Everyone’s financial situation is different, so it can be a little difficult to determine exactly how your financial situation will be affected by the tax changes in place for 2021. However, what is important is knowing what these changes are, as there’s a good chance you might end up with more money in your pocket at the end of the day.Changes range from deadline adjustments to increases in income tax brackets and deductions. A lot has changed, and it’s important to be aware of changes to not only maximize your savings, but also reduce mistakes. No one likes to have the IRS contact them about fixing paperwork. As always, you can contact a tax attorney if you need assistance. 

Big Changes to Note 

COVID has caused some pretty big changes, including this main one: the tax deadline has moved. The IRS extended the federal tax return deadline to May 17, 2021. Another big change revolves around the standard deduction, which increased to $12,400 for singles and $24,800 for couples filing jointly. Income tax brackets have also gotten an increase, thanks to inflation. 

Below are some other changes of which to be aware.

Standard Deduction Changes

When you’re doing your taxes, you have the option to take itemized or standard deductions. These deductions lower your taxable income. The former is more of a pain that the latter, but, if itemized deductions save you more money, then the hassle is worth it. 

Note that the standard deduction has changed. If you’re single, it has changed from $12,200 to $12,400. Married filing jointly has changed from $24,400 to $24,800. Married filing separately has changed from $12,200 to $12,400, and head of household has changed from $18,350 to $18,650. Other deductions, including charitable, medical, business, EITC, and child tax credit, have seen changes as well.

Changes to Other Deductions 

The CARES (Coronavirus Aid, Relief & Economic Security) Act is responsible for many of the changes below. 

Charitable

With the CARES Act, you can deduct up to 100% of your AGI (Adjusted Gross Income), in qualified charitable donations if you itemize deductions. If you take the standard, you can write off up to $300 of donations made in cash.

Medical

Medical bills are nothing new, but the pandemic made them even more prominent, as costly COVID-19 hospital visits put many Americans into the red. You can deduct medical expenses over 7.5% of your AGI, if you’re itemizing your deductions. So, if you make $150,000 per year, you can deduct out-of-pocket medical costs above $11,250.

Business

Self-employed workers know that they can claim a lot of deductions on their tax returns, such as home offices and travel expenses. However, if you were working remotely, you are not able to claim this home office tax deduction. It is only reserved for those who are self-employed. 

EITC

The Earned Income Tax Credit helps out people earning up to $56,844 during the tax year. 20% of taxpayers don’t file for the EITC, which is crazy, as it can save you a lot of money. Make sure to file for the EITC if you earn up to that $56,844 mark. 

Child Tax Credit 

Families can claim a tax credit of a maximum of $2,000 per qualified child. The income limits for claiming the credit are $200,000 for singles and $400,000 for married parents. The credit is refundable, which means families can get up to $1,400 for each kid as a refund. The American Rescue Plan will change this number in 2021, increasing the child credit to $3,000-$3,600 depending on how old the kid is.

COVID: What’s Taxable? 

Plans like the CARES Act provided a lot of aid for Americans struggling to pay bills. However, which of this aid is taxable, and which is not? 

Stimulus Checks

If you received any of the three stimulus checks sent out, you’ll be happy to know that that money is not taxable income. It’s treated the same way as a refundable tax credit. Consider it an advance on your refund.

PPP Loans

Paycheck Protection Program loans are designed to be forgiven, as long as you used them on business expenses. Money from the PPP loans that you used to pay off your expenses can be deducted from AGI. But, make sure you fill out your Small Business Administration loan forgiveness application. Otherwise, you won’t be off the hook to repay the PPP loan.

Unemployment 

The first $10,200 of unemployment benefits are tax-free, as long as your household income is under $150,000. This means that you might owe less than you originally thought on your taxes. If you have unemployment benefits of over $10,200, you have to report any excess as taxable income. For example, if you got $11,000 in unemployment benefits, you must declare that $800.

This list isn’t exhaustive, but it does hit on some of the biggest changes for the upcoming tax season. Our recommendation is that you contact a tax attorney or other tax professional to make sure you’re doing your taxes correctly and maximizing your savings. 

Stay informed and read more useful facts on our website.

April is Stress Awareness Month (ironic, considering that both April Fool’s Day and Tax Day fall during April). Stress can have an enormously negative effect on your body, causing problems ranging from high blood pressure to depression. Financial problems are one of the main causes of stress. 

In 2019, before COVID-19, 70% of Americans said that they were in financial trouble. It stands to reason that that number has only increased since the pandemic hit, causing financial hardship for millions of Americans and their families. Financial stress ranges from debt repayment, high costs of living, and lack of emergency savings to overall poor financial health. In this article, we’ll discuss possible ways to reduce financial stress.

What Happens When You Die? 

When you die, your assets will be distributed, whether to your creditors or to family and loved ones. If you don’t want your estate to go through the hassle of probate court, considering setting up trusts as a way to avoid that process. Whichever financial vehicle you choose, you should make sure that it is comprehensive, providing both a way to distribute your assets to your loved ones and satisfy debts with creditors. 

If you die intestate, which means you have no estate plan, your estate will go to probate court, and a judge will pay off creditors and give your family what is left at the end of the repayment process. Probate likely will add a lot of stress to your family, as the entire ordeal is quite unpleasant. To avoid that potential source of stress, contact an attorney to set up a comprehensive estate plan. 

Protecting Your Business from Creditors

No one is immune to a lawsuit, no matter how careful someone thinks they are America is a litigious society, and millions of lawsuits are filed every year. Asset protection for business owners is something that every single business owner, from a huge corporation to a small mom-and-pop shop, needs. 

Consider changing the structure of your business to a corporation to protect yourself from personal liability. Assets receivable financing, trusts, and insurance are other ways to safeguard your company against creditors. Insurance is especially vital if you are a doctor, lawyer, or other professional. Check with an attorney to make sure you’re doing as much as you can to protect yourself within your state’s particular laws.  

Fixing Tax Issues

A huge source of stress for Americans is running afoul of the IRS. IRS penalties range from fines to imprisonment, and it’s fair to say that the U.S. has a healthy fear of the Internal Revenue Service. However, all is not lost if you owe back taxes or make a mistake. 

If you owe back taxes, still make sure that you file your tax return by the deadline. Immediately contact the IRS to discuss payment options. The IRS will respond far better to someone who is reaching out proactively than to someone trying to hide from them. Whatever your issue, call 800-829-1040 to speak with a representative. You will likely find that the IRS is far more flexible than their fearsome reputation. The worst thing you can do is try to ignore or avoid the situation. 

Dealing with Ill Family Members 

A sick or elderly family member puts a huge strain on family members, especially if that family member is unwilling or unable to take charge of their financing. If you’re in that position, try to convince them to at least set up a power of attorney. This power of attorney will oversee financial and/or healthcare decisions if the elderly or ill person is too incapacitated to handle these decisions themselves. 

Another important financial document for a sick or elderly family member is a healthcare directive, which will communicate end-of-life wishes to the doctors and nurses in charge of their care. Even if the patient cannot voice their wishes themselves, the healthcare directive will act in their stead.

This list is by no means exhaustive. We all lead different lives, and our sources of financial stress vary from person to person. Hopefully, this article at least covers some of your financial health stressors. As always, you can contact an attorney to learn more about protecting your financial well-being. 

Visit our website to find out more, stay informed and reduce stress when you know how to take charge of your financial future. 

Corporate law is a complicated field, and there is a lot to know about this sector of law. If you’re considering forming a corporation, you will definitely need to hire an attorney. It’s not advisable to try to go through the process yourself, as there are so many technicalities. You want to do it correctly the first time to avoid excess hassle and cost. 

In this guide, we’ll discuss the benefits (and drawbacks) of forming a corporation. We’ll go through the basic steps of forming a corporation, providing an overview of what the process will look like. It might seem confusing, but corporate formation could have excellent advantages for your business. 

Benefits to Forming a Corporation 

The main reason that people form corporations is to limit their liability. If you own a sole proprietorship or a partnership, you (and your partner[s]) are on the hook for the business’ debts and liabilities. In many cases, creditors will go after your personal assets when collecting on business debts. 

Personal asset attacks are almost always not an option for creditors if you have a corporation. Advantages include personal liability protection, easier access to capital, and business security and continuity. 

Drawbacks to Forming a Corporation

As with anything, there are drawbacks, even in the face of the aforementioned benefits. Disadvantages to corporate formation include how time consuming the process is. There are also rigid formalities and protocols to follow, and corporations are subject to what’s known as “double taxation.” 

“Double taxation” occurs when the corporation’s profits are taxed, and then the profits are taxed to the shareholders after being distributed as dividends. There is no tax deduction when distributing dividends to shareholders, nor can shareholder deduct any of the corporation’s losses from their taxable income. 

The IRS Definition 

The Internal Revenue Service describes corporate formation as a process by which prospective shareholders exchange property or money (or both) in exchange for capital stock in a corporation. The corporation takes the same deductions as a sole proprietorship when calculating its taxable income, but it can also take special deductions. 

Corporate Formation: A Step-by-Step 

Though by no means exhaustive, and every single step has sub-steps of which to be aware, this step-by-step corporate formation guide is an overview of the process, giving you some idea of what to expect. In general, you will have to follow the steps below.

First, you should hire a transactional lawyer. This lawyer will walk you through the process of forming a company. Laws vary by state, and they are always changing, so hiring an experienced attorney will get your formation process off to a great start. 

Second, you must appoint a registered against. This individual can be a person or a company—called a registered corporate agent—and he, she, or it will accept the service of process on behalf of the corporation. If your corporation is party to a lawsuit, the agent will get the mail. The agent should file the articles of incorporation. After these articles are filed, you can move on to the next step. 

Third, you must create the corporation’s bylaws and appoint the corporation’s directors. The bylaws are rules and regulations your corporation must follow. These laws lay out the responsibility of shareholders, officers, and directors, and ensure there is no confusion or blanks left missing. In some cases, banks might want to see your bylaws before giving you a loan or letting you open a corporate account. 

Fourth, it’s time to issue stock. Shareholders are entitled to stock when they contribute cash, property, and/or services to the business. They have an ownership interest. Shares are classified as securities, which usually fall under state and federal law pertaining to them. 

Fifth, you should file anything else that’s necessary with your secretary of state. An attorney will help you clean up loose ends and get in documents before the deadline. Annual reports are an example of required documents you must submit in Florida. 

Sixth and finally, you should apply for an EIN (employer identification number), which is sort of like a Social Security number for your corporation. You’ll use your EIN when you file corporate taxes and apply for bank accounts. Filing usually takes a month, though you can apply online and get an EIN almost immediately. You should file any other necessary IRS forms at this point, too. 

Once again, you should hire an attorney to complete this process. An attorney will also be able to advise you on whether the process is right for your business, considering your industry, financial situation, tax liabilities, and other pertinent information. 

Visit WFP’s website to find out more about corporate formation. 

Have you ever wondered where the phrase “Luck of the Irish” comes from? Historians have revealed that the phrase isn’t as old as some may think—it’s not as old as St. Patrick’s Day itself, a holiday first recorded in 1601. “Luck of the Irish” dates back to the 1850s, when gold and silver mining was in its heyday. Some of the most successful, famous miners were Irish or Irish-American. The Irish ability to find gold led to the use of “Luck of the Irish.”

In law, we believe there’s no such thing as luck, only strong preparation and careful planning. Take your luck into your own hands through careful asset protection. 

What is Bad Luck? 

Obviously, there is no legal definition of “bad luck,” and we doubt attempting to come up with one would hold weight in court. However, there are certainly some negative events that might lead you to feel blighted. We’ll cover ways to prepare for these unlucky times, including death, sickness, and accidents and lawsuits, below. 

Death 

There’s no way to prevent death, but you might have thought about what will happen to your assets after you die. There might be important things that you own that you want to keep in the family (and out of probate court). 

Last Will and Testament

A last will and testament will not get you out of probate court—it still has to pass through the court process—but it is often peoples’ starting point when they think about how to structure their affairs after they die. A last will and testament is a final document arranging your asset division. 

In Florida, for a last will and testament to be valid, it must meet several requirements. These include: 

(1) The will must be in writing. 

(2) The person making the will (known as the testator) must sign it. 

(3) The testator’s signature must be at the bottom of the will.

(4) The testator must sign the will while in the presence of two witnesses. 

(5) The two witnesses must sign the will in the presence of each other and the testator. 

As with anything in law, there are a million sub-rules for each of those five categories, which is why it is important for you to hire an attorney. The attorney will make sure the will is compliant with the law, avoiding any problems in court when it comes time to validate the will.

Trust 

A trust is a three-party relationship. You, the donor, transfer assets and/or property into a trust. The trust is controlled by the trustee until you give the trustee permission to hand over the assets to a third party, the beneficiary. The beneficiary is the final person you intend to receive the assets. A trust is a way to avoid probate court. 

Sickness

If it’s not death that’s considered the unluckiest of ailments, sickness is certainly a strong contender. And, if you’ve been alive in the past year, you know that sickness is everywhere. More than ever, it’s important to have safeguards set up in the case of illness. Examples of these safeguards include a healthcare directive and power of attorney. 

Healthcare Directive 

A healthcare directive is a set of instructions for the doctors and nurses taking care of you if you are sick. You might have specific wishes for your care, and you will want to communicate these wishes, no matter how sick you are. A directive lays out these instructions in advance, protecting you even if you’re too incapacitated to tell the doctors and nurses what you want. 

Power(s) of Attorney

A power of attorney is a trusted person that you place in charge of your financial and/or healthcare affairs in the event that you’re too sick to take care of yourself. This person will act as your agent, making decisions about your finances and healthcare until you recover. 

Accidents and Lawsuits 

Lawsuits can be the Grim Reaper for your personal assets. Personal asset protection is a way to place assets out of reach of creditors. 

Personal Asset Protection

One common example of personal asset protection is the creation of an irrevocable trust. You place your assets into this trust, and they will be shielded from creditors and controlled by a trustee. You will not be able to remove the assets from the trust, but they will be safe from lawsuits and kept for your family.  

Umbrella Policies  

Another common way to protect your personal assets is to purchase an umbrella policy. This “just in case” insurance policy provides more coverage than your regular auto or home policy in the event of personal injury (for example, if you are in a car accident or someone is injured on your property). Umbrella policies cost extra, but they will give you peace of mind, which is priceless. 

As you can see, the way to have the “Luck of the Irish” is to simply be prepared. Bad things happen, and the best offense is a good defense. Contact an attorney for more information on boosting your own “luck” through careful estate planning. 

Visit our website to get even more details on how to take cover. 

When it comes to you and your family, anything financial is personal. “Personal Asset Protection” might be a term with which you’re not familiar, but it’s incredibly important. You’ve worked hard for your assets—your home, business, personal items, vehicle, and more—and the idea that these prized possessions could become fodder for a lawsuit is appalling. 

In this article, we’ll give you an overview of Personal Asset Protection. As always, you’ll want to talk to a lawyer for more information if this sounds like something that interests you. 

Why Do I Need This? 

You might be wondering why you need Personal Asset Protection. You might feel like you’re not at risk for a lawsuit. Unfortunately, that’s not exactly true, as America is a very litigious society, and over forty million lawsuits are filed a year. Even simple things like fender benders or someone falling on your property can lead to a court case. And, if you’re slapped with a bill, you will want to make sure that your personal assets cannot be taken by creditors. 

Though Personal Asset Protection has sometimes had a shady past (think of billionaires hiding their fortunes in offshore tax havens), there are legitimate, legal ways to keep your assets safe. Listed below are some of these means of protection. 

Asset Protection Trusts 

Several states allow Asset Protection Trusts, and they don’t require you to be a member of the state to buy one. These APTs are irrevocable, which means that, when you transfer assets into the trust, this transfer is permanent. The trust owns the assets and the trustee manages them. You won’t be able to take them out when the storm blows over, but the APT will protect your assets. APTs offer some of the strongest protection against lawsuits and creditors, as well as any other judgment against your estate. 

Accounts Receivable Financing 

Business owners might find that accounts receivable financing (ARF) comes in handy in warding off lawsuit damage. ARF helps avoid cash flow issues (such as those caused by a lawsuit). This financing is a type of arrangement in which a business receives financial capital related to its accounts receivable. Usually, this looks like a company receiving a loan on its outstanding invoices, but these ARF agreements can be structured as asset sales as well. ARF is a powerful tool for not only asset protection, but also growth. 

Note that ARFs do have their downsides. They can be more expensive than traditional lenders’ funding, especially if your business’s credit rating is less than ideal. You might even end up losing money if your ARF is structured as an asset sale.

Family Limited Partnerships

Family limited partnerships (FLPs) are used for moving wealth between generations. Assets that you transfer into the FLP are transferred in exchange for shares in the FLP. The partnership owns the assets, so they are protected from lawsuits. But, you control the assets through the FLP. There won’t be a market for the partnership shares you receive, which means that their value will be less than that of the asset you exchanged for the shares. 

Stripped-Out Equity 

A possible way you can protect your assets is by stripping their equity. Pull the equity from unprotectable assets and put them into assets that your state will protect. Real estate serves as a good example for this. Let’s say you own an apartment building, and you’re concerned about a lawsuit. If you take out a loan against the apartment building’s equity, you could put those funds into a protected asset like an annuity.

Possible Other Means of Protection

Below are a few other suggestions for Personal Asset Protection, including: 

• Retirement Plans. You might be able to put more money into your retirement plan (assuming it’s employer-sponsored). That could provide protection from creditors. 
• Spousal Transfer. You also can transfer important assets to your spouse’s name, but, obviously, this will go south if the two of your divorce. 
• Insurance. Purchasing an umbrella insurance policy will grant you protection from personal injury claims above the usual coverage that your auto/home policies offer. 
• Don’t Mix Assets. Avoid mixing personal and business assets. If your company is sued, separate assets could help avoid risk of personal loss and vice versa. 

There is a lot to cover when it comes to Personal Asset Protection. Contact a lawyer for more details on how to keep your hard-earned assets safe in the event of a lawsuit. 

Visit our website to learn more about Personal Asset Protection.