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Free Tax and Finance Advice for Families and Individuals

When you start a new job and sign up for your company's 401(k) plan, you will need to decide how much to contribute to the account. This seemingly simple decision will affect how much is withheld from your paychecks, your annual income tax bill and how much money you will have in retirement. Here's how to determine the amount to save in your 401(k) plan.

Qualify for the 401(k) match. Find out how much you need to save to qualify for any 401(k) match your employer provides. The most common 401(k) match formula is 50 cents for each dollar saved, up to 6 percent of pay. Employees in this type of plan would need to contribute as least 6 percent of their salary to the 401(k) plan to get the maximum possible 401(k) match. Saving 6 percent of your pay in a 401(k) plan and earning a 3 percent 401(k) match means you are tucking away an amount equal to 9 percent of your salary each pay period for retirement.

  • A lot of people like to receive a refund from the IRS, thinking of it as a form of forced saving. On the other hand, if you underpay your taxes by more than $1,000 and don't meet certain exceptions, you could be hit with a penalty.

    Too big a refund or too large a tax bill is often a sign that you need to review your withholding. This is especially important in 2018 as it's likely that the Tax Cuts and Jobs Act has affected your tax rate.

  • It's tempting to take a break from everything this summer, but you may regret it come tax season if you push off tax planning. Here are some tips to help you keep your head in the game even when your feet are in the pool:

    If you are a sole proprietor with children, consider putting them on the payroll during the summer months. Wages paid to your children under age 18 are not subject to Social Security and Medicare taxes. What's more, their earnings are not subject to federal unemployment tax until they turn 21.
    If employing your children is not an option, you might still be able to score a deduction by sending them to summer camp. Day camp expenses for kids under 13 can provide a tax credit of up to 35 percent. Just remember, overnight camps do not qualify, and usually both parents must work to claim this credit.

  • Emergency funds can be helpful for everyone. Any unexpected hit to your finances, and unanticipated illness or a natural disaster might all be reasons you may need money right away.

    What is an emergency fund?

    An emergency fund is designed to keep your life intact during temporary setbacks and to help you avoid unnecessary debt. That means things like car insurance premiums and regular home maintenance (and other anticipated bills) should not be considered emergencies. The same is true of credit card bills for vacations.

    How much emergency savings is enough?

    In general, your emergency fund should cover three to six months of expenses. How much you'll need will vary based on your financial situation, including the vulnerability of your income.

  • Alot goes through your mind during a divorce.  A Divorce can be an emotionally draining process.  One often overlooked area is taxes.  If you are in the middle of a divorce or just thinking about it, you need to be careful.  Divorce has serious tax implications, and the choices you make now may affect you for many years.

  • Tax Department Principal, Peter Zich and Tax Manager, Andrew Schmidt, recently sat down with Liz Spencer, host of NCTV17's Business Connections to discuss the Tax Cuts & Jobs Act and how it is affecting local businesses and individuals.

  • Who have you designated as beneficiaries for your insurance policies and retirement accounts? If you can't remember, you're not alone. But it's worth checking.  If you make the wrong decision, it could affect who inherits those assets.

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By Dugan Lopatka - Accountants for Midsize Businesses in Chicago:  CPAs for Small Businesses

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Dugan & Lopatka, CPAs, PC, 104 E. Roosevelt Road, Wheaton, Illinois 60187 -MAP- T: (630) 665-4440 Fax: (630) 665-5030