Michigan Indian Community Blog

Guest Post by Manasa Nadig from Metro Detroit. Manasa is a Tax Consultant and can be reached at msogal@gmail.com for Tax filing, preparation and other questions. You can also follow her on Twitter for current tax news.

Last weekend, we took down Christmas lights and cleaned out the decorations inside the house. Another annual routine I followed was to take THE big yellow manila envelope out. You know the one I dump everything in that has to do with taxes?

A common complaint I hear as a Tax Consultant, is that clients dread to go through all their papers and face what they have to file with their tax returns for the year. And I know they are not alone; there are quite a few of you out there who sail in this boat!

Right now, before tax time, is a great time to get financially organized. Why? This is the only time of the year that you are forced (by Uncle Sam) to find all those financial documents to report your income. I’m talking about those 1099-INT from your bank accounts, 1099-DIV from your investments, and each and every other type of form. Beyond that, the more organized you are now, going into tax time, the easier it will be to get your taxes done quickly and efficiently.

What to Look For

1099-INT: This form shows the interest you have received from your bank accounts (checking and saving). Look at the amount. Are you happy with how much you received? For the first time in several years, interest rates are rising at banks across the nation. There is no better time to look for a great rate on a savings account than now. If you use a service like Adaptu or Mint, you can easily see how much MORE you could be making by moving your funds to another account!

1099-DIV: This form shows your dividend income. This is what is paid by the stocks that you own in your brokerage accounts. Once again, are you happy with the amount that you were paid by the stocks you own? There are some great companies out there that pay great dividends. If you don’t get paid for holding the stocks you do, you should seriously consider changing your investment mix.

1099-B: This form shows how much you made, or lost, from the sale of investments. You should know exactly what this number is, well before the form shows up. Losing money? Consider sticking to index funds and ETFs, and get the market rate of return. Making money? Share what you are doing with the rest of us!

Along with the 1099-B, you need to ensure that you know your cost basis for all of the shares you sold. This can be the most tedious part of a tax return if you are not organized. If you are a heavy trader, I recommend using software, such as Quicken, which will keep track of all of your capital gains and losses

on every share. Then, at tax time, you simply print your 1099-B Capital Gain Report, and all the math and data is right there to plug into your taxes.

Small Business Income (Schedule C):

You might receive Form 1099-Misc. You need to ensure that you have accurate records of: Gross Income, Cost of Goods Sold, and Expenses.

For expenses, you could have internet and computer expenses, advertising, contract labor, legal fees, and even travel.

To keep all of these expenses organized, I highly recommend using Quickbooks. If you keep track of everything diligently all year by entering your receipts and sales as you incur them, it makes taxes easy. You just transfer over the data from your Year-to-Date Profit/Loss Report, and you’re done.

W-2’s, 1099-R’s etc:

These Forms are legally due by the end of January. Open the envelpoes and make sure the Wages/ Retirement Income reported are correct before you do your taxes. Cross checking with the last statement for the year will make sure the numbers are what have been deposited into your Bank accounts.

Receipts for All Items Itemized:

The IRS and the State of Michigan is now getting strict about what you claim on your Tax Return, make sure you have receipts to back them up. These include property tax statements, donation receipts, car registrations, and all the little receipts if you can claim Employee Business Expenses.

Organization is Key!!

And remember—this is not only for the current year-the IRS recommends keeping your receipts on file for 3 years from the time you filed your taxes.

So go get yourself a nice new binder/ accordion folder/ organizer) and be sure to file away everything and your tax time will be a cinch!