Once again, tax season is upon us. This time of the year isn’t exactly pleasant, but it is inevitable. While asking for positivity when it comes to taxes might be a stretch, you should at least be prompt about filing. It’s better to just get it over with. There are consequences if you get them in late, and the consequences range from irritating to serious. Here are some tips to preparing your taxes in time, as well as some changes to know about. There are many new rules in effect with the new presidential administration.

There is a chance that your filing might look very different this year as opposed to last year. That’s why you should throw out the playbook from last year and look at your taxes with a fresh eye. 

Child Tax Credit 

The new tax reform laws boosted the child tax credit. If you have kids, you will probably benefit from this new rule. If you have children who are sixteen or under (and who qualify for the credit), the amount you can claim is $2,000. That’s double 2017’s amount, which was just $1,000. Also, there are new guidelines as to who can claim the tax credit. These new income guidelines expand who can take the credit. This means that even if you couldn’t take it before, you may be able to now. This is an example of why it is important to take a look at your taxes anew. 

State v. Federal Taxes

Note that state taxes might not mirror federal taxes. You could qualify for federal deductions while seeing little to no change in your state taxes. Some states may have a flat tax, while others do not. While this is not news to someone who has been filing for a while, new filers should not get caught unawares by the difference in the systems. Making a mistake might end up costing you. This is why you shouldn’t be afraid to consult a tax planner for assistance. What you pay them to do your taxes is far less what you’ll owe the IRS in penalties. 

Standard v. Itemized Deductions

One of the most notable changes the tax reform law brings has to do with standard and itemized deductions. The standard deduction has increased. Itemized deductions, by contrast, have decreased. For many households, it now makes more sense to take the standard deduction than to itemize. At the end of the day, the principle is simple math. If the itemized deductions give you more money, itemize. If the standard deductions give you more money, take the standard deduction. Just make sure you’re adding up the numbers to see which one gives you the higher return. 

Think About Retirement Accounts 

Another tax tip is to think about retirement accounts. Come 2019, retirement plans such as a 401(K) or IRA have higher maximum contribution limits. This means that if you start now (or keep up with the account you have), you can increase tax savings even more, as these accounts are tax-advantaged. This tip works for any year, however. Retirement accounts are an excellent way to both plan for the future and save money.  

Consider Electronic Filing 

Think about filing electronically. The error rate for electronic filing is lower than it is for paper filing, and electronic filing is also faster. The second it goes through, the IRS acknowledges that they have received your tax filing. Additionally, it is easier on the environment to not use paper. Note that if you make less than $58,000 (AGI), you can file electronically for free. 

Consequences 

If you’re late on your taxes, the consequences will hit April 15. The monetary fine ranges from 5% to 25% of the taxes you owe. This is per month, not per year. You might also forfeit your refund check. At worst, you could be arrested. The IRS will send you a bunch of paper notifications and even a representative to knock on your door before this happens, but arrest is the last resort. If you owe more than $25,000 and you’re evading payment, that could mean a jail sentence. 

Once again, April 15th is the deadline. April 15th falls on a Monday this year. These tax tips are just some of the many ways to file taxes promptly while saving money where you can. No one likes paying taxes, but you have to. Hopefully, these tips will make the process a little more painless. Consult a tax planner to maximize savings and minimize error. 

A New Year brings tons of opportunities for you to make and achieve resolutions. Whether you’re improving your diet, finances, weight, health, or lifestyle, make this year your year. A big part of ensuring that you’re ready to meet the New Year head-on is to plan properly. Planning can help safeguard against challenges. Think about it. For weight loss, you plan your meals and exercise routine. For finances, you plan out your budget. Planning is a key part of meeting your goals.

Estate planning is no different. Throughout the year, you should not only think ahead in terms of your lifestyle; you should also be prepared to meet financial challenges you may come across. Here are some key life events or changes and what you may want to do to plan for them. 

New Family Members

Is a new family member joining you? Perhaps a relative is expecting a baby or someone in your family is getting married. If that is the case, you should adjust your estate plan to reflect these new changes. For example, if you have grandchildren (or are expecting some) and you want them to receive some of your estate, consider setting up a trust that will grant them the assets once they are of age. A trust will let them receive the asset immediately upon the date of your choosing, as it goes into effect right away. This will allow them to avoid probate court, too.

…Or Maybe Just Some New Assets 

Maybe you don’t have a new family member, but you did get some new assets. Perhaps you’re buying a boat, new stocks, another home, etc. in 2019. You will want to think about what will happen to that asset after you pass away. While that’s not exactly a positive thing to consider, it’s important to ensure that the asset, if you own it, goes into the right hands. Again, as stated in the previous section, you could set up a trust. Or, you could set up a different type of transfer. Either way, put these new assets into your estate plan to guard them against probate court. 

Any Upcoming College Plans

If your kids or grandkids are considering college, you might want to take a look at a 529 plan. This is a tax savings plan that the IRS offers. Another name for the 529 plan is a “qualified tuition plan.” The IRS offers a 529 plan to encourage people to save up for college. You can choose from either a prepaid tuition plan or a college savings plan. Prepaid tuition plans let the plan holder purchase credits from their chosen educational institution, while savings plans act as investment accounts for someone saving up to attend college. Each comes with their own tax advantages, benefits, and disadvantages. If someone in your family is attending college and you want to help them out, consider taking a look at your state’s 529 plan. 

Sickness

People get sick. Unfortunately, it happens, and the best way to deal with it is to meet the challenge head on. To prepare for this unpleasant surprise, you should complete a healthcare directive and name your power of attorney. A healthcare directive details your instructions to the hospital or doctor taking care of you. The directive gives these instructions if you are too incapacitated to deliver them yourself. A power of attorney also lets a trusted individual (who you select) control your finances and make financial decisions on your behalf. Both of these financial tools give you autonomy in your decision-making, even when you are sick.

Aging: Still Inevitable

Another reason to take a close look at the sufficiency of your estate plan is the inevitable fact that people age. You will want to begin thinking about where you want your assets to go after you pass on. An effective estate plan will allow your assets to pass to your family without the involvement of probate court. 

These are just some of the changes you might experience this new year. Right now, we’re only in the first few weeks of the year. There is still time to plan ahead and avoid any unpleasant surprises. When it comes to your other New Years’ resolutions, you will want to get a plan together for success. Your finances are no exception. 

Hopefully, your New Year is off to a good start! There’s no telling what 2019 will bring, and that’s both exciting and maybe even a little scary. 2019 will probably come with some surprises, and these surprises can be pleasant or less-than. One way that you can deal with challenges successfully is to plan in advance for them. Formulating concrete plans for less-than-pleasant surprises will help take the edge off them if they happen. 

People get sick, and people pass away. These types of things are out of our control. In order to at least make these events more manageable, you should plan ahead. Handling these events is not out of your hands, even if the occurrence itself is. Here are some “worst case scenario” surprises that 2019 might (but hopefully will not) bring and how to deal with them. 

Sickness: Making Healthcare Decisions

Sickness can be serious. You also may have some predesignated notions about how you want doctors and nurses to care for you when you are sick. Just because you are incapacitated does not mean that your wishes will be ignored. By setting up a healthcare directive, you ensure that your care preferences are honored. A healthcare directive is a document that details any directions you may have for doctors. A classic example of this is a “DNR” (Do Not Resuscitate) instruction. These are the types of closely-held decisions you want upheld even if you cannot communicate them verbally. A healthcare directive lets you do this.

Sickness: Making Financial Decisions

Another important decision-making area is finances. Your finances enter perilous territory when you are sick. Before this happens, you should nominate a power of attorney to take care of your finances. This POA is someone you trust. You know he or she will make the best decisions for you. You can give him or her instructions while you are healthy that will give them guidance about what to do in the event you become incapacitated. Your finances do not have to suffer just because your health is in a bad situation. Nominating a POA gives you control over your money. 

Passing Away

Death is also inevitable. Depressing as that may sound, it is, sadly, true. Death also definitely qualifies as an unpleasant surprise. If you die, do you know where your assets and property will go? The answer “the courts will decide” is not going to work. Probate court will divide your estate and pay off your creditors first. Then, your family will get whatever is left. By setting up an estate plan with tools such as living trusts, you can ensure that your assets will go to the people you select. You avoid saddling others with the burden of probate court when you structure your estate plan properly. 

Guardianship 

If you have children and something happens to you, you will obviously want someone responsible to take care of them. Setting up guardianship in your estate plan allows you to appoint the guardian. This way, you will have peace of mind that your kids will be taken care of if something happens. If you do not have guardianship set up, the court will appoint a guardian, and it might not be a person you would choose. Make sure to ask your chosen guardian if they agree with your decision before setting the guardianship up. 

Divorces 

Lastly, divorce is very common. More than half of marriages end in divorce. If you are undergoing this unpleasant process, you know that jointly-owned property is often very difficult to unravel. Deciding who owns what is not easy, especially if the divorce is acrimonious. When working on your estate plan, you will need to adjust for the divorce. If you left something to your ex-wife in the event of your death, you might want to change that. An estate planner can help you with this. The whole divorce process almost always affects estate plans, so it is best to face these changes head-on.

This article is somewhat of a bummer, but it is important to prepare for any unpleasant surprises that 2019 might bring. While you shouldn’t be pessimistic, optimism does not mean lack of preparation. Guarding your finances and protecting dependents is essential to a well-rounded estate plan.