Preparing your tax and financial records for 2016 will help you to keep track of your income, expenditures, savings and taxes. These four elements are vital in measuring monetary growth. Organized records also make preparing your tax return easier. Here are tips on what to do when preparing your records.
What Records to Keep
Records of receiving of income such as bank statements, expenditures such as credit card statements, and receipts of expenses that are tax deductible such as those of charitable giving are important and should be retained. Any document that supports the claims you make on your tax return should find a space in your tax records.
In case of an audit, the responsibility of proving deductions, entries and statements on your tax return falls on you. This is called the burden of proof. Even if you did not include incorrect information on the return, you must be able to prove that you included the correct information by using supporting documents.
Collect Information Returns
Depending upon whether you file as individual or business, you might be required to file various information returns. Some of the most commonly filed information returns are:
- Form W-2 for Wage & Tax Statement
- 1099-INT for Interest Income
- 1099-D for Dividends
- 1099-MISC for Miscellaneous Income
- 1098-E for Student Loan Interest
- 1099-R for Distribution from Pensions, Annuities, IRAs, Retirements, etc.
- 5754 for Receiving Gambling Winnings
- 1099-C for Cancellation of Debt
For businesses, there are forms, including:
- Form 8027 – Employer’s Annual Information Return of Tip Income & Allocated Tips
- Form 8300 – Report of Cash Payments Over $10,000 Received in a Trade or Business
The recipient must receive these forms by January 31 unless the deadline doesn’t apply, such as in the case of gambling winnings.
Gather the Receipts
If you itemize deductions, it is vital to keep the receipt or bank record of any deduction you claim on your return. You may gather receipt for medical expenses that are not covered, charitable contributions, restaurant bills for business meetings, property taxes, and so on. If you are unsure of what to keep, retain and organize the receipts of all the expenses before your return preparer informs you of which deductions to claim.
For help with tax planning call one of our offices:
Plymouth 734.454.4100, Allen Park 313.388.7180,
Grayling 989.348.4055, Livonia 734-462-6161,
Royal Oak 248.399.7331, or St. Clair Shores 313.371.6600