Janell A. Israel & Associates

1585 Kapiolani Blvd., Suite 1604, Honolulu, Hawaii 96814 Phone: 808-942-8817

October 2012 Tax Newsletter


What's New in Taxes:


Where Your Tax Dollars Go


The Federal government raised almost $944 billion in revenue from the individual income tax in 2010 (the most recent year for statistics). What happens to this revenue? According to the Office of Budget and Management, the federal budget for 2011 broke down this way:



Who Pays "Enough" in Taxes?


A recent poll by the Pew Research Center revealed that 58% of those surveyed felt the rich don't pay enough in taxes. 26% said the rich pay their fair share, and 8% said the rich pay too much.


According to the Tax Policy Center, a nonpartisan group that studies tax issues, the wealthy do, in fact, pay a significant portion of taxes collected. Households earning over $1 million a year total 0.3% of all taxpayers; yet they pay 20% of all federal taxes (income, payroll, and estate taxes). Households earning $50,000 to $75,000 a year, a group totaling 12% of taxpayers, pay 9% of federal taxes. About 46% of households pay no federal income tax though they do pay payroll and other taxes.


What's New in Finances:


Take Credit to Help Pay College Costs


From 2008 to 2010, the average tuition at four-year public universities rose 15%, and in 2011 total student loans topped $1 trillion. Those statistics are no surprise to parents and students trying to pay for a college education.


The IRS recently issued a reminder that the tax law offers some education tax benefits that can help offset some college costs for students and parents.


The education credits include the American Opportunity Credit and the Lifetime Learning Credit.


The American Opportunity Credit can be up to $2,500 per eligible student and is available for the first four years of study at an eligible institution. Up to 40% of the credit is refundable. For 2012, the credit begins to be phased out once adjusted gross income reaches $80,000 for singles and $160,000 for couples.


The maximum Lifetime Learning Credit is $2,000, and there is no limit on the number of years you can claim the credit for an eligible student. The income phase-out for this credit begins at $52,000 for singles and $104,000 for couples.


Only one type of credit per student can be claimed in the same year. However, if you pay college expenses for more than one student in the same year, you can choose to take credits on a per-student, per-year basis. You can, for example, take the American Opportunity Credit for one student and the Lifetime Learning Credit for the other student.


The IRS reminder also mentions the tax deduction available for student loan interest of up to $2,500.


Tips for Taxpayers Who Receive an IRS Notice


Receiving a notice from the Internal Revenue Service is no cause for alarm. Every year the IRS sends millions of letters and notices to taxpayers. In the event one shows up in your mailbox, here are eight things you should know.

  1. Don't panic. Many of these letters can be dealt with very simply.
  2. There are a number of reasons the IRS sends notices to taxpayers. The notice may request payment of taxes, notify you of a change to your account or request additional information. The notice you receive normally covers a very specific issue about your account or tax return.
  3. Each letter and notice offers specific instructions on what you need to do to satisfy the inquiry.
  4. If you receive a notice about a correction to your tax return, you should review the correspondence and compare it with the information on your return.
  5. If you agree with the correction to your account, usually no reply is necessary unless a payment is due. If you disagree with the notice, please send it to our office. We prefer that we reply on your behalf.
  6. Most correspondence can be handled without calling or visiting an IRS office. However, if you have questions, call the telephone number in the upper right corner of the notice or call us. When you call, have a copy of your tax return and the correspondence available.
  7. Keep copies of any correspondence with your tax records.

For more information about IRS notices and bills, see Publication 594, The IRS Collection Process. For information about penalties and interest charges, see Publication 17, Your Federal Income Tax for Individuals. Both publications are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).


Take a break


“Always read stuff that will make you look good if you die in the middle of it.” – P.J. O’Rourke


“Freedom is not empowerment. Empowerment is what the Serbs have in Bosnia. Anybody can grab a gun and be empowered. It’s not entitlement. An entitlement is what people on welfare get, and how free are they? It’s not an endlessly expanding list of rights – the “right” to education, the “right” to food and housing. That’s not freedom, that’s dependency. Those aren’t rights, those are the rations of slavery – hay and a barn for human cattle. There is only one basic human right, the right to do as you damn well please. And with it comes the only basic human duty, the duty to take the consequences.” –P.J. O’Rourke



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.

Rep is not an attorney. Rep can help review the documents and recommend a local attorney that specializes in Estate Planning. Estate planning can involve a complex web of tax rules and regulations. You should consider the counsel of an experienced estate planning professional before implementing any strategy.