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What should be included in an effective estate plan

Having an effective estate plan, which includes the necessary estate planning documents, is important for the estate planner, their family members and the protection of the estate planner's assets. In addition, an effective and well-prepared estate plan is also useful to help minimize conflicts down the road between the estate planner's family members and can help keep the peace during an emotional and stressful time period.

There are several different types of documents that should be included in any estate plan. Estate planning documents include a will, living trust, advanced healthcare directive, a power of attorney and a HIPAA release form. A will sets forth how the estate planner wants their assets disposed of and who the estate planner wants their assets to go to. A will can be used in conjunction with a living trust but even if the estate planner utilizes a trust, and there are different types of trusts, they should still have a will. A requirement of a trust is that it is properly funded so it is important for estate planners to understand the details of a trust.

Avoiding mistakes when you file your tax return

You may remember the first time you filed your own tax return. Was it in high school when you got your first summer job? Maybe you did not make enough money to file a tax return until you finished college. No matter when it was, chances are that it was straightforward and simple. Your income likely came from one local source, and you probably used the 1040-EZ form.

Those days are gone. Your world is much more complex, and your taxes reflect that. Whereas at one time you may have been able to produce an adequate return with a computer program or a pop-up tax preparer, this year things are different. The complexity of your tax return may make you more susceptible to making some of the common errors taxpayers make on their returns.

What is an audit?

Every year around this time Illinois residents begin scraping together their W-2s, donation receipts and other tax documentation so that they can submit their state and federal tax returns. Most of the time this is a boring and somewhat straightforward process, wherein a tax payer fills out their tax forms online or hands their tax documentation over to their accountant for submittal. After several weeks those tax payers who are lucky enough to not owe money will receive refund checks compensating them for the taxes they overpaid in the prior year.

However, there is another form of correspondence that a tax payer may receive regarding their returns and it is nowhere near as pleasant to receive as a refund: an audit statement. The Internal Revenue Service audits or reviews many tax payers' returns each year for a number of reasons. Some audits are performed because the IRS has found possible issues in the documentation that the tax payers provided. Other audits are random checks to ensure the efficacy of the process.

Tax avoidance is not the same as tax evasion

Tax evasion is a serious crime that can, if it results in conviction, lead an Illinois resident to spend many years in jail. It involves the willful avoidance of paying one's taxes through illegal means of concealment. However, every year many Americans make mistakes when they file the income tax returns and commit errors that may reduce their tax burdens. These errors must be corrected but generally do not constitute tax evasion. Tax avoidance is another type of issue all together that involves the proactive planning by an individual to legally lower their overall tax obligations.

A person can practice tax avoidance by maxing out retirement and other investment plans that take money out of their paychecks pretax and place it into accounts that the person will later be able to access. Doing this lowers a person's annual taxable income and therefore reduces their income tax burden.

Why you need an estate plan

It is a common misconception that only the very wealthy or the elderly should have an estate plan. In fact, every adult Illinois resident regardless of their age or the status of their bank account should have several important estate planning tools in place in the event that unexpected life changes occur. This post will discuss some of those documents and how together they can create an effective estate plan.

One important estate planning tool that readers should have in place is a will. A will is a document that describes how a person wants their property to be distributed at the time of their death. While some readers may assume that their possessions do not warrant such considerations, it is important that they know when they do not dictate their preferences on such matters the laws of the state will govern how and where their assets are distributed.

Bitcoin gains or losses? How to account for them on your taxes

The IRS has stated that, for federal tax purposes, virtual currency or cryptocurrency investments are treated as property, with general tax principles applying. For people in the business of trading or mining these virtual currencies, any gains will be treated as ordinary income. For those who invest in or hold cryptocurrencies for personal (non-business) reasons, they are considered capital assets. Net gains are subject to the capital gains tax.

That means your Bitcoin or other cryptocurrency investment will be taxed either at the ordinary income rate or the capital gains rate.

Don't Forget about College Tax Benefits

Now that many parents have helped their children with settling into the college or university, parents need to be reminded that our current tax law provides tax credits for certain qualified education expenses. Here is a short summary of some of the benefits available to parents.

Should I Amend my Return?

There are many reasons to amend a tax return. Before you begin the process, speak to a professional about making changes to your prior filing. With complexities such as statutes of limitation, tax benefit rules and others, changing a return is not a simple decision.

Here are some tips if you are considering making changes to a prior filing.

Moving Expenses Might be Deductible

Being able to deduct moving expenses can ease some of the burden of the cost associated with the move. The rules are very specific and somewhat mechanical. Review these rules with your tax person before make the move. Also check with your employer to see if they offer some direct payment for some moving expenses. Some direct payments could be excluded from your income.

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