Well, it’s here again. Tax season is inevitable, as the old saying goes, and this article will give a brief primer on the top ten things you should know about tax season, including why filing is important, how life changes can affect your taxes, and, of course, penalties you can incur if you run afoul of the IRS.

Top Ten Tax Things to Know 

10. E-Filing 

Coming in at number ten (though it could fall anywhere on this list) is e-filing. E-filing is a good way to save money, as opposed to doing your taxes on paper and mailing them in via snail mail. You can use tax software (like that at H&R Block, for example) to help you save time, trees, and, most importantly, money. 

9. Always Look for Exemptions 

Being married and having kids are two major examples of exemptions. Chances are, even if you don’t fit into either category, you might fall into an exemption that will save you money. For example, if you fall into a lower tax bracket, you might be eligible to save on your taxes. Taking your time to find out whether you can save is a wise idea.

8. Three Words: Adjusted Gross Income 

That’s what really matters. Your AGI (Adjusted Gross Income) is the number you get after the government subtracts expenses, like IRA contributions or education tuition. AGI determines credits and deductions we can take. After deducting those, we get our taxable income. The word “AGI” is all over your tax forms because it is really important at the end.

7. Credits = Money Saved

Exemptions and credits are not the same thing, even though they’re both good. An exemption reduces your taxable income. Credits actually reduce how much taxes you owe. Credits are simple to understand: a credit is money you don’t have to hand over to the government. 

6. Standard Deduction

Standard and itemized deductions are always somewhat of a source of confusion for people. Here are brief definitions for both. First, a standard deduction is worth somewhere between $5,800 and $11,600. If you have simple taxes, you don’t have to go through a huge process to get deductions. A standard deduction is just a reduction off your taxable income. It’s a flat number. You take it, and you pay less.

5. Itemized Deduction 

…Which then brings us to itemized deductions. For itemized deductions, you will need to list out each deduction you can take. If your itemized deductions together equal more than your standard deduction, this is the deduction you take. Examples of itemized deductions include charitable donations, mortgage interest payments, and medical expenses.

4. Why Filing Is Important (AKA Don’t Procrastinate)

Filing is important because there’s no way around it if you make over a certain amount. Because figuring out what exemptions you qualify for and what deductions to take might take some time and digging, you should get started ASAP, not on April 15th or the day before.

3. Ok, So You Procrastinated 

However, someone is always going to procrastinate for whatever reason, and the IRS knows that. You can file for an extension if you need more time. This is not a good idea if you’re putting it off because you don’t have the cash to pay it. If finances are the issue, you can use a credit card (if your bill is low) or go on a payment plan. 

2. Penalties 

If you don’t pay your taxes, bad stuff can happen. The IRS will send you some scary letters and charge you fees for not paying. In very extreme cases (the big-name, Al Capone tax evasion cases), you can even do prison time. If you’re having trouble paying, you can talk to the IRS about a payment plan. They will take it easy on you if you do that, but not if you simply don’t pay.

1. Don’t Mess Up Your Filing Status 

If you get one thing right out of this entire process, it needs to be your filing status. This is the question on the tax form that asks you if you’re single, married, etc. This status will affect how much you pay, and getting it wrong will be a huge hassle.

Do you have big plans in 2020? If you’re planning to get engaged or married in 2020, first off: congrats! Secondly, you want to make sure that your estate plans are in order before you move forward. Ensuring that your estate plan reflects the new addition of a spouse can save you quite a lot of headaches later on. Don’t worry—making an appointment with an estate planner won’t take too long, and it won’t be (too much of) a buzzkill on the upcoming nuptials. Here are some things to think about before you tie the knot. 

Prenuptial Agreement

Ah, the dreaded prenuptial agreement, AKA “a prenup.” A prenup provides asset protection, not just in the case of divorce but also in the case of death (which might be a more appealing way to sway your significant other into signing one). A prenuptial agreement addresses what happens with alimony and assets if either of these things occur. It also can address how you want your kids from another marriage to be treated in terms of asset protection. Additionally, a prenup can handle how debts are divided between spouses if there is a divorce or death. A prenuptial agreement is, of course, signed before you get married, unlike a postnuptial agreement.  

Postnuptial Agreement 

A postnuptial agreement, as the name suggests, is signed after you get married, as opposed to being signed in contemplation of the marriage. A postnuptial agreement has effectively the same protections as a prenup; the timing is just different. In almost all states, this agreement must be in writing. In some states, it must be notarized. A postnup outlines the obligations and responsibilities of each partner in the event of death or divorce. 

This makes the list because, if you’re in a time crunch and will be married before you can set up a time to make a prenup, a postnuptial agreement is a viable option so that you’re not left in the lurch.

Power of Attorney 

A common misconception is that a spouse automatically becomes your power of attorney once you two are married. This is not true; you have to designate your spouse as your POA. A power of attorney is someone who has the ability to make decisions on your behalf in the event that you are unable to do so yourself. Obviously, this must be someone you can trust to behave rationally and uphold what they know to be your wishes for healthcare and finances. Hopefully, you feel that way about your spouses. Another common power of attorney choice is your children.

The Will

While a will isn’t the perfect way to protect your assets, it is better than nothing. If you are not married and you die intestate (without a will), your spouse-to-be will not inherit anything from you. They will receive nothing from your estate. Setting up a will or, even better, a trust, can ensure that you don’t leave your spouse hanging if you die before you are married.

Trust 

Trusts are flexible, useful estate planning tools. If they are done correctly, you can avoid probate and its expenses, and you can keep your estate’s affairs private. A trust is a legal document that creates a fiduciary relationship between you, your trustee, and, later, your beneficiary. It is a way to transfer assets without going through probate. You can use a trust to transfer assets to your spouse, or you can even create one with specific provisions that ensure your kids will get a share of your estate. Trusts are very wide-ranging and can do a lot for asset protection.

Okay, so maybe this isn’t the most fun thing to do before you get married. But, these types of documents are essential to financial health. Take a break from cakes, tuxes, and dresses and get your estate plan with your new beau squared away. 

According to divorce lawyers, January is “Divorce Month.” There are plenty of reasons for why January ends up being the busiest month in which to file divorce. Usually, families want to stick it out through the holidays before making a big chance. Who knows, maybe someone’s New Year’s Resolution is to get divorced. 

Whatever the reason, there are some things you need to know when you’re in the process of getting divorced. And no, we won’t put you through the, “Are you sure you want to get divorced?” question. Here are five things to know about getting a divorce. 

1. Get Your Financial Documents Together 

Divorce relies heavily on documentation for the purposes of things such as alimony, marital property, and child support. Financial records, phone records in some cases, mortgages, and receipts for sale are all things you might have to show to a court to prove financial status or lack thereof. Start digging around for that stuff now, whether you have copies online or in boxes somewhere. It’s always wise to make copies of physical documents, just in case. 

2. Update Your Estate Plan 

You probably don’t want your spouse as your power of attorney, especially if you are dumping them, or vice versa. Update your estate plan to make sure that they are stricken from the plan where you want them to be. While in some states, divorce automatically invalidates some provisions, the pre-divorce limbo period doesn’t invalidate anything. 

3. Ask an Attorney about Joint Bank Accounts/Credit Cards 

Joint bank accounts and joint credit cards are tricky. They might have seemed like a good idea at the time, but now they’re a mess because the finances are all tangled up. Talk to an attorney about getting the finances separated and handling the joint bank accounts. You might need to call in an accountant, but the first step is talking to an attorney. 

4. Custody Issues 

A lot goes into custody. The prevailing standard in most states is the best interests of the child or children, and that “best interests test” depends on a whole penumbra of factors. You will likely need to sit down and work out your work schedule, financial stability, and housing situation when you’re discussing custody. The court will look to the best interests test when determining custody. It is best to keep custody battles between you and your spouse and avoid dragging kids into back-and-forth between the two of you.

5. Know When You Are/Aren’t Single 

This one’s about adultery. If you’re still legally married, it is unwise to move in with or start a relationship with someone else, as your spouse could claim that as adultery. Even if you’re living separately, some jurisdictions will look on that as adultery. Adultery doesn’t affect the division of marital property, but it can affect other considerations of the process. Save relationships and dating for when this process is over. You’ll likely be far less stressed out and better able to focus on a new relationship when the divorce is settled, at any rate.

According to the CDC, the US divorce rate is 3.2 per 1,000 people. While this is a decrease, the decrease is caused by people not getting married, as opposed to just being better at getting married. All this to say: divorce is common. Don’t be afraid to ask for help or advice, as you are not alone through this process, though it might seem like that at times. Help is out there, and the first step is to talk to an attorney.