Here’s some news to warm the hearts of tax procrastinators: You can file your tax return too soon.
I’m not talking about people who jumped the gun on the AMT-delayed forms, or those with forgiven mortgage debt who now are twiddling their thumbs until March 3 when they can e-file.
I’m talking about those obsessive folks who routinely have their returns ready to go on Jan. 2. That’s not always wise.
Sure, you want your refund money ASAP. But, according to a story in U.S. News & World Report, early filing can sometimes be costly.
Take the case of investors. Nowadays it seems like more and more brokerage firms and fund managers are sending out corrected tax documents. "That new information could mean filing an amended return or having the IRS ask for more cash or revoke part of a refund after it checks your return," says the USN&WR story.
Even if you don’t have investment income to worry about, or are confident that you’ve got all the up-to-date documentation that you need, taking it slow can have a tax benefit. It will give you time to double check your entries and make sure you’ve claimed every tax break for which you’re eligible.
Get organized now: Deliberate filing, however, does not mean total last-minute filing. No one should wait until April 14 to start the process.
So think about getting your taxes in order now.
You’ll need to get the Social Security numbers of your spouse, all your dependents (kids and adults, too), even exes if alimony is involved. Make sure you have these critical ID numbers before you sit down to fill out your forms.
You should have all your wage and 1099 income statements by now. If you didn’t look at them when they arrived, either in your curbside mailbox or electronically, do so immediately. Most issuers have to send the IRS its copies of this information by the end of February. If there’s a problem with one of your forms, you want to make sure you catch it now to avoid having to deal with a corrected statement.
Take some time to think about what tax credits and deductions you might be claiming this year. Do you have kids? Pay for their daycare or education? Give money or goods to your favorite charity? Each of these could affect your taxes.
If your life hasn’t changed a lot since you filed your 2006 return, pull out your copy of last year’s return to see what you claimed then. You also should check out this story on new tax laws that might affect your 2007 return.
What’s that? You say all this tax-planning stuff doesn’t worry you because you’re handing your tax chores over to a professional. Well, if you you haven’t already hired one, you need to get cracking. The calendars of tax preparers and accountants book up quickly.
No accountant, no worries, you say. You’re going to use trusty tax software. Again, start shopping around now for the program that best fit your needs. Some tips in that regard can be found in this story, as well as in the tax tip section of this previous blog post about e-filing.
This story has more info on how to get ready to file. If you want to tick off your coming tax tasks, print out TurboTax’s tax preparation checklist. And H&R Block has an interactive program where you can create a customized filing prep list.
Kristine
Last year was a horrible year as far as corrected 1099s from brokerage companies. Hoping this year is better, but I’ll probably delay some clients who experienced this last year, just in case. Great post as usual!