7 easy steps to an early tax refund

By the end of January, you should have all your checks and receipts broken down in each envelope by deduction category. Add up the receipts and checks (don't double count), and those are the numbers 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 numbersSometimes, the raw numbers you have are 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 last year was only the sale price. You're not taxed on 100% of that number. You reduce it, on Schedule D of your return, by your cost, including broker's fees. You're taxed only on the net profit. Starting with sales in 2011, Rosetta Stone Chinese your broker is required to report cost basis as well. Speak with your broker before any sales are made, and discuss alternative ways of valuing shares if your whole position isn't liquidated. From a tax point of view, you want to sell the shares with the highest cost to minimize your current tax.If you don't sell 100% 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 make your Jan. 1, 2012, mortgage payment on Dec. 31, 2011. The interest you pay won't be reflected on the Form 1098 sent by your mortgage company. That's because it won't get the check or the online payment until 2012. (If you pay online, be sure your bank records the date that you send the payment properly. A canceled check is still adequate proof.)Paying before the end of the year transforms your January 2012 payment into a 2011 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.(You can make the same tax move at the end of 2012, converting what would normally be a January 2013 payment into a 2012 deduction.)5. Call your accountantIf you're going to have your return professionally prepared, call your accountant now for an appointment.

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