soon can you file your 2020 tax return?

You can technically file your taxes as early as January 1, 2021. However, the IRS won’t accept electronic filing until later in the month. Because of the inefficiencies of manual processing and snail mail, which is especially slow now due to the postal service being overwhelmed with holiday mail during the pandemic, it will probably still be faster to wait a while to file electronically than submitting your return by mail.

However, you can get a head start now by gathering all your tax documents and financial information so that you’re ready to fill out the forms and submit your return as soon as the IRS starts accepting returns.

Next, let’s go over some of the reasons why you might want to file your taxes early.

5 reasons to file taxes early

There are several benefits to filing your taxes well before the spring deadlines:

  1. Get your refund months earlier. The sooner you file, the sooner you can get your refund. This can help with essential expenses like rent and food, give you a savings cushion going into the spring, or help you make ends meet if you’re going through a period of unemployment.

  2. Have more time to pay your taxes. If you think you’ll owe money, you’ll have more time to figure exactly how much you’ll owe, and how to pay your tax bill.

  3. Avoid having to file an extension. Waiting until the last minute can cause you to miss the standard filing deadline, so getting a head start on your taxes means you don’t have to worry about the extra steps involved with being late.

  4. Save on interest and fees. If you owe the IRS money, it is due on the standard deadline, even if you file an extension. By filing early, you can more easily avoid being charged interest and fees on what you owe.

  5. Prevent tax return identity theft. If someone else gets a hold of your social security number, they can possibly file a return in your name to try and collect your refund.

However, even if you file early, it’s impossible to know exactly when you’ll get your refund. Next, we’ll look at how long it might take, and issues that could possibly delay your refund.

How soon can you receive your 2020 tax refund?

According to the IRS, returns are typically processed within:

  • 21 days for electronic returns

  • 6 weeks for mailed returns

However, if you e-file as early as you can, possibly as early as January 25 (or even sooner), according to estimates by CPA Practice Advisor, you could get your return between February 5 and February 12.

Be careful not to count on getting your refund that soon, however, because you may encounter one of these situations:

  • Claiming the Earned Income Credit (EIC), Additional Child Tax Credit, or American Opportunity Credit, which will delay your entire refund until mid-February.

  • Waiting on employer(s) and companies to send W2s and 1099s, which they have until February 1, 2021 to send out.

  • Receiving questions from the IRS about your return.

Ways to speed up processing of your refund:

  • Get your W2 and 1099 information electronically where available, such as on your employer’s payroll website or online banking systems.

  • File your return electronically instead of by mail.

  • Sign up for your refund to be directly deposited into your account for free.

Be wary of companies offering loans or cash advances on your tax refund. While there are a few legitimate companies that offer this, there are many scams in this arena, so be sure to read the fine print on any offer and stick with reputable companies that you know. You can also protect yourself by checking the IRS website for known tax scams.

Twenty-four hours after you file, you can use the IRS’s Where’s My Refund? page to track the status of your return. You’ll need:

  • Your social security number or ITIN

  • Your filing status

  • Your exact refund amount

Now let’s turn to how the CARES Act could impact your 2020 taxes.

Are stimulus payments taxable?

The government stimulus payment (more formally called an economic impact payment) won’t increase your taxable income or reduce your refund.

If you didn’t get the stimulus payment in 2020 or didn’t get the full amount due to your income level, you can get it by claiming the Recovery Rebate Credit on your 2020 tax return.

Charitable deduction with the standard deduction

Another, lesser-known tax relief clause in the CARES Act is a charitable deduction change. It allows taxpayers who made donations to charity in 2020 to take a charitable deduction of up to $300 without having to itemize deductions. In other words, if you choose to take the standard deduction, you can still claim an extra $300 for cash contributions made in 2020 to qualifying organizations.

Using your tax refund to help pay down your debt

If you’re unable to pay more than the minimum payments on your credit cards, you may be thinking about using your tax refund to pay down debt. If you have over $10,000 in debt and are going through a financial hardship, talk to one of our Certified Debt Consultants about how you can maximize the use of your tax refund in our debt relief program. Every dollar counts, so it makes sense to stretch it as far as possible.

Learn More:

A look into the world of debt relief seekers

We looked at a sample of data from Freedom Debt Relief of people seeking debt relief during August 2024. This data highlights the wide range of individuals turning to debt relief.

Debt relief seekers: A quick look at credit cards and FICO scores

Credit card usage varies significantly across different age groups, reflecting diverse financial needs and habits.

In August 2024, the average FICO score for people seeking debt relief programs was 582.

Here's a snapshot by age group among debt relief seekers:

Age groupAverage FICO 9 credit scoreAverage Credit Utilization
18-2556593%
26-3557591%
35-5057889%
51-6558387%
Over 6559782%
All58288%

Use this data to evaluate your own credit habits, set financial goals, and ensure a balanced approach to managing credit throughout your life.

Student loan debt  – average debt by selected states.

According to the 2023 Federal Reserve Survey of Consumer Finances (SCF) the average student debt for those with a balance was $46,980. The percentage of families with student debt was 22%. (Note: It used 2022 data).

Student loan debt among those seeking debt relief is prevalent. In August 2024, 24% of the debt relief seekers had student debt. The average student debt balance (for those with student debt) was 50087.

Here is a quick look at the top five states by average student debt balance.

StatePercent with student loansAverage Balance for those with student loansAverage monthly payment
Washington DC29$85,809$208
Mississipi29$58,265$181
Georgia31$56,074$145
New Jersey29$54,691$197
Maryland26$54,410$124

The statistics are based on all debt relief seekers with a student loan balance over $0.

Student debt is an important part of many households' financial picture. When you examine your finances, consider your total debt and your monthly payments.

Manage Your Finances Better

Understanding your debt situation is crucial. It could be high credit use, many tradelines, or a low FICO score. The right debt relief can help you manage your money. Begin your journey to financial stability by taking the first step.

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