Greetings, it's tax season
Prompt filers will receive refunds quicker than ever
Cox News Service
January 8, 2006
Last week the Internal Revenue Service mailed out 17.7 million tax instruction booklets, opening the door for those who want to file their income tax returns ASAP.
Lots of people will do just that — mainly those who have simple returns and who are confident they will get refunds.
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File early in the season and you can expect that your paperwork will go through the system faster. You can also speed up the process by having your refund deposited directly in your bank account and by filing electronically.
"Every year the federal and state governments have gotten faster and faster with getting back refunds," said Roy Burke, a certified public accountant in Tucker. "Last year I had some refunds back in two weeks. It's better than waiting six or eight weeks for a check to come in the mail."
Instruction booklets went to taxpayers who filed paper returns in years past. The number continues to decline, as more and more people choose to file electronic rather than paper returns. In all, the IRS expects to process about 135 million individual tax returns this spring.
Only a small portion of those millions, however eager, will be able to complete state and federal returns and put them in the mail quickly.
The reason is that all of us must wait for the private sector to do its part. At a minimum, most taxpayers need the W-2 forms in which employers report how much we were paid and how much of that was withheld for taxes.
Employers have until Jan. 31 to mail out those forms. The same deadline applies for reports showing income from investments, interest paid on mortgages and other vital information.
Still, impatient taxpayers can get a running start. Here are some things to do or at least plan to do:
Assemble the paperwork. Burke advises everyone to hold on to her last pay stub, because it can be used to double-check information on the W-2 when it finally comes in.
It's best to make a checklist of all the reports you need to finish your tax return. Establish a folder or some other safe place to keep your checklist and all documents as they come in.
For example, stockbrokers will send you — and the IRS — a 1099 form that records taxable activities during 2005. If you get a pension, expect a statement showing how much you received.
Banks will send a form showing how much interest you earned on savings accounts, as well as statements of how much interest you paid on mortgages and other loans. The latter are important if you plan to itemize deductions.
You should also gather up paperwork to back up other deductions, such as local and state taxes you paid, medical expenses, charitable deductions and the like.
Watch out for changes in the law. You can check the instruction booklet and irs.gov for details on changes, such as credits now available for certain energy-saving expenses.
Be alert also for specialized tax breaks, such as those available to members of the armed services and to people who suffered losses in Hurricane Katrina and other disasters.
Check out tax preparation software. A good software program helps you wade through the complexities of tax law and usually will prompt you to fill in all the necessary blanks. That may seem silly, but keep this in mind: Last year more than 421,000 Americans got their Social Security numbers wrong or left them out entirely.
The software also does the adding and subtracting — another source of many thousands of errors. If you goof up things like that, you can't complain when the IRS delays your refund until you straighten out your mistakes.
You can find links to major software makers at www.taxsites.com/software.html.
Check out irs.gov. The IRS truly has been trying in recent years to make tax filing easier, and the effort shows up on the agency's Web site.
Click on the 1040 Central link at the top of the page, for example, for information on new wrinkles, scam warnings, downloadable forms and frequently asked questions.
There is even a section on the dreaded alternative minimum tax, including an interactive worksheet to help figure out if you are subject to the AMT.
Beware of refund anticipation loans. Every year commercial preparers offer to get your refund money back to you in a day or two. What this amounts to is a loan secured by your refund, and the interest rate can be 400 percent or more, on an annual basis. Unless you're really hungry for the money, you're better off waiting for the check in the mail.
Stay cool. For one thing, you'll have to wait for those W-2s and other forms. For another, however early you file, the IRS will not start sending out refunds for several weeks. Last year, the first direct deposits of refunds were made on Feb. 28, said IRS spokesman Eric Erickson. The first checks were mailed Feb. 4, to people who filed their returns by Jan. 20.
One other thing: If you plan to file electronically, the IRS will not accept your return until Friday.
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