Janell A. Israel & Associates
1585 Kapiolani Blvd., Suite 1604, Honolulu, Hawaii 96814 Phone: 808-942-8817
February 2011 Tax Newsletter
What's new in taxes:
More Savings Bond Options For Your Tax Refund
Last year, you could use your tax refund to purchase U.S. Series I Savings Bonds in your name. This year, there are some new options for purchasing savings bonds with your income tax refund.
You can buy savings bonds for yourself and up to two other individuals. Form 8888 is used to designate the person or persons in whose name the bonds are to be issued. The savings bonds will then be mailed to those individuals.
Up to $5,000 in bonds can be purchased, and they must be bought in $50 increments. This year, you no longer need to use direct deposit for any remaining refund amount; you may request a paper check for the balance if you prefer.
What's Your Status?
While gathering information to complete your income tax return, you may give little thought to your filing status. But there's a reason "filing status" choices appear at the beginning of tax forms: They're important.
Why? Because filing status can impact exemptions, reportable income, deductions, credits, tax rates, liability, the type of form you file, and whether you need to file at all. In addition, some states require that you use the status reported on your federal return, which can affect the amount of state tax you pay.
Here are facts to consider when determining filing status.
1. Your status generally depends on whether you're married or single on the last day of your taxable year (typically December 31). In cases of divorce or separate maintenance decrees, the laws of your state determine whether you're considered married or single. Same-sex marriages are not recognized for federal income tax purposes.
2. As a married couple, you can choose joint or separate returns. When you file separately, you can change your mind later and amend your return to file jointly. However, you can't switch from joint status to married filing separately after the due date of the original return.
3. If you were widowed during the year and have not remarried, you have the option of filing jointly with your late spouse. When you're widowed and have dependent children, you can continue to use joint tax rates for two additional years following the year your spouse died.
4. Head of household status is intended for single taxpayers with dependent children. It may also be available when you're single and maintaining a separate household for a parent - including one living in a nursing home.
Questions about your filing status? Please contact us if you need more information.
What's New in Finances:
Time Your IRA Contributions To Help Attain Maximum Growth
The tax rules give you a period of 15½ months to make contributions to an IRA for any given year. For example, you could contribute to a 2010 IRA as early as January 1, 2010, and as late as April 18, 2011.
The timing of your contributions can have a significant effect on the amount your retirement fund can grow to, and if you're contributing to a tax-deductible IRA, the timing can make a tax difference too.
Here are two bits of advice.
* First, if you didn't reach the 2010 contribution limit ($5,000 if you're under age 50; $6,000 if you're over) by December 31, 2010, designate 2011 contributions as being for 2010 until you reach the dollar limit or April 18. Then you can deduct these contributions on your 2010 return for a quicker tax benefit. Use that reduction in your tax bill to fund your 2011 IRA.
* Consider your ability to make your contributions for each year as early in the year as you can. That gives your fund more time to benefit from tax-deferred growth. If you can't manage a lump sum at the beginning of the year, fund your IRA with a set amount each month.
Talk finances with your elderly parents
One day you may find yourself taking care of an elderly parent who is in declining physical or mental health. This can be stressful, both emotionally and financially. On the financial side, there are steps you may want to take to prepare for this situation.
Talk to your parents about their financial affairs. Parents may be reluctant to discuss their finances, but someone needs to know the names of their lawyer and accountant. Someone needs to know where their important financial papers are located. Chances are that much of the information will be in your parents' heads, or scattered in various places around their house.
Here's a general overview of the topics you might want to cover with your parents.
* Where are social security cards, driver's licenses, and passports kept?
* Where are marriage or divorce records and family birth certificates?
* Where are military service records and pension records?
* Help your parents make a list of their financial assets, bank accounts, investments, etc.
Review the beneficiaries they have designated and how accounts are titled.
* Do they have a safe deposit box? Record the location and box number.
* Find the name of their accountant and copies of tax returns.
* Locate mortgage records and the deed to their house or other property.
* Locate vehicle titles.
* Do they own any assets stored elsewhere?
*Locate records for home, vehicle, health, and life insurance.
* Do they have a will or living trust?
* What is the name of their attorney?
* Discuss any special wishes for bequests; encourage your parents to put them in writing.
* Have they set up directives for medical care (living wills)?
* Have they set up a Power of Attorney in case they become disabled?
Don't try to find all this information in one exhausting session. Instead, use the list as a starting point for a series of conversations. Wherever possible, involve your parents in putting their own affairs in order. You may find it's a great opportunity to bond with your parents in their golden years.
Take a Break
A few observations...
* A penny saved is a government oversight.
* The easiest way to find something lost around the house is to buy a replacement.
* He who hesitates is probably right.
* Did you ever notice: When you put the two words "The" and "IRS" together, it spells "Theirs."
All information is believed to be from reliable sources, however we make no representation as to its completeness or accuracy. The information contained in this newsletter is provided by Mostad & Christensen, Inc. The information is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance. For more information on anything in this newsletter, or for assistance with any of your tax, business, or financial strategy concerns, contact our office.
Securities and advisory services offered through National Planning Corporation (NPC), Member FINRA/SIPC, a Registered Investment Adviser. Mosted & Christensen, Janell Israel & Associates and NPC are separate and unrelated companies.
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Please visit www.janellisrael.com for up-to-date financial information & www.postoplanning.com for information regarding long term care insurance.