Updated: 12/14/2012 6:15 PM ET|
7 easy steps to an early tax refund
The sooner you get your money back from the IRS, the better, so start now. Get your taxes done faster and more accurately with these steps.
If you want to get your 2012 taxes in early and get your refund quickly, here are Schnepper's Seven Strategies to getting those dollars in your pockets ASAP. Here's what you have to do:
1. Get started
The first step is the hardest. Stop thinking about it and get moving. Until you actually start your return, you'll never finish it. And that's probably going to slow down your refund.
If you don't have all your numbers, just put your name and address on the form. It will get you in the mindset to move forward.
Your first step is to break the inertia. As my father used to say, a trip of a thousand miles begins with a traffic jam. Break that jam and get moving.
2. Accumulate the data
January is collection month. By the second week of February, you should have the numbers in hand. Make sure you've gotten W-2s and any statements from your brokers and banks. You'll receive 1099 forms for any interest, dividends and stock sales.
Your mortgage company will send you a Form 1098 for any interest and real-estate taxes paid. Get those statements together and review the numbers. They're not always right. They won't include any interest you paid at the very end of December because the creditor won't have received the money until 2013.
3. Put the numbers in IRS categories
Neither the Internal Revenue Service nor your CPA is going to add up those numbers for you. Well, maybe your CPA. Many years ago, a psychiatrist near Philadelphia paid me $150 an hour to open his mail because he couldn't be bothered.
You're going to want to have totals for the income and deduction categories the IRS provides. You'll need those final numbers if you're doing your own return, whether by hand or by computer. If you're having your return prepared, you'll want to give those numbers to your CPA to minimize the bill.
I suggest my clients use what I call the envelope system. You create an envelope for each of the IRS income/deduction categories. There'll be an envelope for medical expenses, charitable contributions, job expenses, interest paid, etc. Find all the receipts, all the checks and all the invoices, then put each in the appropriate envelope.
If you live in a state without an income tax, don't forget to look for numbers for a possible deduction of sales taxes. Those states are Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming. This deduction was extended through 2013 by the American Taxpayer Relief Act of 2012.
In December 2012, Congress extended a number of tax breaks, including the sales-tax deduction, a $250 deduction for classroom expenses and deductions for mortgage insurance premiums (all through 2013) and college tuition expenses (through 2017).
And don't forget about other tax breaks, including credits for energy improvements (extended through 2013), amended adoption credits (now made permanent) and various credits for college education costs.
You can use this simple system all year: Throw all of your receipts into a file or even a shoe box. When you reconcile your checking account, on a monthly or at least a quarterly basis, break down the checks and receipts according to the categories you selected.
By the end of January, you should have all your checks and receipts broken down in each envelope by deduction category. Add up the receipts and checks (don't double count), and those are the numbers you use on your return or give to your preparer.
That's how much you've spent in each deduction category. And with this system you never have to fear an audit.
An audit is nothing more than the IRS asking you to prove the numbers you put on your return. You've already done that. Just hand over the deduction-category envelope with the receipts and checks. After a series of matches, it's going to be a quick audit.
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