Tax season is right around the corner and there have been a few changes to the tax laws for 2020 that you should be aware of when preparing your taxes. Below are a few of the changes:
- The CARES act allows for you to claim more for charitable donations. Even if you take the standard deduction, you can claim up to $300 for cash charitable donations (it does not apply for any other items such as: clothing, food, furniture, etc.). Additionally, if you itemize your deductions, you can deduct more than in previous years.
- The stimulus payments were an advance refundable credit and are not taxable.
- There have been adjustments for inflation. For example, the standard deduction for heads of households is $18,650 (up $300), for married filing jointly it is $24,800 (up $400), for single and married filing separately it is $12,400 (up $200). Marginal tax rates, Earned Income Credit, limitation for transportation fringe benefit and parking, and other credits and deductions have also been adjusted. For a complete list of these adjustments you can go to the IRS website.
- The SECURE act retroactively reversed the kiddie tax rate for a child’s unearned income to reverse the negative impact that the Tax Cuts and Jobs Act created for many families. The IRS has a topic page with more information.
- More of the tax changes can be found at Investopedia.com.
It is always important to plan ahead and get started on your taxes early to avoid late penalties. This year, however, it is especially important to give yourself more time with all the tax changes and challenges created by the COVID-19 pandemic. The IRS has a special webpage with some helpful tips to prepare for tax season.
Currently, there are over 12 million people in the United States unemployed and many more who are experiencing employment instability. Experiencing a job loss is an incredibly stressful time and more so now that it is the holiday season, and many parts of the country are facing renewed shutdowns due to the pandemic. There are, however, many resources available for people to receive economic assistance and opportunities to learn new skills. The Federal Trade Commission website lists steps that you should take to protect yourself and search for a new job. Indeed.com lists resources for unemployment support and job search tips. They have also compiled a list of job resources by state. AARP.org also provides a comprehensive list of job loss resources.
If you are unemployed or are concerned that you may lose your job, you may want to take it as an opportunity to learn a new skill and possibly find a better job. Career One Stop provides links to many federal employment and training programs. The US Department of Labor also has many programs for adults and dislocated workers.
Having a cell phone has become a necessity for most people, and because cell phone plans are becoming more and more complicated with plans that claim to have unlimited text, talk, and data but actually have limitations, 4G and 5G networks, cell phone upgrades, offers to keep or change your number and/or phone, etc., many people are overpaying for their cell phone plan or paying for unnecessary services without realizing it. It can be difficult to sort through all the different options and choose one that will not only give you the coverage and service you need but also not break the bank. There are a few different web sites that provide simplified comparisons of cell phone plans from different providers. Reviews.org and Nerd Wallet compare companies based on who has the best plan for a specific need (i.e., best value, best coverage, best unlimited, etc.). Consumer Reports lists the best low-cost plans. Tom’s Guide also provides a detailed comparison of some of the major cell phone providers’ plans. If you don’t want to switch companies, you should still contact your current provider to review your plan and make sure that you are receiving the best price. Companies are continually updating their services and plans. You may be able to switch your plan and save money each month. Additionally, you should always ask if there are any promotions or discounts available.
When a disaster strikes, your financial well-being may not be your initial concern. But, after the threat has passed and you start to look at rebuilding, it can be overwhelming to know where to begin financially. Even if you are well prepared and have a rainy-day fund, recovering financially from a disaster is difficult. However, there are many resources and trained individuals available to help you. MyMoney.Gov has a page dedicated to financial recovery resources including phone numbers for counselors to help you get started. The Red Cross has general information about how to replace lost or damaged vital records and a free guide for disasters and financial planning. DisasterAssistance.gov and USA.gov can help you find local resources and apply for assistance. Even if you have not experienced a disaster, these resources can help you prepare for the unexpected.
The creators of scams are constantly looking for new ways to confuse and trick people into giving them money or their personal information. With the current COVID-19 pandemic, there seems to be multiple new scams being created each day. Some of these are very sophisticated and can be difficult to identify as scams. In order to keep people informed, The Federal Trade Commission has created a website dedicated to helping people identify, report, and avoid coronavirus scams. You can also sign up to receive alerts about new scams and ways to protect yourself. The Consumer Financial Protection Bureau also has valuable information on how to protect your finances during the pandemic, avoid scams, and apply for housing assistance. If you are in need of assistance, you can also find legitimate coronavirus assistance programs on the benefits.gov website.
Learning about financial literacy can be somewhat dull even for adults. Thus, parents may find it especially difficult to engage children when teaching about budgeting, credit, insurance and saving. However, there are lots of websites and programs with inventive ideas for parents to use. A few websites with lots of free resources are Junior Achievement, EVERFI, and Mymoney.gov. There are also a lot of apps that that have gamified teaching about finances so that kids can have fun playing while learning. Here are a few of the best rated apps:
Many banks and credit unions also have programs designed to help teach teens money management. Be sure to ask your financial institution what type of savings and checking accounts that they offer for teens.
One way to raise your credit score is to pay off debts. Once you have created a budget and set aside money each month to pay extra towards your debt, it can be daunting trying to decide which bill to pay off first. One way to decide is to pay off the debt with the highest interest rate. For example, paying off a credit card with a 15% interest before paying off a car loan with a 5% interest rate. By doing this, you will pay less in interest for the money borrowed.
Or you can decide to pay off your smallest debt first. If you owe $9,000 on your high interest credit card and $5,000 on your lower interest car loan, you may want to pay off the car loan first. That way, when the car loan is paid off, you can make larger credit card payments by applying the money set aside for the car loan to the credit card payment. Additionally, it may help you stay motivated when you are able to pay off a debt and see that sticking to your budget is helping you become debt free.
If something unexpected happens and you are not able to pay extra one month, do not skip a payment on another bill or make a late payment to make up the difference. Be sure to always make at least the minimum payment on time for all your bills. Missing payments or making late payments will hurt your credit score and you will end up paying more in fees.
Discussing with your family and loved ones your wishes for what happens when you die or are incapacitated is difficult. However, it is important to have those conversations before something happens so that your loved ones know what you want and can carry out your wishes. If you die without having a written will, your estate will be settled according to the laws of your state by an appointed administrator and he or she may not follow your wishes or your heirs’ wishes. Thankfully, writing a will does not have to be extremely complicated. You can hire an attorney to assist you or you can use a do it yourself kit. AARP.org has a series of informative articles about creating wills and web site links to find legal assistance. If you choose to write your own will, just be sure that it complies with the laws of your state. You will want to name an executor or joint executors as well as a guardian for minor children. You can also include a letter specifying who should inherit specific items such as family heirlooms. You should keep your original will signed by you and witnesses in a safe and secure place. It is also a good idea to review and update your will every few years or after any major life event (i.e., birth of a child, marriage, etc.).
When creating your will, it is important to consider designating a power of attorney as well. Depending on the type of power of attorney that you choose, that person will be able to make financial and medical decisions on your behalf if you are unable to do so yourself. ElderLawAnswers.com explains the four different types of power of attorney that are available and gives tips on how to choose which is best for you. The website for the National Academy of Elder Law Attorneys also has valuable resources on estate planning, designating power of attorneys, and finding an elder law attorney near you.
The COVID-19 pandemic has impacted every part of our daily life and many people have lost jobs and are struggling to make ends meet. Although they may be eligible for unemployment benefits, the application process can be confusing and long. DoNotPay is an app that can help navigate the process of applying for unemployment benefits. According to the article in CNBC, the app will ask a series of questions to gather information in order to complete the application for unemployment benefits in the user’s state and then submit the application during the state’s recommended time. It will also automatically reapply for benefits for the user. It is a subscription service and costs $3 per month but users can apply to have that fee waived.
In addition, the federal government is issuing stimulus payments to qualifying citizens. Over 80 million Americans received their payment on April 15th. If you have not received your payment, you can check the status of the payment using the Get My Payment tool provided by the IRS.
If you are in need of additional assistance for healthcare and food and nutrition needs, Benefits.gov has created a page specifically for finding government programs during the current pandemic. They also offer a benefits finder tool which can help you find information about benefits that you may be eligible to receive.
During a crisis, it is difficult to know how to maintain financial security and fight the urge to panic. There are some steps that you can take, however, to make sure you are ready for whatever the future brings.
- Having a rainy day fund is extremely important. If you are able, continue to contribute to your savings and don’t begin using the funds until it is necessary. If you don’t have savings but are still able to work, deposit what you can into a savings account. Additionally, don’t withdraw your savings from the bank unless you need to use the money.
- Use online banking. If you haven’t set up an online account yet, you should be able to find information on how to do it on your financial institution’s website. Most banks offer free online bill pay and you can pay all your bills without having to leave your house.
- Remember that investments in the stock market are for the long haul. It is important to remain calm through the market fluctuations.
- If you have lost your income or are struggling to make ends meet, do your best not to incur lots of debt (i.e., try not to use credit cards, payday loans or other high-cost loans). There are lots of organizations available to help. Reach out to your local churches, food banks, Red Cross, United Way, Department of Human Services, etc.
- Finally, don’t make financial decisions based on panic. If you are feeling anxious and are wanting to make a huge financial decision, try to talk to a financial advisor or someone not emotionally involved first.