Put down that snow shovel and pick up those tax forms! Tax Day is almost here

Do your aching back a financial favor. Put down the shovel and pick up your tax forms.

The bright side for all those Americans on the east coast still shut-in from this weekend’s blizzard is that they can get a jump on their taxes. And while that does not sound like an overly exciting diversion, advisors say getting them done early can really pay off - and especially this year.

Jeff Brooks, senior wealth strategist with the specialist consulting group at Janus Henderson Investors, for one, is a fan of filing early because it may lead to larger refunds due to the OBBBA. The Tax Foundation estimates the OBBBA, which became effective last July 4th but are effective for all of 2025 income, reduced individual taxes by $129 billion for 2025. Nevertheless, most taxpayers set their 2025 withholdings and estimated tax payments at the beginning of the tax year when income tax deductions were a bit lower. 

“Although deductions were increased, many taxpayers did not change their withholdings or estimated payments to conform with the new laws. Hence, larger refunds this year. Overpaying the government by way of withholdings or estimated payments really amounts to making government an interest-free loan,” Brooks said.

These refunds, though fun to receive, amount to a return of a taxpayer's own money overpaid the year before. And the government pays no interest on that refunded money.

“We counsel investors to prepare their 2025 income tax returns as soon as possible. For those that owe additional taxes, don’t file or pay until April 15th. For those due a refund, file immediately and get your money refunded as soon as possible,” Brooks said.

Brooks also recommends that Americans should take the extra time to maximize their 2025 retirement account contributions. Americans, on average, are ill-prepared for a long, potentially expensive retirement. 

“Investors at every age level must be made aware of the importance of retirement planning. Fortunately, our government thinks so too and provides tax deductions for those who contribute to qualified retirement plans,” Brooks said.

Assuming it’s too late to generate an additional 2025 deduction is another big mistake, according to Brooks. Typically for an expense to be deductible it must be paid in the calendar tax year in which it is claimed. One important exception to this rule involves IRA contributions. 2025 income tax deductions are still available for contributions to a traditional IRA account made after January 1, 2025 all the way through to April 15, 2026.

Thomas Decker, wealth advisor at Cerity Partners, often sees errors involving clients waiting until tax preparation season to review their tax picture. Being proactive with tax planning throughout the year – such as increasing deductions where able and making payments if needed - might not only help with organization but potentially tax savings as well come filing season.

“Working with a holistic wealth advisor that provides tax projections, sees the entire financial picture, and provides ongoing tax strategy can help minimize mistakes during filing. An advisor that also provides tax preparation as needed might help by having all parties aligned throughout the year,” Decker said.

All that said, while it’s good to file early, there are some risks in filing too early, like before you’ve received all your 1099s.

Mike Horn, deputy general counsel for tax at ICI, for one, warns that while most funds send their 1099s by the end of February, some funds (particularly real estate funds) may be delayed in providing 1099s. Late or amended 1099s can cause headaches if you’ve already filed your tax return, because you probably need to re-file your tax return.

“Don’t forget you can extend your tax return filing date beyond April 15, but if you owe tax, that’s still due by April 15,” Horn said. 

MORE POTENTIAL PAYOFFS

ICI analysis shows that under the GROWTH Act’s tax deferral, an investor in an actively managed equity mutual fund would have had $1,340 more in returns from a $10,000 initial investment over the ten years from 2015-2024 compared to the current tax treatment. This is a meaningful return for investors, according to Horn.

“The GROWTH Act would help 40 million American fund shareholders and would incentivize a culture of long-term investing in our country. Investors should write to their representatives in Congress and urge them to cosponsor the bill, and if they have already, ask them to work towards its passage!” Horn said of the bipartisan bill aimed at boosting retirement savings by allowing investors to defer capital gains taxes on reinvested mutual fund distributions.

Meanwhile, Janus Henderson’s Brooks encourages clients to investigate maximizing charitable impact through employer-gift-matching programs and innovative techniques such as the new Charitable Support Fund offered by Janus Henderson Investors in conjunction with the American Cancer Society (ACS). Through this partnership initiative Janus Henderson donates an amount equal to half of their management fees for all assets under management from the JHI Government Money Market Fund to ACS, net of any waivers.

“There is a certain portion of our income that is destined for societal use. I call this ‘social capital.’ This social capital is money we don’t get to keep. Either we give it to our government to redistribute as our elected officials see fit or we can give it to a specific cause which we, individually, feel is worthy. I certainly know what my choice is!” Brooks said.