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The basics of estate planning

Estate planning can be intimidating if the estate planner is not familiar with the process or what to expect but if they understand the process and know what to expect, they will also understand the benefits. The estate planning process can provide peace of mind for the estate planner and family members, among other benefits as well. Understanding the basics of estate planning is crucial to understanding how to set up an effective estate plan.

Drafting estate planning documents ahead of time can ensure that the estate planner's wishes related to property and health care are honored and that their loved ones are cared for according to their wishes. An estate plan can effectively account for the estate planner's assets including bank accounts; real estate; stocks and securities; life insurance policies; and personal property including cars, jewelry, artwork and other items as well. An estate plan can also account for the estate planner's wishes related to their health and financial affairs should they become incapacitated and unable to communicate those wishes themselves.

Could an offer in compromise suit your tax debt situation?

Though the tax filing season for 2018 has come to an official close, you may still face a great deal of worry concerning your situation. You may owe a considerable amount in taxes but feel that you do not have the means to address your tax debt. Because you are dealing with a government institution when it comes to the Internal Revenue Service, you likely already feel ill at ease and believe that punishment for not paying your debt is right around the corner.

Fortunately, you may have options for addressing your tax debt, and you do not have to feel frightened exploring these options. The IRS itself offers certain assistance measures that could help you address your situation in an effective manner. One possible route involves an offer in compromise.

Understanding tax evasion

Because accusations of tax evasion can be serious, it is important to understand what tax evasion refers to. Because the tax code is complex, mistakes are understood, however, under-reporting income on purpose and claiming deductions the filer should not receive is considered tax evasion. Tax evasion is considered a serious offense.

Tax evasion is defined by the Internal Revenue Service (IRS) as the failure to pay or the deliberate underpayment of taxes. Tax evasion can result in significant fines or even prison time for the filer accused of tax evasion. There are two different forms of tax evasion recognized by the IRS including evasion of assessment of taxes and evasion of payment of taxes. It is important to keep in mind that simply failing to pay taxes is not considered tax evasion.

Trusts basics and how they help with an estate plan

Trusts can be an effective estate planning tool that is oftentimes not well understood. Trusts can aid with the management of property during life and can also be useful tools to supplement a will or even replace a will in some circumstances. Trusts can be used to manage property by transferring the benefits and the obligations of the property to other parties.

When used as part of an effective overall estate plan, a trust can serve important uses. It is helpful to note that there are different types of trusts for different needs and situations and it is useful to understand the rules and requirements of whatever type of trust the estate planner is considering using. When creating a trust, the property owner transfer legal ownership of the property to a trustee that manages the property for whomever is the beneficiary of the trust.

Understanding the serious nature of tax evasion accusations

Tax evasion accusations are serious and should not be taken lightly. The Internal Revenue Service (IRS) performs criminal investigations and employs greater than 2,000 special agents to investigate complex tax crimes. When individuals intentionally refuse to file an income tax return, when one is required, or report incorrect information on a tax return, the behavior is considered fraudulent and may be considered a crime.

In general, there are four different types of tax crimes that the IRS investigates. The IRS investigates legal sources of income incorrectly reported; illegal sources of income; narcotics-related financial crimes; and counter-terrorism financing. Tax evasion may be alleged by the IRS's criminal investigators in situations when an individual is accused of understating their income; overstating their expenses; making erroneous claims for credits or exemptions; or failing to report taxable income.

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.

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