February 10, 2022
Some Good Reasons to File Your Taxes Early
Some Good Reasons to File Your Taxes Early
Nobody loves filing taxes. It’s something we have to do—not something to look forward to. But there are several good reasons why you shouldn’t wait until April 18 this year to file yours.*
Are you expecting a refund in 2022? The earlier you file, the sooner you’ll get that money.
If you’re not rushing to complete forms, you may have time to learn more about the deductions or credits you can claim on your tax return that can possibly allow you to receive a larger refund.
E-filing your return with direct deposit into your bank account is the fastest way to get your refund. Instead of spending the money or letting it sit in your checking account, consider these two ways to make better use of it:
- Invest in an IRA. Like employer-sponsored 401(k)s and 403(b)s, your contributions to a traditional IRA are made on a pre-tax basis. That means you do not pay taxes on your contributions when they are made, although you will have to pay taxes when you make withdrawals in the future.1 A Roth IRA is different: you invest after-tax dollars, but most withdrawals are not taxed.2 In some cases, you can even take money from a Roth account to make a down payment on a home or pay for a child’s college tuition. The IRS sets income rules for who is eligible to invest in a Roth IRA.
Through April 18, you can contribute up to $6,000 to an IRA for tax year 2021 if you’re age 49 or younger, $7,000 if you’re 50 or older.
Mutual of America’s IRAs are variable annuity contracts. - Pay down debt. The interest on some debt compounds, so debt left unpaid gets more and more expensive. By using your tax refund to pay off credit cards or other debt, you can make sure money you owe doesn’t endanger your ability to save for retirement.
If you think you might owe money to the government for the 2021 tax year, it’s still a good idea to complete your paperwork as early as possible. You won’t have to pay what you owe until April 18. But completing your return sooner will give you time to plan for budgeting around the owed amount.
Don’t risk being late. Filing early means you won’t find yourself up against the deadline, scrambling to fill out your return or locate your tax forms from an employer or other sources. Missing the April 18 deadline could result in financial penalties. Get your taxes squared away in February or March so you can avoid risking that outcome.
The IRS began accepting returns for the 2021 tax year on January 24, 2022.
*The deadline is April 18, 2022, instead of April 15, 2022, due to the Emancipation Day holiday in the District of Columbia. Taxpayers in Maine and Massachusetts have until April 19, 2022, to file their returns due to the Patriots’ Day holiday in those states.
1Withdrawals are subject to income tax at your ordinary income tax rate at the time of withdrawal, and if made prior to age 59½, a 10% federal tax penalty.
2State and local taxes may apply. Estate taxes may also apply. This does not apply to converted Roth IRA accounts.
The tax information contained herein is for informational purposes only. You should consult your financial adviser or attorney regarding your individual circumstances.
Mutual of America’s IRAs are individual variable annuity contracts and are suitable for long-term investing, particularly for retirement savings. The value of a variable annuity contract will fluctuate depending on the performance of the Separate Account investment options you choose. Upon redemption, you could receive more or less than the principal amount invested. A variable annuity contract provides no additional tax-deferred treatment of benefits beyond the treatment provided to any IRA by applicable tax law. You should consider a variable annuity contract’s other features before making a decision.
