It’s Never Too Early for Tax Planning

Good tax planning is a year-round activity that requires knowing your options and keeping good records. Easily stay on top of it with these great tips.

Benjamin Franklin once said “to fail to plan is to plan to fail.” This adage certainly applies to tax planning.

Although the Tax Cuts and Jobs Act of 2017 (TCJA) eliminated many deductions outright, there are exceptions. Certain deductions still exist but are being phased out, whereas others will expire after a set time. This means good tax planning remains an important aspect of good financial health.

Following are six steps you can take right now to prepare for your future taxes:

1. Adjust Withholdings

Determine whether you are someone who takes out more taxes every pay period so that you get a tax return, or whether you want the benefit of having the cash on hand right now. Adjust your withholding accordingly by filing a new Form W-4.

2. Organize Receipts

Start organizing your receipts now so you don’t accidently miss a deductible expense or a tax credit. Check the standard deduction for your situation, and consider whether you might need to itemize.

Having your receipts ready eases the tax preparation process. You should have the following categories of receipts and other documents handy:

  • Last year’s federal, state and local tax returns
  • Receipts/statements/cancelled checks for medical and drug costs, health savings account contributions, charitable contributions, contributions to retirement plans
  • Business travel and meal expenses (including a mileage log)
  • Childcare expenses
  • Receipts related to your home, including mortgage and line-of-credit expenses, repair and renovation expenses, real estate and school taxes (not all of these will be deductible, but they may help reduce your basis when you sell your home)
  • Any receipts related to a home purchase or sale
  • Receipts related to life events like marriages, divorces, births and deaths
tax planning

3. Review Your Investment Strategy

Short-term investments (those held 12 months or less) don’t get special treatment, but long-term investments (those held longer than one year) are typically taxed less.

4. Review Your Charitable Contribution Strategy

If you make large contributions, it may make sense to alternate the years in which you make the contribution so you can exceed the threshold for the standard deduction.

5. Evaluate Tax Credits

Consider whether you’re eligible for any tax credits so you can take full advantage of them. Tax credits are important because they are dollar-for-dollar reductions in the amount of taxes you owe. These credits may be refundable or nonrefundable. Refundable tax credits can reduce your tax liability below zero, while a nonrefundable credit cannot.

6. Review Your Estate Plan

No one knows what is going to happen in the future. TCJA changed many deductions related to gifts and estates; take this time to review the changes and make sure your estate plan reflects your wishes and is current. Keep in mind that some of the provisions now in effect are due to sunset in 2025.

If you need help preparing for your future taxes, schedule a consultation with us today.

©2019

Photo by Helloquence on Unsplash

Not Filing Anti-Money Laundering Forms Could Cost You $10,000 or More

Filing anti-money laundering forms may be applicable to you. To not be penalized, learn more about what forms are involved and how to file them.

Without realizing it, each U.S. taxpayer provides anti-money laundering information to the IRS each year.

How?

At the bottom of Schedule B, there is a question asking if you have a financial interest in or signature authority over a financial account in a foreign country – yes or no. This question explores whether the taxpayer has an anti-money laundering obligation.

Even an account at a non-U.S. crypto exchange is considered a foreign financial account that must be reported.

READ MORE: Do I Need My Crypto Taxes Fixed?

Reporting Your Anti-Money Laundering Forms

Foreign financial accounts are reported on two forms. The first is called FinCEN Form 114 (nicknamed FBAR). The second is IRS Form 8938. Also reported on Form 8938 are all financial transactions like buying or selling/exchanging cryptos.

TAX TIP: I usually aggregate the totals of all transactions instead of itemizing them.

The FBAR form is technically not an IRS form, but the IRS is responsible for administering the collection of the form. Click here for the latest version of the FBAR form and the system for filing and submitting it.

Click here to access Form 8938 if it is not supported by your tax software. This form is filed with the 1040 tax return form.

anti-money laundering

Photo by Kelly Sikkema on Unsplash

Both of these forms are usually due on tax day, April 15th, or on October 15th if you properly filed an extension. Failure to file these forms on time is an automatic $10,000 penalty per form.

The only way to avoid this penalty if you haven’t filed these for past tax years is to file using tax amnesty.

Learn about how to do the tax amnesty process with our Crypto Tax Fixer Package.

Not Sure If Your Taxes Need Fixed?

Take our FREE take health check now. 

Featured Image Photo by Kelly Sikkema on Unsplash

GAO agrees FBAR and Form 8938 are too burdensome for expats.

The Government Accounting Office released a study to Congress acknowledgding that the FBAR and Form 8938 reporting requirements are confusing and burdensome for Americans living abroad.

A 2010 law requires Americans and foreign banks to report more information to IRS about Americans' foreign assets. Implementing the law, however, has raised some concerns.

Continue reading "GAO agrees FBAR and Form 8938 are too burdensome for expats."