Americans are well aware that April 15* is tax filing day — but tend to put off thinking about it until April 14. If you recognize yourself in that description, here are three reasons to avoid the last-minute rush: 1. Pulling your information together now gives you time to review forms provided by employers, brokerage firms, and pension providers. If the amounts or taxpayer identification numbers are wrong, you can ask for corrected documents before you file your return.
2. Good basis data can save you tax dollars. Check your files for purchase confirmations and dividend reinvestment statements of stocks and mutual funds sold during 2006. Gathering missing records may take a few days. Starting early is a smart move.
3. Calculating the final tally before the due date gives you the opportunity to plan. For instance, say you have an overpayment. Do you want to take advantage of this year’s new option to split your refund between a savings account and your IRA or health savings account?
If you owe tax, knowing in advance lets you budget by setting aside a certain amount each week or paycheck. Alternatively, you may want to save so you can make a contribution to your IRA before April 15*. Depending on your income, a deductible contribution could reduce your tax bill.
* Note that tax filing day this year is April 17. That's because April 15 falls on a Sunday, and the following day, April 16, is Emancipation Day, a legal holiday in the District of Columbia. On January 24, 2007, the IRS issued a news release stating that the April 17 deadline would apply nationwide.
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