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7 Easy Steps to a Faster Tax Refund
(ARA) - 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 seven strategies from Jeff
Schnepper, author of the best-selling “How to Pay Zero
Taxes” and a tax expert for MSN Money.
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 get to finish it.
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.
2. Accumulate the data
By the end of January, 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
sales of stock. 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.
3. Put the numbers in IRS categories
Neither the IRS nor your CPA is going to add up those
numbers for you.
You’re going to want to have totals for the income and
deduction categories the IRS provides. You’ll need that
final “number” 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 that number to your CPA to
minimize his or her bill.
A good way to get organized is to use the “envelope”
system. 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, all the invoices and put them in the
appropriate envelope.
You can use this simple system all year. Throw all of
your receipts into a file or even a shoebox. When you
reconcile your checking account, on a monthly or at
least a quarterly basis, you break down the checks and
receipts according to the categories you selected.
By the end of January, you should have had all your
checks and receipts broken down in each envelope by
deduction category. You add up the receipts and checks
(don't double count!), and that’s the number 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.
4. Analyze the numbers
Sometimes, the raw data you have is going to be wrong.
On the income side, you’re required to report any and
all interest and dividends received, even if you don’t
receive a Form 1099.
You’ll have to match up the sales of stock with the cost
of those shares. The number shown by your broker on Form
1099 B is only the sale price. You’re not taxed on 100
percent of that number. You reduce it, on Schedule D of
your return, by your cost, including broker’s fees.
You’re only taxed on the net profit. (To automatically
generate a Schedule D based on your investments, visit
MSN Money at money.msn.com and check out the GainsKeeper
service).
If you don’t sell 100 percent of your position, you’ll
have to allocate your costs on a per-share basis.
On the deduction side, you may have deductions not
reflected by the raw data. Say you made your Jan.1,
2004, mortgage payment on Dec. 31, 2003. The interest
you paid won’t be reflected on the Form 1098 sent by
your mortgage company. That’s because they didn’t get
the check until 2004.
But it’s a 2003 deduction, and you should run an
amortization schedule to compute the additional
interest. That additional interest would be shown on
line 11 of your Schedule A.
5. Call your accountant
If you’re going to have your return professionally
prepared, call your accountant now for an appointment.
Just make sure you’ve got the numbers in order when you
show up. Your wallet will appreciate it.
6. Put ink to paper
Or, at least open the tax program on your computer.
You’ve got your numbers. If you’re doing your own
return, put ink to paper. Go to your quiet place and
actually do your return.
You’ve done the real work. Now you’re just putting
numbers in boxes. Relax; this is really the easy part.
7. Mail your return
A completed return on your desk that calls for a refund
is the IRS’s idea of heaven. It’s your money. Don’t
leave it with the IRS. It’s bad enough that they’ve held
it all year without paying you any interest on your
excess payment. Don’t compound the pain by delaying the
mailing.
Of course, the best way to speed up your return is to
e-file -- available at Web sites such as MSN Money. The
IRS appreciates the cost savings and claims it expedites
your refund.
Electing a direct deposit of your refund will always get
it into your hands faster than snail mail. More than 41
million taxpayers used direct deposit for their 2002
refunds, up from 39 million a year earlier.
Complete lines 70(b), (c), and (d) of your Form 1040,
and, coupled with an e-filed return, in theory you could
have your refund in your bank account in as little as 24
hours.
Alternately, the IRS now has a new refund assistance
line, (800) 829-1954. It also has a new Web tool called
“Where’s My Refund?” that can tell you whether the IRS
received your return and whether your refund was
processed and sent to you.
For more of Schnepper‘s tax tips and access to
preparation and filing tools, visit www.money.msn.com.
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