Right now, before tax time, is a great time to get financially organized. Why? Because it 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 their 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)
If you are blogging full time, you are probably reporting your blogging earnings as well – either as a small business or as a hobby business. Either way, you need to ensure that you have accurate records of: Gross Income, Cost of Goods Sold, and Expenses.
For bloggers, most of your gross income could include advertising revenue and products, such as eBooks, sold. The number one cost of goods sold I encounter as a blogger is PayPal and other merchant account fees.
Finally, for expenses, you could have internet and computer expenses, advertising, contact labor (such as writers, SEO help, etc.), legal fees, and even travel if you went to a conference this year.
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.
Organization is Key
Still wondering how to get organized as things come in the mail? Check out the picture on the right. That is the binder I use every year. As all of these statements start coming in (I’ve already had a few), I file them immediately into the binder. It is important to not forget things such as: property tax bills, car registration payments, and donation receipts. By putting them all into this binder throughout the year, I have everything I need in one place to make tax time a cinch!
Readers, what tips or tricks do you use to get organized and stay organized for taxes, or all year?
Editor’s note: After reading and commenting, here’s one of my favorite recent post’s of Robert’s called, “Congressional Leaders Promote Individual Financial Un-Accountability“.