Sherman, Tx 1. First, last year we had a lot of changes to consider - tax brackets, deductions, and credits were impacted with the 2018 tax reform law. Are there more changes this year we need to be prepared for?
• Income tax brackets increased in 2019.
o The standard deduction increased to $12,200 for single filers and $24,400 for married couples filing jointly.
• There’s no penalty if you did not have health insurance in 2019.
• You can no longer deduct alimony payments; it’s also not considered taxable income.
2. What are some costly mistakes you see when it comes to taxes?
• Missing out on tax savings by not reviewing the tax return. Human error could cost the client. So, try and review the work and ask questions.
• Not preparing for next season. Maybe you could have contributed more to your 401k to help with taxes. Look into the future to save. We all want that instant gratification of saving today. But, it’s not necessarily what you make, but what you keep.
• Blend your distributions. Whether you are purchasing an asset or pulling from assets for retirement, develop a withdrawal strategy and blend your tax buckets to minimize your taxes.
3. What about refunds? Should we save all of it or is it OK to spend some of that money?
• It’s a good idea to have a plan. Take a look at your finances and decide what could be beneficial for your financial situation. That could mean using 1/3 of it to pay off credit card debt, another 1/3 to put into retirement, and the remaining 1/3 to put into your savings account.
• Remember, we like to suggest people have 3-6 months’ salary saved up for unexpected expenses. This could be a good time to replenish savings that may have been tapped into during the holidays.
4. And finally, any tips for people who are waiting to get their taxes ready?
• First, get organized. It can be a good idea to get all your documents together now.
• Start gathering those forms – W2 forms, anything you might need to start the process, whether you file yourself or work with a tax professional, sort through old papers and documents and set aside what you might need. April 15th is right around the corner!