Are you kiddie taxing me?

Hi Nickels, as you may know I have 10+ years of financial services and compliance experience. Additionally, I am in school to become a licensed financial professional. My primary objective will be to help my prospective clients accumulate and manage wealth. My other objective will be to support initiatives to increase financial literacy in underserved communities. This platform is a great resource to carry out such fundamental tasks, beginning with today’s Nic inspired by the 2020 tax season.

Nic #1: Consider hiring help. It is that time of year again and tax season is full swing. We have until that sacred deadline date, April 15th (without extension) to file our personal tax returns. Most financial stewards would agree taxes can be one of the largest impediments to wealth accumulation. Therefore, it is beneficial to gain a basic understanding of the Internal Revenue Codes that govern our tax laws; and to consider hiring a recognized representative to help you navigate more complex tax strategies. An Attorney, Certified Public Accountant (CPA), or Enrolled Agent (EA) are all recognized representatives before the IRS and may defend you in the event of an audit. It may be worth the investment to hire these professionals if your tax circumstances were more nuanced in 2020.

Nic #2: Be sure you understand what income is taxable. Dub 20 has curated a myriad of black entrepreneurs and a public campaign to invest in black owned businesses. I surmise even more business owners will blossom in 2021. As a result of the influx in ownership within our community many of you may be thinking about legacy and generational wealth. This may include ideas like purchasing stocks and opening savings accounts for your offspring, right? If so. parents should ask their tax preparer about kiddie tax and how it may impact your child. Kiddie tax is a tax applied to children under age 19 (age 24 if student) on unearned income. Unearned income includes saving accounts or dividends.

Nic #3: Be sure you understand your tax deductions. In 2020 the kiddie tax is applied at the kid’s tax rate on unearned income over $1100 but under $2200. Amounts over $2200 are taxed at a less favorable rate, the parent’s tax rate. Please note the first $1100 is tax free due to the standard deduction. Speak to a tax advisor if you are unsure which deductions apply to your circumstances in 2020. Remember proper tax avoidance is legal and used by savvy tax strategist to help you lessen your tax liability whereas tax evasion is illegal.

Leave a comment below to let me know how you are preparing for the 2020 tax season?