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Tips for early tax filers
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February 2, 2000: 6:40 p.m. ET
Preparing now will make sure you get any refund as quickly as you can
By Staff Writer Alex Frew McMillan
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NEW YORK (CNNfn) - - If you're in need of cash - perhaps your coffers have run dry after a little holiday overindulgence or you desperately need a sunny winter holiday - you can always try to get your mitts on your tax refund early.
With faster tax filing options, such as electronic filing, you may get your tax refund quicker than you had in the past. Getting organized now and planning ahead will speed up the process, too.
Also, making sure you've got everything in order should also help prevent any last-minute panic or mistakes when April 15 rolls around.
"There are two things you don't want to get -- a letter from the IRS and a letter from the draft board. They're not calling up to say hello," joked Laurence Foster, a partner in the personal financial-planning practice of accounting and consulting company KPMG.
Below are some steps that KPMG and Foster recommend you take now, so that you're ready to file as soon as you have all the right forms. That way you can get any refund you're due as fast as possible.
- Gather receipts for your deductions, such as business expenses that weren't refunded by your employer and tax contributions you made.
- Select the direct deposit option when you file your taxes so the money goes straight into your bank account.
- Decide how you're going to file. If you have a dependent child or parent, you qualify as the head of household. If you're a widow or widower, you can file a joint tax statement the year your spouse died and file jointly as a surviving widow or widower for the next two years.
- Make sure you have Social Security numbers for any children born in 1999. All dependents you claim must have taxpayer-identification numbers, normally Social Security numbers. Non-resident aliens may need to apply for an Individual Taxpayer Identification number.
- Decide whether it's more efficient for you to file electronically with the IRS or to mail in your forms.
- Organize documents for any unusual situations that came up in the year, such as selling a residence.
- If you're married, decide whether it makes sense to file separately or as a couple. For instance, a couple with $5,000 in medical expenses and incomes of $70,000 and $30,000 would not qualify for a deduction together. That's because their combined $100,000 income puts them over the 7.5-percent threshold for medical-expense deductions. But the spouse with the $30,000 income could deduct $2,750 to $5,000 minus 7.5 percent of their income, or $2,250. "You always have to run the numbers to see which would be appropriate," Foster said.
- Contribute early to IRA and Roth IRA accounts in 2000 so you get the full year of tax benefits.
- If you haven't contributed the full amount to your IRA, remember you can still make payments through April 15 and have them count on your 1999 taxes. Foster points out that if you know you're getting a 1999 tax refund, you can file early and get your refund, claim the amount of the refund as an IRA contribution on your 1999 taxes, then contribute the refund to your IRA (as long as you're sure the check will arrive by April 15).
- Review your 1099-R form to check that IRA distributions were treated correctly. That's particularly important if you converted a traditional IRA to a Roth IRA, to make sure the Internal Revenue Service has noted the change.
- If you withdrew investments from an IRA and paid taxes on them, make sure your brokerage reflects the new cost basis of the investments. Because you paid taxes and possibly a penalty, it's as if you bought the investment anew. If you don't, when you sell you'll pay capital gain tax based on the old purchase price. That's tax you already paid.
- Review any tax forms as soon as they arrive. "You may have $100 in the bank and be expecting a 1099 for $1, but it says $1,000 because some computer had a bad day," Foster said. The IRS will go with what's on the form. To avoid an audit, correct any errors early.
- Keep and store your tax documents in a secure place.
To make the most of your return, KPMG insists you pay proper attention to the deductions you're allowed. Home-mortgage interest, property taxes, charitable contributions, non-reimbursed employee travel, job uniforms and tools, professional dues, professional journals, some job-hunting costs, professional tax preparation and moving expenses are all tax deductible.
The National Association of Tax Practitioners has some other ideas to help you battle the IRS paper tiger that comes at tax season.
- Look at last year's tax return. If your circumstances haven't changed very much, it'll be a good guide.
- Organize all your forms such as W-2s, 1099s, bank records and expense receipts into two piles: one pile for income, one pile for expenses.
- Consider meeting with your tax preparer now to make sure you have the right paperwork and records. Dealing with property sales, for instance, is particularly difficult.
- If you've done your own taxes but your situation has changed dramatically, or tax-law changes have left you confused, consider contacting a tax preparer.
Then get that refund check in hand -- and enjoy that Caribbean vacation. 
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