By Matthew Gaude & Shawn McGuire
If you had to choose, would you rather file your taxes or go without your phone for a week? At this point, you may be among the 28% of Americans who are also dreading having to deal with taxes and would gladly give up your cell phone just to avoid it. To add to the fun of tax season, the new Tax Cuts & Jobs Act means that we have a slew of new tax reforms to decipher, which include six new schedules to fill out, depending on your situation, as well as a new 1040 form. As is usually the case, what is intended to simplify filing taxes for some has complicated it for others.
Nevertheless, no matter how you feel about tax season and the recent changes, the fact is that taxes are unavoidable. On the other hand, the months of stress and anxiety that seem to come with taxes are actually largely avoidable. The fastest way to shake this added stress is to get everything in order now so you can get back to focusing on things you love instead. Don’t let yourself be one of the 29 million people who stretch the anxiety of tax season out and file their taxes at the last minute. Start preparing now and eliminate some of this looming stress by following these four steps.
1. Organize Your Documents
For most of us, preparing our taxes usually means several piles of paperwork and the inclination to ignore them until you can’t any longer. Unfortunately, while avoiding those piles may be easier on the front end, it leaves you much more vulnerable to missing possible deductions and making other mistakes, which makes things much less desirable in the end. The best way to avoid this is to get all your documents well organized before you start filling out your forms.
To start with the basics, you will want to be sure you have your copy of the most commonly needed documents that apply to you, such as:
- W-2, 1099, or other records of income
- Records of charitable contributions over $250
- Information from prior years’ tax returns
- Rental income
- Mortgage interest and property taxes paid
- Dividend income
- Childcare costs
- Medical expenses
Pro tip: Make a master list of all the forms and documents you need. You can even use last year’s return to remind you what your unique situation requires. As each document arrives in the mail, check it off and add it to your organizer. Your efforts to clear up some of the chaos today will make filing much faster and easier in the end. To help you out, we have created a handy checklist for you:
2. Take Advantage Of Deductions And Credits
Benjamin Franklin may have declared that “nothing is certain except death and taxes,” but that does not mean you cannot do your best to reduce your tax bill. Fortunately, there are multiple credits and deductions that will not only benefit you this tax season but also serve to give your financial future a boost.
Make Deductions Work For You
Just because we have turned the calendar to 2019 does not mean you cannot maximize your retirement savings and reap the rewards on your 2018 taxes. If your employer offers a 401(k), you can contribute up to $18,500 in 2018. If you are over 50, you can also take advantage of catch-up contributions of an additional $6,000. If you do not have the opportunity to save through an employer-sponsored plan, you can still invest in an IRA, depending on your income.
Contributions to HSAs (health savings accounts) are also an excellent option to reduce your total taxable income. The 2018 contribution limits for HSAs are $3,450 for an individual or $6,900 for a family. You can also make a $1,000 catch-up contribution if you are over 55.
For the 2018 tax year, you have until April 15th to contribute to HSAs, Roth and traditional IRAs, SEP IRAs and self-employed 401(k)s to benefit from this deduction, so jump on this opportunity to build your nest egg and reduce your taxable income while you can!
There are additional deductions that may also apply to you, such as state sales tax on major purchases, student loan interest, and medical and dental expenses. However, due to the new higher standard deduction, itemizing your taxes and applying these deductions may not work in your favor. Be sure to speak to a professional about tax strategies that will maximize your deductions under the new tax laws.
Research Applicable Credits
Filing taxes can be painful, but depending on your situation, you may be able to benefit from a variety of credits if you know where to look. Many Americans qualify for the Earned Income Tax Credit, and if you or your children attend post-secondary education, you could benefit from the American Opportunity Credit and the Lifetime Learning Credit. There are also credits for saving for retirement and child and dependent care. A qualified CPA will know what questions to ask and what to look for so you do not miss out on any opportunities to minimize your tax bill.
3. Reevaluate Your Filing Status
Have you experienced a significant life change this year, such as marriage, divorce, or the birth of a child? Any of these milestones will affect your filing status, which determines your tax rates, deductions, and eligibility for credits. Make sure you are filing under the correct status so you do not face unnecessary penalties or taxes.
4. Find A Professional You Can Trust
Did you know that in America over 1 million accountants are hired each year to help with taxes? That is a lot of help, and that is not without good reason! Working with a qualified and seasoned accountant can make your tax season experience as seamless and stress-free as possible. They have the knowledge to help you claim all the deductions you deserve, account for many variables unique to your situation, and answer any and all questions you may have. Utilizing their expertise can save you money and give you peace of mind.
And the benefits go beyond this tax season alone. In addition, a CPA can also provide suggestions that will help you reduce your taxes for years to come, such as offering advice on tax-friendly ways to set up your estate and showing you the benefits of maximizing your retirement savings. Regardless of your financial status or current situation, you cannot put a price on the value a CPA provides. At Live Oak Wealth Management, we not only take the lead to coordinate your financial plan with your other financial team members, but we can also help you find a qualified CPA so you can have full confidence in the service you are receiving.
We’re Here To Help
Your stress levels do not have to increase as your time to file taxes decreases. Do yourself a favor and take these steps now to get your taxes prepared and filed so you are not scrambling at the last minute. If you have any questions about how to take control of your finances, or if you simply need some help getting started, call my office at 770-552-5968 or email [email protected]. Or, if you prefer, you can simply click here to schedule an appointment online.
Matthew Gaude is an *investment advisor representative and the co-founder of Live Oak Wealth Management, a financial services firm in Roswell, Georgia. He serves the planning and investment needs of corporate employees, those approaching or in retirement, and 401(k) plan sponsors. Working first as a commodity broker and then as a Business Development Manager for a national broker-dealer in previous jobs, he has the insights and experience to help clients understand the complexities of the market and implement strategies to minimize risk. To learn more about Matthew, connect with him on LinkedIn or visit www.liveoakwm.com.
Shawn McGuire is a financial advisor and the co-founder of Live Oak Wealth Management, a financial services firm in Roswell, Georgia. He serves the planning and investment needs of corporate employees, those approaching or in retirement, and 401(k) plan sponsors. He has worked in financial services since 2002 in positions ranging from financial advisor to stock broker and portfolio manager. As a CERTIFIED FINANCIAL PLANNER™ professional, he is trained to help clients with virtually all their financial needs. To learn more about Shawn, connect with him on LinkedIn or visit www.liveoakwm.com.
Securities offered through American Portfolios Financial Services, Inc., member FINRA/SIPC. Investment advisory services offered through *American Portfolio Advisors, Inc., a SEC Registered Investment Advisor. Live Oak Wealth Management, LLC is independently owned and not affiliated with APFS or APA.
Any opinions expressed in this forum are not the opinion or view of American Portfolios Financial Services, Inc. (APFS) or American Portfolios Advisors, Inc. (APA) and have not been reviewed by the firm for completeness or accuracy. These opinions are subject to change at any time without notice. Any comments or postings are provided for informational purposes only and do not constitute an offer or a recommendation to buy or sell securities or other financial instruments. Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk, and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors.