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Should You File Your Return Now or Later?

The final piece of your tax season game plan is carefully timing when to file your tax return. Here’s why.

Articles by Betterment Editors
By the Editorial Staff Betterment Resource Center Published Feb. 12, 2015
Published Feb. 12, 2015
2 min read
  • File your income tax return immediately if you will be receiving a refund.

  • Delay filing until close to the tax deadline if you owe the IRS money.

Congratulations! You spent the last day or two completing your income tax return. Now you know whether you’re getting a refund or whether you owe money to the IRS.

However, completing the paperwork is just the first step of the process—now it’s time to think about when to file your tax return.

Alex Benke, CFP®, Betterment’s Director of Advice Products, recommends that you time your filing to the IRS based on whether or not you will be getting a refund.

“File immediately if you will be receiving a refund,” Benke says. “Delay filing until close to the filing deadline if you owe the IRS money.”

Here’s a quick guide for filing your return:

when to file tax return

Your Status: You will get a refund.

What To Do: File immediately to get your refund processed as soon as possible; otherwise you’re extending an interest-free ‘loan’ to the government. While some people see a tax refund as a way to enforce savings throughout the year—and create a fund to pay off holiday bills—you might consider re-examining the withholdings on your W-4. It may be that you are ‘lending’ the government too much money. If you’re not sure, consult a tax advisor. In most cases, you can adjust your withholdings by talking to your company’s payroll department.

Pro Tip: If you tweak your W-4 withholdings for a bigger paycheck throughout the year, consider automatically depositing that extra income into a savings account. That way, you earn and keep the interest.

Your Status: You owe money.

What To Do: If you owe money to the government, you are getting an interest-free loan…until you file. Don’t be in a rush to pay it off. In a general way, that provides you the opportunity to ‘stay in the market’ longer (or earn more) before paying the bill. However, make sure you do file—and pay what you owe—by the tax filing deadline. The IRS has stiff penalties for late filers and charges interest on late payments. If you owe a substantial amount, re-examine your withholding (W-4) so that next year you’re not left with a big (annoying) tax bill.

In either case, take a moment to consider the bigger picture. If you have time before the tax filing deadline, ask yourself whether you can still do better: Did you contribute to your IRA for 2014? If not, would you be able to if you had another month of earnings? Consider postponing filing your return until you make your 2014 contribution to your IRA.

If you have already done that, then file away and feel great about a job well done.

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