File Your Taxes Early: Get Your Refund Faster & Avoid Penalties

There's little reason to wait to get your hands on the money the IRS owes you.

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Key points

• The IRS has begun accepting returns for the 2021 tax year.
• You have until April to file your return, but you may want to file sooner.
• Doing so could either get you your refund faster or give you more time to cover a tax bill.

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Tax-filing season has officially opened for the 2021 tax year, which means the IRS has now begun accepting returns for the income you earned last year. Your tax forms aren't due for a while yet, though, as there's an April deadline for submitting your documents -- or an October deadline if you request a timely extension.

Although you have months left before the deadline, you may want to seriously consider submitting them as soon as possible. Here's why.

You can put your refund to work for you -- and potentially save money

Submitting your tax forms as soon as you can makes a lot of sense for most people because they can get a tax refund more quickly.

The majority of Americans are owed thousands of dollars by the IRS because they overpaid their taxes during the 2021 year. And some Americans may be in line for an especially large refund this year if they did not receive the full amount of coronavirus stimulus money provided by the American Rescue Plan Act.

If you are owed a lot of money from the IRS, you'll likely want to get your hands on it as soon as you can. You may be able to use this tax money to pay off debt or to bulk up your emergency fund, and doing either can help you save on interest or avoid getting stuck borrowing for emergencies while waiting for your refund to come.

Once you've submitted your returns, the IRS usually processes refunds within 21 days, as long as you filed your tax forms electronically and requested your payment be directly deposited into your bank account. The best tax filing software should allow you to file quickly and without a lot of hassle -- and perhaps even for free, depending on your income and which software you use.

Other reasons to file quickly

Submitting your tax forms as soon as possible is also important if there's a chance you could owe money to the IRS. If you end up with a tax bill, you'll likely want to know about it as soon as you can. And if you find that out sooner rather than later, you can start saving to pay that bill if you don't already have the money set aside. That way, you won't be surprised right before the payment deadline and end up struggling to come up with the cash to fulfill your IRS obligations.

Finally, if you start filing and discover you are missing needed paperwork, you'll have time to get everything sorted out so you can still submit your tax return on time.

The bottom line is, there's little downside to filing your taxes in the near term -- and lots of potential upside. So moving forward with getting that paperwork done as soon as possible is the right choice for many tax filers.