Get a jump on your taxes: IRS e-filing starts Jan. 10

CBS MarketWatch Article
By Andrea Coombes, CBS MarketWatch.com
Last Update: 12:01 AM ET Jan 3, 2003

SAN FRANCISCO (CBS.MW) -- The tax season starts now -- if you want it to.

Taxpayers assume they can't file until they receive their W-2s and year-end bank and brokerage statements in late January. But there are ways to get a jump on the process.

Anyone anticipating a fat refund or needing a return for a new loan or refinancing can get a big jump on the process -- the IRS accepts electronically filed returns beginning Jan. 10.

"Most people wait until they get all these forms in, which means they don't file until February, but you can get this information ahead of time and file your return early," said Roger A. Kahan, a certified public accountant in Stoughton, Mass. "The earlier you file, the faster you get a refund."

In fact, if you have the refund deposited electronically to a bank account, you'll receive it about 10 days after "e-filing." For a mailed check, expect about a two-week wait.

More people are already figuring out the advantages of early filing.

"Last year, we registered almost 5,000 people before the program was available, and it was available on Jan. 13," said Carlos Quiroz, a certified financial planner and president of E-File Online, Inc., which operates www.e-file-online.com.

Missing some information? A little time on the phone and Internet could yield an answer. For instance, if you think you have interest income, many banks will tell you over the phone or by fax how much interest you've earned on each account over the year, Kahan said.

Banks also will often divulge over the phone how much deductible mortgage interest you can claim for the year, he said.

If you're trying to determine stock dividends or capital gains distributions, review account statements sent to you during the course of the year. Many brokerage firms offer online access to monthly statements before mailing them, meaning December statements are accessible early in January.

"December statements should contain the information needed," said Lance Berg, a spokesman at Charles Schwab, which usually makes electronic statements available the first week of the following month.

Filing without a W-2

Some employers distribute W-2s early in the year, but all is not lost for taxpayers who get the form later: If you file electronically, you don't always need a W-2 in hand.

Electronic filers fill-in an online version of the form and can use the last paycheck stub of the year to glean wages earned and taxes withheld. However, you will need your employer's identification number and complete address. These are available on your previous year's W-2 if you work for the same employer.

Beware: The IRS checks what you've entered against the employer's submitted W-2 statement. For those who receive pre-tax contributions to a retirement account, some experts recommend confirming those year-end amounts with your employer.

"If you get these wrong and they don't match up with the W-2s that the employer sends in, then the IRS will be getting in contact with you to find out why they're different," said IRS spokesman Tim Harms.

Paper returns require the W-2 statement be attached. However, in most cases, 1099 forms (detailing interest, dividend and miscellaneous income, among other things) do not have to be attached, so if you happen to be among those who receive W-2s early, you can file early. Paper returns can be filed any time.

Now heed this

Not everyone agrees that filing before you receive a W-2 is a good idea. IRS regulations require that tax advisers have the W-2 in hand before transmitting a return, said Abe Carnow, a certified public accountant in Los Angeles.

But at a Jackson Hewitt tax-prep franchise office in San Francisco, taxpayers can file their return using only their paycheck. However, they can't receive their return until they bring in their W-2, owner Karl Lindinger said.

Also, rushing what can be a complex process might be a problem in and of itself, Carnow said.

"The advantage of filing early is to get it out of the way, move on with life, stop worrying, and if you have a refund, to have the refund get back to you as soon as possible," Carnow said.

"But early filing to me is dependent on having access to all the data you need, and being sure you understand the tax law and all the provisions that apply to you. Sometimes people are in such a rush to do it on their own that they will miss out on certain tax benefits."