Crazytree said:I'm probably going to file on Jan. 1, so this is good news.Horrible idea. File on January 1 and I can almost guarantee that you'll be back here in February or March asking about how to amend your return to include that 1099 that you forgot about. Happens every year.

Even if you think you have everything, you could still get caught. My employer has sent amended W-2's several times over the years or sent out additional W-2's for taxable reimbursements that most people never realized were coming. Don't you love when you get an email from your employer in February that says, "Do not file your tax return before reading this...?"

Okay, Triple B and Crazytree excepted, but for everyone else, you should wait a little while before filing your tax return:

2008 Example #1

2008 Example #2

2008 Example #3

2008 Example #4

2008 Example #5

tripleB said:Crazytree is one of those responsible people that knows the risks of filing early...I don't know about responsible, but filing on January 1 is generally a sign of two things: 1) fairly low income, since last minute tax changes, such as AMT patches, are often not reflected in the calculations until late January/February (this year the AMT patch was enacted way early but other regs are still in the hopper), so the only way that you can feel comfortable filing on January 1 is when you know for a fact that you won't be subject to any of them, which only happens in fairly low income situations, and 2) a sign of poor financial planning/lack of financial sophistication. This is because the only real advantage to filing on January 1 is receiving a large tax refund early. Good financial planning means that instead of giving a tax-free loan to the government, you've done the calculations to ensure that you will actually owe money at the end of the year while minimizing or eliminating underpayment penalties. If you've done that, you will generally file right around April 15, since you want to extend that interest-free period as far as possible.

Likewise, you can only file early if you have a very simple financial situation. If you have various types of investments and business ventures, there is no possible way for you to be prepared to file on January 1, since you must first receive and complete the calculations for those investments and ventures.

LawDawgAtl said:...If you've done that, you will generally file right around April 15, since you want to extend that interest-free period as far as possible...Even if you owe money, you can file without paying.

You only have to PAY by the due date. A taxpayer may elect to submit a return early in the tax season and then remit the balance due in a separate mailing closer to the due date.LawDawgAtl said:...Good financial planning means that instead of giving a tax-free loan to the government, you've done the calculations to ensure that you will actually owe money at the end of the year while minimizing or eliminating underpayment penalties....While that's the conventional wisdom, with interest rates this low, it doesn't matter a heck of a lot of difference.

It's not like you can delay remitting an entire year's tax payment until April 15. As you point out, to avoid penalty, you have to withhold or make estimated payments large enough to avoid a penalty, so you're only earning interest on a small part of your tax payment. For most people, it's not worth the hassle.

For very wealthy people (like all FWF members) that might be different, but for the average taxpayer, being under-withheld is not going to make them much money.

tripleB said:Why is everyone still talking about FILING on Jan 1st?We are discussing Crazytree's comment that he will probably be filing on January 1 and your subsequent comment that such a statement is a sign of "responsibility." As I explained above, it may or may not be a sign of responsibility, but it is almost certainly a sign of low income and/or poor financial planning.

Even if I had pay stubs or bank statements to determine amounts to file, I'd still wait for the W-2's and 1099's to come, and those most certainly aren't going to be there until late January or early February. The only compelling reason for rushing to file would be if you needed the completed tax return for some other purpose, such as a loan application or a financial aid package.

Xnarg said:While that's the conventional wisdom, with interest rates this low, it doesn't matter a heck of a lot of difference.

It's not like you can delay remitting an entire year's tax payment until April 15. As you point out, to avoid penalty, you have to withhold or make estimated payments large enough to avoid a penalty, so you're only earning interest on a small part of your tax payment. For most people, it's not worth the hassle.

For very wealthy people (like all FWF members) that might be different, but for the average taxpayer, being under-withheld is not going to make them much money.I agree, but it is also silly to leave money on the table, especially when it's such easy money. Besides, if you are going to take the risks associated with filing on January 1 or thereabouts, you really do need that refund or you wouldn't be jumping through hoops to get it early. This is a result of poor financial planning since instead of scrambling to file early to get your hands on that refund, the taxpayer would have been far better off getting his taxes underwithheld, waiting until all the tax regulations were finalized and all the tax forms arrived, and then calmly filing his return around April 15th.

LawDawgAtl said:Xnarg said:The upside is that you get it done and don't have to worry about it. Is that peace of mind worth a couple of bucks? Maybe so.If you are not expecting a refund and are filing early so you don't have to worry about it later, there is nothing preventing you from getting it done early and then holding off filing it until later on and including your tax due at the same time.

Besides, as I mentioned above, the only way that you can file as early as January 1 anyway is when your income is quite low, so that you don't have to worry that last minute changes, such as AMT patches and the like, will affect your calculations.I don't have a mortgage interest deduction... so why exactly should I give a f about AMT patches? I can't even deduct my student loan interest.

Also, I keep meticulous records (and copies of all checks) that account for every penny that I make via 1099, so if a 1099 doesn't match, I have all my backups and the issuer will have to correct the 1099. Besides, I filed my 2008 taxes with no 1099's, because my primary source of income didn't file their taxes until 10/15... and I probably won't get a 2008 1099 until 2010.

Finally, I'm buying a house mid-year... and I am going to owe significant taxes, and although I am not paying the taxes until April 15th, I would like to know exactly what my financial situation is going to be like next August. And the only way to do that is to determine my exact 2009 tax liability... which I can do on January 1st.

So unfortunately I'm in a position where I have a very high income and no chance of being subject to the AMT. The only thing that may hold me up is my IRA and investment paperwork from Fidelity. And as discussed, my chances of receiving a 1099 by April 15 are slim to none.

Xnarg said:LawDawgAtl said:Xnarg said:LawDawgAtl said:...If you've done that, you will generally file right around April 15, since you want to extend that interest-free period as far as possible...Even if you owe money, you can file without paying.

You only have to PAY by the due date. A taxpayer may elect to submit a return early in the tax season and then remit the balance due in a separate mailing closer to the due date.Absolutely, but if you actually owe money to the IRS, as you should, there is no possible upside to filing early.The upside is that you get it done and don't have to worry about it.

Is that peace of mind worth the couple of bucks interest the average taxpayer mightearn in a savings or checking account? Maybe so.don't bother trying to reason with him, he is geo123's closeted lover, and comes out to defend his boyfriend with some frequency.