Can You Get a Refund on Social Security and Medicare Taxes?

Tax refunds are often celebrated, but that’s because people don’t realize what they truly are. These refunds are not ‘free money.” Instead, the are simply your own money that you have accidentally overpaid to the federal government during a given tax year. 

And, you can actually overpay in a variety of ways. So, if you happen to overpay to the Federal Insurance Contributions Act, commonly known as FICA, rest assured that it’s still possible to get a refund. In fact, anytime you overpay in any way, you are entitled to get your money back.

What to Do When You’ve Overpaid

If you determine that you have overpaid on your FICA taxes, then claiming a refund Is fairly straightforward and easy. You simply have to fill out IRS Form 843, which is a claim for a refund and request for reimbursement.

It helps if your employer can include a letter substantiating your claim, but you can also include your own letter explaining the situation, which your employer can then verify. Be sure to also include your W-2 form from the tax year in which the overpayment occurred.

To make the process faster and easier and to ensure you have attached all required documentation, it’s a good idea to seek the help of a qualified tax professional. Often, with their help, you can expedite the process greatly.

Avoid the Situation in the First Place

While getting your overpaid money back from the IRS is possible, it’s definitely a hassle. If you’d like to avoid this hassle altogether, then work with a tax professional from the beginning. That way, you can ensure you always pay just the right amount in FICA taxes so that you don’t end up having to fill out extra forms and make extra effort just to get your own money back.

Understanding Installment Agreements with the IRS

When you owe a large debt or a tax liability to the IRS, it can feel very daunting, especially if you can’t pay what you owe all at once. Fortunately, the IRS deals with situations like this every day, and it has options in place to make it possible for taxpayers to more easily pay what they owe.  

Most often, the IRS will grant a monthly payment plan to make tax debts easier and more manageable to pay. These plans, also known as payment arrangements, are helpful to the tax payer. However, they do come with interest and penalties for late payments, so that’s something to be aware of.

If, regardless of the consequences, a payment plan is still your best option, you will simply need to fill out Form 9465 to request an installment agreement. If you’re unsure of whether you need an agreement or have questions about the form itself, you can contact the IRS or a tax professional for assistance.

Automatic Agreement

Often, taxpayers are very worried about whether or not their request for an installment agreement will be granted. However, that worry is often needless.

Generally, if you owe $10,000 or less, the IRS will perform a guaranteed acceptance of your installment plan. However, there are a few other criteria that you must meet. These include:

l  Not having filed your tax returns late in the last five years

l  Not having paid your taxes late in the last five years

l  Having filed all required tax returns

l  Agreeing to file all taxes on time in the coming years

l  Agreeing to pay all tax payments on time in the coming years

If you do not or cannot meet this criteria, don’t panic. Work with the IRS or your financial advisor to see what other options you have. Generally, the IRS does not want to make it hard for you to pay your debts and will work with you as long as you work with them!

What Happens if You Stop Filing Tax Returns

Sometimes, for various reasons, people will simply stop filing their tax returns. They might do this for one year, or they might do it for multiple years in a row. While you should never be tempted to simply stop filing your returns, you may be curious about what happens in this situation. While there is no one exact answer for every person, there is one common course of action that the IRS is likely to take should you fail to file.

A Substitute Return

One thing that may happen when a return is not filed is that the IRS may file what is called a substitute for a tax return. They will fill this form out based on the information they have available on you, whether it is accurate or not. From there, they can use that information to start collection activities against you.

As you can imagine, a substitute return is not in your best interest. The IRS is not going to file for deductions or anything else to cut you any tax breaks. Instead, in most cases, they will charge you the maximum amount possible, which could leave you owning some serious cash.

To avoid having a substitute return filed, always file your own returns on time, preferably with the help of a tax professional.

Your Rights

While it’s best to avoid a substitute return being filed in the first place, you do have options if one is filed and you don’t agree with the amount you owe. You can, for example, choose to go to tax court and attest the IRS’ assessment.

However, this is often a long, complex, and difficult process that you should avoid if you can. If it’s too late for that, contact a tax professional for assistance.

However, when possible, you’re much better off just filing your returns on time, with professional help, to avoid hassles and situations like this one.

Lasik Surgery and Your Taxes

Many people choose to undergo LASIK surgery in order to correct or at least better their vision. Unfortunately, since this procedure is often considered elective, it isn’t typically covered by health insurance policies.

However, just because your health insurance doesn’t cover it doesn’t necessarily mean you have to eat the whole cost. Often, you can deduct the cost of the surgery from your tax return.

The Importance of itemizing

If your LASIK surgery qualifies as a medical expense and you wish to deduct It, then you will need to itemize your deductions when you fill out your tax return. You won’t be able to claim the standard deduction. Instead, you will need to add up all of your tax deductible expenses and qualify them.

Once you have done this, you will be able to determine your itemized deductions, which you can then enter on your tax returns instead of the standard deduction. Of course, if your deductions equal less than the standard deduction, which is $6,350 for most taxpayers, this isn’t worth your while. However, if you can deduct more than that amount, then go ahead and do it in an effort to save.

Keep Limitations in Mind

As you deduct costs related to your LASIK surgery, keep in mind that the IRS has placed limits on what you can deduct.

In general, medical expenses can only be deducted to the extent that they exceed 10% of your adjusted gross income. So, basically, you can only deduct the portion of your medical expenses that goes over 10% of your income.

What this means for you is that, unfortunately, you probably cannot deduct all of the costs related to your eye surgery. However, you can deduct some of them, which could ultimately save you money.

To determine if itemizing deductions and going through all the effort to claim LASIK-related expenses is worth your while, talk with a tax professional. They can help you to understand whether or not claiming medical expenses is worthwhile in your case and, either way, can help you to find foolproof ways to save on your taxes.

Understanding Your Credit Card Number

If you’re like most people, then you have a credit card. And, also if you’re like most people, you probably don’t really understand how that credit card works or even what the numbers mean. And, while it’s not absolutely necessary for you to understand this information, it can be fascinating!  

The Basics of Credit Cards

First of all, all credit card account numbers are made up of three different features. These numbers, sometimes referred to as primary account numbers, provide information about who issued the card, the account the card is connected to, and the checksum.

The Card Issuer

If you look at the very first number on your credit card, this number is what is referred to as an “industry identifier.” In other words, it provides information about who issued your card and what industry the issuer is in. Next, there are six to eight digits which provide more detailed and exact information about who issued the card.

Your Account

Once the card issuer information is out of the way, all of the other numbers, except for the very last digit, are directly linked to you and your account. They provide information about the account itself, how much is available within it, and more.

The Checksum

The final digit of your credit card is what is known as a “checksum.” It exists to allow people running the card to ensure that the card and card number are valid. A sophisticated algorithm is used by payment processors to determine the validity of the card. Unfortunately, however, this system is not yet perfect, and people sometimes figure out the algorithms in order to generate card numbers that register as valid even though they are not.

As you can see, there is more to credit card numbers than you might have realized. And, since you now know that card numbers, as complex as they may be, are not perfect, hopefully you can take even greater care with protecting your card information.

Is it Wise to Invest Your Emergency Fund

In this day and age, nothing is certain except for uncertainty. For this reason, it’s always a good idea to have an emergency savings fund, money that you have available but don’t touch unless absolutely needed.   

However, just as it’s important to have “just in case” money on hand, it’s also important to invest. For those who don’t have enough disposable income to both invest and save, they often question whether or not they should invest part of their emergency fund. The answer to that question isn’t a simple one. It depends on a lot of factors and is a a decision best made with the help of a qualified financial advisor. With that said, however, there are a few tips that can allow you to determine whether it’s better for you to invest your nest egg or keep it safely stashed.

When You Have More than You Need

One of the first things to consider when trying to determine whether to invest or save is to look at the current amount you have in your emergency fund. It’s generally recommended that you have at least six months worth of money stashed away just in case.

So, look at how much you need to survive in a given month. If you already have that times six or even more, then you’re probably safe and even smart to invest a portion of it.

When You Can’t Predict Your Income

Investments can be a wonderful way to earn money, but sometimes, even the best-planned investments can still lead to money loss. Thus the smartest course of action is to replenish the money you’ve invested from your savings account as soon as possible after you’ve invested it. That way, if there is a loss, you won’t feel it quite so much.

However, if you don’t have a predictable income, such as when you’re an independent contractor or your business regularly goes up and down in terms of profits, it may not be the best time to invest. Generally, investments should only be made when you’re in a very stable and predictable financial place and can afford to take a financial loss if it comes to that.

While these tips can help in making your decision, remember it’s really best to make these tough choices with expert help. Thus, it’s highly advisable to not make any investment decision without qualified, professional help and advice guiding the way.

How the Tax Cuts and Jobs Act Affects Corporate Income Tax

If you own a business or are thinking about going into business, one thing you’ll need to familiarize yourself with is the corporate income tax rate. This is income tax levied on business profits at both the state and the federal level.

The good news is that, just like with regular taxes, business owners do have many options to legally lower the amount of taxes they owe. And, with the right understanding of tax law and the right professional advice, business owners can easily save themselves a large sum of money. However, a recent Act has brought about some changes to corporate income tax rates that people need to be aware of.   

Recent Changes

Right now, the corporate tax rate is 21%, which is lower than it has been in quite some time. This is due to a recent change made by President Trump, who signed the Tax Cuts and Jobs Act into effect in December of 2017. Under this act, the tax rate dropped from 35% to its current rate, and other changes went into effect as well.

One of the changes affects pass-through businesses, which include sole proprietorships, limited liability companies, real estate companies, private equity funds, and more. If you’re not sure whether or not your business qualifies as a pass-through business, check with your financial adviser. If it does, then you should know that your deduction for qualified income has been raised to 20%, a rate that will continue until 2024.
Another change made by the Act limits a corporation’s ability to deduct interest expense. Now, only 30% of income can be deducted as interest expense. During the first four years, corporations must calculate income based on their earnings before interest, tax, depreciation, and amortization. After that, however, income is calculated based on earnings before interest and taxes.

These are actually just a few of many changes that have occurred due to the Act being signed. If you are concerned about how this Act may affect you in these or other ways, work closely with a financial adviser. Even when changes like these happen, they still know how to help you save money on corporate income taxes and pay the lowest amount possible.

Simple Tips for Saving on Taxes

Life is expensive. As such, if you’re like most people, you try to save money wherever and however you can, including on your taxes. Fortunately, there are many ways to do just that. After all, why should you pay Uncle Sam more than you have to?   

Add a “Green” Addition to Your Home

If you care about the environment and your wallet, why not help both by taking advantage of the government’s Renewable Energy Tax Credits, which are available until 2021. These tax credits apply to eligible energy-efficient additions to your home, including things like fuel cells, geothermal heat pumps, and more.

How much of a credit you receive depends on when you have your system installed. For the maximum 30% credit, you’ll need to have your addition up and running before December 31^st

of 2019.

Just make sure, before you install anything, you check to ensure it’s eligible for the tax credit. Otherwise, you could end up making an investment and getting nothing back in return!

Opt for a 401(k)

Another nice option for saving money is to open up a 401(k). Not only will this plan enable you to save money for retirement, but you can deduct that money from your income, thereby lowering the amount of taxes you owe

The IRS does have some limits on how much you can contribute, tax-free, to your 401(k), but it’s a pretty high limit by most standards. If you’re under fifty, you can contribute $18,500 per tax year. And, once you reach 50, that amount goes up to a whopping $24,500.

These are just a couple of options for saving big come tax-time. To learn about more ways to save and to lower your tax bill exponentially, obtain the services of a qualified financial adviser. It’s one of the smartest investments you can make.

Tips for Handling Tax Debts

Every year, many Americans find themselves in a position in which they have tax debts that they are unable to pay in full. If this happens to you, don’t panic. The key is, first of all, to not avoid the problem. And, secondly, you must work with the IRS and, preferably, a professional tax adviser to find the best solution to help you settle the debt.   

Installment Agreements

One very common way to handle a tax debt that you cannot pay all at once is to set up an installment agreement or even a partial payment installment agreement. Via these arrangements, you will make small, manageable payments to the IRS until your debt is satisfied.

As long as you have some degree of disposable income and can reach a reasonable agreement with the IRS about how much you’ll pay and when, this option should provide an easy way to pay off your debt in a reasonable amount of time.

Work with your tax adviser or with the IRS directly to ensure you are eligible for this option and to set it up in a way that is mutually beneficial to both you and the IRS.

Offers in Compromise

Another option you might have if you are unable to pay your debt and can document your inability to pay it in full is an offer in compromise. Via this method, you and the IRS will settle on a reasonable payment amount that is actually less than what you owe to satisfy the debt.

Negotiating an offer in compromise can be tricky, so if you plan to go this route, it is highly advisable to have professional assistance. Otherwise, you just waste a lot of time and end up wracking up interest in the process…and that’s if your offer ever gets accepted in the first place.

As you can see, you do have options- these are actually just a few of many possible solutions- for paying too-high tax debts. For best results, work closely with a tax professional to avoid getting into this situation in the first place, or, if it’s too late for that, to get out of it in a way that won’t have a severe negative impact on your finances.

401k Secrets You Need to Know

Many people invest their money in 401(k) plans. In fact, these are one of the most popular and trusted ways of saving among American citizens. However, a lot of people are unaware of how, exactly, these plans work, and that’s not a good thing.  

It’s important to understand how these plans work, as well as to be aware of some of the lesser-known “secrets” about them.

The Separate Account Charge Secret

Did you know that you may be being charged a separate account charge for your 401(k)?

Typically, you have to pay this fee (which is often carefully hidden) if your plan is owned by a life insurance company. Even worse, this is no small amount. It’s often as much as 1.25%.

The charge can go by many names, including:

l  Group variable annuity

l  Mortality & expense charge

l  Variable account Charge

If you find you’re paying this fee and you don’t like it, talk with your financial adviser about switching to a 401(k) plan that doesn’t make you pay this unfair fee.

The Revenue Sharing Secret

Look out for revenue sharing happening on your account. This is when money is getting shared among your service providers.

Unfortunately, when revenue sharing starts happening, it often means that you will be steered toward risky, high-cost investments. It can also indicate that you’re likely to pay higher than average administration fees.

It can be hard to tell when revenue sharing is happening, so, if you have questions or concerns, have a trustworthy financial adviser, one not directly connected to your 401(K), to look over it for ou.

As you can see, 401(k) accounts can be tricky and sometimes even misleading. With the right financial help and guidance, however, you can discover their secrets and make your knowledge work for you.

Why Aren't People Saving More?

In America, there is a big problem with people not saving enough money. It is not uncommon, in this country, for people to get to retirement age and have very little to show for it, let alone enough to take care of themselves into old age.   

As you can imagine, not saving enough can lead to some serious regret. So, why do people regularly not save enough?   

Plain Procrastination

One reason people often give for not saving like they should is procrastination.

It’s all too easy to think that you’re young and that you have plenty of time ahead of you to save. Before you know it, however, years have passed, and you have nothing stashed in the bank.

Don’t let simple procrastination be what keeps you from saving. Remember, it is never too early to start a savings account. In fact, talking with a financial adviser and getting set up on a good savings plan as soon as possible can go a long way toward kicking procrastination to the curb and getting you on the right track.

Job Loss

No one likes to think about losing their job. Unfortunately, this can happen to the best of us.

Whether there are lay-offs at your job, or you do something wrong, firing can and does happen. And, when it does, it’s easy to deplete your savings and never get back on track.

This is why it’s so important to have an “emergency plan” in place for if you got fired. Would you have some kind of backup employment? Would you have at least six months worth of money to live on without dipping into your savings?

The better you prepare for these types of potential situations, the less likely it is you will find yourself devastated and your savings wiped out in the event of firing or some other undesirable life event.

In fact, having a plan- a plan to save and a plan for how to save in light of dire circumstances- is really the key to saving successfully. If you haven’t already, meet with a financial planner to get your finances on the right track and to ensure you’re saving as you should.

Addiction: The Financial Effects

When you have a loved one suffering from addiction, your concerns are probably about his or her health and wellbeing. And, while these are very valid concerns, addiction can affect more than just a person’s health. Addiction can also have a huge negative impact on the person’s financial wellbeing. Sometimes, addiction can even progress to the point where it financially hurts the family members of addicts as well. 

Borrowing or Stealing Money

When addiction gets severe, the addict will often spend every last penny he has to get his fix. And, when that money runs out, the addict will often ask family members to borrow money.

Often, this borrowing will get to the point where it is depleting the finances of the lender. Even worse yet, many addicts will turn to stealing, even from their loved ones, just to get the money needed to buy their substance of choice.

Bail Costs and Court Fees

It’s no secret that addicts are prone to getting arrested. Whether they get busted for buying or selling drugs, driving under the influence, or any number of crimes related to their addiction, bailing the person out isn’t cheap.

To top that off, addicts regularly need to go to court, which can rack up court costs, fines, and more. If you are the main person in an addict’s life, there’s a good chance that you will regularly be asked to help with these expenses, which can have a devastating financial effect.

Treatment

Even if you’re lucky enough for the addict in your life to seek help, that doesn’t come cheap.

Rehab and detox facilities cost a lot of money, and insurance only lasts for so long. Family members often take out loans and rack up major debt to help an addicted loved one recover.

Obviously, having an addicted family member is no picnic. Your best option is to know the warning signs of addiction and to try and nip addictive behaviors by encouraging your loved one to get help early on. Barring that, remember to put yourself first. Remember, you have a right to care for yourself and your finances while still caring about and loving the addict in your life.

Preparing to Send the Kids to College

When a little baby is first born, paying for college is often the last thing on the parent’s mind. However, children do grow up. And, there’s a good chance that, when they do, they’ll want to go off to college and will look to you, the parent, for help. If and when that day comes, here are a few things you need to know.   

College is Definitely Worth It

One of the biggest things parents wonder is whether or not college is actually worth the cost. The answer, in most cases, is a resounding yes.

Recent studies conducted by Georgetown University show that those who graduate from college will typically earn $1 million more in their lifetimes than those who skip it.

Thus, if you want to give your child a great chance at success, college is the way to do it. You have to pick a school you can afford without going into too much debt, and your child has to choose a major with care. But, if you can do those things right, you can set your son or daughter on the path toward success.

The FAFSA is a Must

When your child is planning on going to college, all kinds of forms are going to be put in your face. One that you absolutely have to fill out is the FAFSA, which stands for Free Application for Federal Student Aid.

This form gives you access to federal money, outside scholarships, loans, and grants that are available to you and can be a wonderful tool for helping to pay for your child’s college education.

No matter how many other forms you may skip out on, don’t overlook the FAFSA.

The advice presented here probably doesn’t answer all of the many questions and concerns you have about college. However, it’s a great start. To learn more and to get more help, contact a financial adviser who knows the ins and outs of paying for college and can help you to set up a solid plan for helping your child achieve his or her dreams.

Tips for Being Financially Happy

Everyone has heard the saying that money can’t buy happiness. And, while that may be true to some degree, it’s also true that it’s hard to be happy without money.   

This isn’t to say that you have to be swimming in money, but it definitely helps to be comfortable and secure from a financial standpoint.

So, how can you be more financially “happy” and comfortable? It’s really as simple as following some basic tips.

Save What You Can

First things first, one of the best things you can do for your financial happiness is to save as much money as you can.

The more money you have tucked away in case of an emergency, the less worrying you’ll have to do. Plus, once you have emergency savings covered, you can start putting money aside for fun things, like that big trip you’ve always wanted to take.

If you’re not sure how to start saving, where to allocate the money, or how much to save, speak with a financial consultant. They can look at your budget and your goals and get you set up on a reasonable savings plan.

Avoid Debt at All Costs

One of the easiest ways to chip away at your freedom and happiness is to be forever indebted to someone else.

When you’re always worried about debt and making payments, it’s hard to feel free and happy. This is especially true if your debt finds you in court or ends with your wages getting garnished.

To avoid these types of situations, avoid any debt that isn’t absolutely necessary. And, if you are already in debt, come up with a plan to slowly pay it off so that you don’t have that dark cloud hanging over your head anymore.

If you can follow these helpful tips and, ideally, work closely with a financial planner, there is no reason you can’t be happy and secure, at least from a financial standpoint, for the rest of your days.

Family and Finances

In a lot of families, finances tend to be somewhat of a “taboo” topic. Many people just don’t like to talk about money or financial matters, even with those closest to them. However, there are some instances in which family and finances have to go together. And, when these situations come up, it’s your job to deal with them appropriately.   

When You Need a Loan

At one point or another, most people are going to find themselves in a situation where they need help.

Perhaps they want to start a new business venture but need a little financial boost to get started. Or, maybe they are just having trouble making ends meet and need some assistance to get back on their feet.

Whatever the case may be, if you find yourself in a situation like this, you should be able to turn to family for the help you need. When you need to borrow money, the best option is to just flat out ask, not to beat around the bush. By asking directly and having a well thought-out plan for how and when you’ll pay the money back, you’re a lot more likely to have your family help you out.

When You’re Dividing Your Estate

In your later years, you will, hopefully, have some assets to leave behind. When it comes time to allocate those assets by dividing your estate, things can get tricky and tense among family members.

To avoid tension, your best option is to evenly divide your estate among your children or other heirs. If you can’t or don’t want to do that, have easy answers for why at the ready.

Keep the answers practical, such as the person who inherits more earning less, and try not to show favoritism. If you can be honest- but thoughtfully so- about how and why you divided your estate the way you did, you can avoid family squabbles and drama.

As you can see, sometimes families and finances can’t help but mix. When the two do come together, following these tips and trying to keep a level head will help you greatly.

Disinheritance

In life, things don’t always go as we plan. Sometimes, for example, a relationship that we thought would last for life fizzles out. Or, even worse yet, the person might do something to betray you, severing the relationship for good.

Whatever leads up to a ruined relationship, people often have to make changes. One such change could be disinheriting the other person. This is not an easy process, and it should always be done with the help of an experienced attorney.

Knowing some information ahead of time, however, can make the disinheritance process more manageable and easier to understand.

Try to Go for a Living Trust Whenever Possible

If you happen to have a living trust instead of a will, you’re in luck. A living trust makes disinheritance much simpler.

With a living trust, it becomes much more difficult for someone to successfully challenge the validity of your document and any changes you may have made to it since these plans are drawn up a few years or even many years before death.  As a result, people will have a difficult time claiming you weren’t in your right mind when you made the changes or that someone unduly influenced you to make the changes.

It’s also nice that a living trust is a private document, unlike wills, which are public. People are less likely to feel embarrassed or ashamed at being disinherited, which can cause them to fight the decision, since no one else has to know about it.

If you have a living trust, you will be glad for it when you start the disinheritance process. If you don’t, don’t panic. You’ll just have to work a little harder and a little more closely with a professional to make sure your wishes are clearly backed up and airtight in your will.

Be Careful About Your Beneficiary

One final thing to keep in mind is that the person who have will have the most control over your assets after your death will be your beneficiary. Thus, if you have named someone a beneficiary, but you wish to disinherit that person, you will want to remove that designation immediately.

While removing someone as your beneficiary isn’t technically the same as disinheriting someone, it does a lot of the same things and keeps your assets away from someone you wouldn’t want to have them.

As you can see, the disinheritance process can be a tricky one. With the right help and guidance, however, you can make it through!

How to Protect Your Digital Assets

The world is changing, especially when it comes to how people make, spend, and store money. This is especially true in the case of Bitcoin and other online or cryptocurrency.  

All of these changes have many people wondering what will happen to their online funds after they die. They wonder if there is any way to protect these assets and to potentially pass them on to others.

The good news is that there are options available. You just have to know about them and then make them work for you.

Keep Careful Track of What You Have

First things first, make sure you are keeping careful track of what your digital assets actually are and the exact amounts. You’d be surprised at how many people are unsure about how much cryptocurrency they have saved up.

Cryptocurrency isn’t the only type of digital asset either. Many people store photos and other important mementos online, and it would be a shame to lose access to all of that once a person passes on.

Thus, the first step in making sure all digital assets, in all their forms, are available after death, is to keep careful track of what those assets are and where and how they are stored. It’s a good idea to keep a running list of your assets somewhere and to make sure that those you care about also have access to it.

Choose a Fiduciary

In addition to keeping careful track of your digital assets, go ahead and name someone as a digital fiduciary in your will. More and more people are taking this step of appointing someone to be in charge of their digital assets following death.

You may also want to make good use of any relevant tools offered by major sites. Facebook, for example, gives you the option of putting someone in charge of your account after your death, someone who would be able to shut down your account or take other steps, such as memorializing it, after your death.

In addition to following these helpful tips, speaking with a financial consultant about how best to manage your digital assets both now and after death can be extremely helpful.

New Divorce Tax Laws

Divorce is not something anyone ever wants to go through. And, going through it is hard enough on its own that you don’t need any source of added pressure or stress. Unfortunately, however, divorce tax laws are changing. And, in 2019, there are some new laws regarding and affecting divorce. The good news is that, with the right professional help and understanding, navigating these new laws and how they may affect you doesn’t have to be all that difficult.  

Alimony

Sometimes, following a divorce, one person will be required to make alimony payments to the other person. In the past, any alimony that was paid was tax-deductible. And, any alimony received was counted as taxable income.

However, all of this will change in 2019. While this change may not seem like such a big deal, it is likely it will impact how divorce proceedings are conducted. It is likely, for example, that the higher-earning divorcing spouse will fight viciously to pay less in alimony or to not pay any alimony at all since this expense can no longer be written off. Likewise, spouses who are likely to receive alimony will probably fight for more of it since they don’t have to worry about the money being taxable.

If you are in or about to go through a divorce and think that alimony may come into play, speak with a tax professional about how to make this new law work for you, or at least not against you.

Pre-Nuptial and Post-Nuptial Agreements

Whenever new tax changes are made, they have a way of trickling down and affecting other things.

In light of these new laws affecting alimony, old pre-nuptial and post-nuptial agreements may be affected. Therefore, if you are divorcing or planning to divorce, have a financial consultant go over these documents with you to see if and how they will be affected.

Change doesn’t always feel like a good thing, whether it’s in a marriage or in taxes. When change is inevitable, however, your best bet is to try and mitigate the damage with the help of a financial professional.

Financial Changes that will Change Your Life

People set all kinds of goals and make all kinds of plans for how they will improve themselves, financially speaking. And, while people tend to be good at setting goals, not everyone is so good at keeping them.   

If you’re having trouble keeping your goals, maybe it’s because you’re not making the right ones. The key is to choose manageable goals that are actually doable, rather than huge ones that leave you feeling overwhelmed and, ultimately, like a failure.

In the spirit of setting the right goals, here are some “small but mighty” ones you can try.

Set and Stick to a Budget

One of the best things you can do for yourself is to set a reasonable budget, one that has you spending less than you earn, and then stick to it. While you can come up with this budget on your own, it’s a really good idea to have a financial professional write one up for you.

That way, you can not only set your budget, but you can make a smart plan about what to do with the leftover money. Whether it’s socking the extra away in savings or investing it, you’ll be setting yourself up for a bright financial future when you get serious about this goal.

Pay Down Your Debt

A lot of people live a huge chunk of their lives with crippling debt.

If you don’t want that to be true for you, develop a plan for paying down your debt. Whether it’s credit card debt, student loans, or anything in between, finding a solution to start getting out from under your debt can lead to great freedom.

You can do this by speaking with a financial adviser and coming up with a plan or even by working with your lenders directly. Even if it takes awhile to pay off your debt, you’ll feel so much better once you do!

As you can see, goals don’t have to be huge. In fact, small goals have a much greater chances of getting accomplished and of having the desired impact, which is to change your life for the better.

Craziest Deductions You've Ever Heard Of

If you’re a taxpaying adult, then you probably know all about deductions, which can help you to save money on your taxes. Maybe you’ve even qualified for a deduction or two yourself.

However, not every deduction that people try to pass off is “by the book.” Believe it or not, there are some pretty crazy deductions that people have tried to fight for…sometimes successfully. While they may sound nuts, these are some real-life deductions people have tried to get.   

The Cat Food Deduction

A local junkyard was having problems with infestation. It had lots of snakes slithering around, as well as rats, which the snakes were feeding on.

The junkyard made the decision to attract wild cats by putting out cat food every night. Their plan worked, and the cats started to kill the rats, which also got rid of the snakes.

The junkyard tried to deduct the cat food costs as a business expense. And, believe it or not, the IRS was just fine with it!

The Charitable Babysitting Deduction

There was once a mom who wanted to do her part and “give back” by volunteering for a charity. The only problem was that she needed a babysitter for the hours she wanted to volunteer. Her solution was to hire a sitter and then deduct what she paid her as a charitable contribution.

While this was a bit of a “workaround”- some might even call it a stretch- the IRS actually went for it!

These stories might surprise you, but trust us. They aren’t the craziest of the craziest!

Before you give any of your own “crazy ideas” a try with the IRS, send them through your financial adviser. This will keep you out of trouble and might just increase the chances that your deduction idea gets the seal of approval from the IRS.

Claiming Dependants: What You Need to Know

Recent tax reform has brought about a lot of changes. One of these changes is the fact that you can no longer claim the dependent exemption.  

However, you can still have dependents who qualify as such for various tax benefits, such as the Child Tax Credit. In order to be a dependent for IRS purposes, the person must be a “qualifying child” or relative and must meet specific criteria.

For children, these criteria include:

l  The person must be your child, an adopted child, a foster child, a sibling, or otherwise related to you in a qualified way

l  The person must live with you for more than half of the year

l  The person cannot file a joint return in the tax year you claim him or her as a dependent

l  The person cannot provide more than half of their own support during the given tax year

l  The person must be under 19 or under 24 if a full-time student; this age requirement does not apply to those who are permanently disabled

For adults, the criteria are slightly different. They include:

l  Not also being the “qualifying child” of you or any other taxpayer

l  Lives with you all year as a full member of your home and/or is a relative

l  Earns less than $4,150

l  You must provide more than half of the support for this person each year

As you can see, there are some pretty clear guidelines as to who counts as a dependent. However, people are sometimes still a bit confused on this matter, especially if the person they’re claiming as a dependent is not a blood relative.

If you have confusion, for any reason, about claiming dependents or about the benefits of claiming them, talk with a tax professional to make sure you’re doing everything correctly and in a way that is beneficial for you.

Does Gambling Affect Your Taxes?

Gambling, when it’s done in small ways, like betting on sports or buying a lottery ticket, can be a lot of fun. However, gambling can also have an impact on your taxes, especially if you’re good at it.  

What’s more is that the US Supreme Court recently ruled that sports gambling is legal in most circumstances and in most states, which is bound to lead to a marked increase in sports betting and general gambling. Whether you’re a long-term gambler or a newbie taking advantage of this recent ruling, it is important to know the impact gambling can have on you tax-wise.

Your Winnings Count as Income

When you gamble, your goal is to win big. When you do win, however, it’s not all fun and celebration. There will still be taxes to pay on your earnings.

Any money that you win from any type of gambling is considered income and needs to be counted as such. You even file this income on a special form, Form W2-G, which is made just for claiming gambling wins.

Losses Can Count as Itemized Deductions

If you’re like most people, then you probably lose at gambling more often than you win.

Don’t panic though. If you choose to itemize your deductions, you can deduct your losses too.

Losses can be deducted up to the amount of your winnings. So, in other words, you can deduct losses as long as you have some winnings. Of course, this doesn’t help you if you lost more than you won, but it still provides some possibility of relief.

Just make sure you keep track of your losses in a verifiable way. Whether you’re saving receipts or tickets or just keeping a log, you want to be able to back up your claims. Also, bear in mind that this deduction option only applies to wagering-based gambling experiences.

As you can see, your wins and losses can both matter when it comes to your taxes. If you’re ever confused about how to claim either, just seek the advice of a qualified, professional tax adviser

Tax Reform Change and the Self-Employed

Recently, there have been some tax reform changes. These changes have caused a great deal of confusion and worry for many people, especially the self-employed.  

If you are self-employed, it’s a good idea to sit down with your accountant and to ensure that you understand the changes and how they affect you. This can help to else your mind and can also ensure you don’t get hit with any unwelcome surprises.

Chances are, however, that the change is going to affect you a lot less and a lot less negatively than you may have been led to believe.

Deductions are Not Going Away

One thing many self-employed people have been concerned about is losing their deductions under the new tax laws.

If you’ve had this fear, go ahead and cast it aside! You can still enjoy your deductions. In fact, when you’re self-employed, you enjoy, for the most part, the same deductions as a corporation.

There’s a New Deduction in Town

Not only are you not at risk of losing your deductions, there may even be a new deduction that you could qualify for.

This deduction is known as the qualified business income deduction, and it’s a nice 20% deduction. Most solo-owned businesses will qualify, but you can find out for sure if yours does by checking with a professional tax adviser.

You Can Buy a New Car

Something else to appreciate- instead of fear- about the tax reform is that you may be able to finally buy that new car for your business.

In many cases, you can now get a depreciation deduction within the first four years of buying the vehicle. Check with your accountant for details and to see if you can take advantage of this deduction.

As you can see, the tax reform changes don’t spell disaster for the self-employed as many have wrongly speculated. Instead, they can actually be quite helpful and beneficial when utilized properly.

How Cryptocurrency Affects Your Taxes

In today’s world, more and more people are dealing in cryptocurrency. Maybe you trade this currency. Or, maybe you even get paid in Bitcoin, Ethereum, or some other form of cryptocurrency. Whatever the case may be, if you are dealing in this type of currency, you need to understand how it affects your taxes.   

One of the first things to understand is that cryptocurrency is currency. And, just like any other form of currency, your use of it needs to be tracked and reported where applicable. That “where applicable” part is where people sometimes get confused.

In general, you’ll need to treat and report cryptocurrency as income in these situations:

l  If you’ve converted your cryptocurrency into a more common currency

l  If you’ve received free cryptocurrency coins

l  If you’ve made money from selling cryptocurrency

l  If you have used cryptocurrency to buy something

Fortunately, not every cryptocurrency transaction is taxable. Some situations in which your use of the currency is not taxable include:

l  Buying cryptocurrency

l  Purchasing cryptocurrency using your self-directed IRA

l  Gifting under $15,000 in cryptocurrency to a friend

l  Purchasing cryptocurrency with a Solo 401(k)

If you’re ever unclear on how to track or tax anything you have done involving cryptocurrency, don’t worry. A professional accountant should know the answer to your question or can at least find it out. While it is becoming possible to use online programs to track and report cryptocurrency transactions, nothing beats real, in-person help and advice.

The reason for this is that cryptocurrency is a new and confusing thing for many people, and everyone, including the IRS, is still trying to work out the kinks. However, in terms of taxation, the rules are pretty clear and easy to follow, but only if you have the right professional helping you to understand and follow them all.

Do You Qualify for the Earned Income Tax Credit?

The earned income tax credit is a refundable tax credit. It was created for taxpayers earning a low to moderate income. Through this credit, qualified taxpayers can reduce or even eliminate their income tax liability. In some cases, taxpayers can even receive a refund if the credit outweighs how much they would owe in taxes.  

No matter how broadly the credit affects you, if you are eligible for it, you won’t want to miss out! This is a great way to save or potentially earn money. And, sadly, a lot of people miss out on it because they don’t know what it is or don’t realize that they qualify.

Eligibility Requirements

So, who is eligible for the earned income tax credit? Well, first of all, for the 2018 tax year, you’ll need to ensure that neither your adjusted gross income or your earned income exceed the following:

l  $49,194 with three or more qualifying children

l  $54,884 with three or more qualifying children if married filing jointly

l  $45,802 with two qualifying children

l  $51,492 with two qualifying children if married filing jointly

l  $40,320 with one qualifying child

l  $46,029 with one qualifying child if married filing jointly

l  $15,270 with no qualifying children

l  $20,950 with no qualifying children if married filing jointly

Other eligibility requirements include:

l  Being a US citizen

l  Being over the age of 25 or, if not over that age, having qualifying children

l  Not filing “married filing separately’

l  Having earned income from employment

l  Not having more than $3,500 from interest, dividends, and other investment earnings

If you think you meet these eligibility requirements, do not miss out on a great credit. Talk to your tax professional about the credit and how to ensure you get what is rightfully yours!