First up, why do life events change our taxes?
Consider your Pinterest boards—you probably have some colorful inspiration for just about everything to remodeling a fixer-upper to decorating ideas for your youngest child’s room once he or she finally leaves the nest. But while you might not think beyond those goals, once they become a reality, the government wants a piece of your hard-earned pie. “Taxes are a reflection of our lives. As life becomes more complex so does one’s tax situation. When you’re young, the only tax matters are relating to simple wage income and educational expenditures. But as life progresses family and business lives filled with various investments tend to create more complex tax pictures,” explains Crystal Stranger, the president of 1st Tax Inc.
Why is it important to stay up to date?
Though it might be easier to log-in to TurboTax and let them do the song-and-dance for you, it might be a better idea to seek professional assistance if you had a major shift this year—from changing your name to opening up a rental business—because there might be laws or perks an accountant can share with you. If for no other reason, you want to make sure you aren’t penalized for your successes or losses. “From buying a house to marriage to having a child, the tax code is littered with exemptions, deductions, and credits for taxpayers. The hard part for taxpayers is knowing how and when to claim these benefits. In addition, the tax code may impose new filing requirements based on a change in one’s life. For example, if a U.S. citizen moves to Italy for six months and opens a bank account, that person may need to file additional tax forms,” Travis A. Greaves, partner at Greaves Wu LLP, explains. “Therefore, it’s important to have a tax adviser that you trust and that will make you aware of the tax impact of your life changes.”