Janell A. Israel & Associates

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

May 2014 Tax Newsletter

What's New in Taxes:

Court Case Changes Rules on IRA Rollovers

A recent Tax Court decision will change the way the IRS applies the law on IRA rollovers.

For years, the IRS has interpreted the IRA rollover rules to mean that a taxpayer could do one rollover per year for each IRA he or she owned. In doing a rollover, the taxpayer is not taxed on the funds taken from the IRA so long as the funds are redeposited into an IRA within 60 days of the withdrawal.

The recent court decision changed the way the tax rule is applied, ruling that the limit on rollovers should be applied on an aggregate basis — that is, only one rollover per year is allowed for all the IRAs a taxpayer owns. If a taxpayer takes funds from one IRA and rolls the money back into an IRA within 60 days, he or she can't do any other tax-free rollovers within the following 365 days.

This change goes into effect January 1, 2015; therefore, the aggregate rule won't apply for rollovers done during the remainder of 2014. Note, also, that trustee-to-trustee transfers can still be done as often as the taxpayer likes; the limit doesn't apply to these transfers because the taxpayer never has possession of any of the IRA funds.

Do Your Tax Payments Need Adjusting?

If you got a big tax refund or owed the IRS a lot of money when you filed your 2013 tax return, it may be time to adjust your income tax withholding.

Many people like to receive a refund from the IRS, thinking of it as a form of forced saving. If you're of this opinion, that's fine. But too big a refund means you're wasting your money, giving an interest-free loan to the government.

On the other side, if you underpay your taxes by more than $1,000 and don't meet certain exceptions, you could be hit with a penalty.

Adjusting your withholding is as simple as filing a new Form W-4 with your employer. The form comes with a worksheet to figure out how many allowances you should claim. Or you can increase withholding by specifying an extra dollar amount to be withheld from every paycheck.

When reviewing your 2014 tax payments, keep a couple of general rules in mind. Generally, you must pay (through withholding or quarterly estimated payments) at least 100% of last year's tax liability (110% if your adjusted gross income is over $150,000), or at least 90% of what you'll owe for this year.

However you do it, you should adjust your withholding to match the taxes you expect to owe. If you need assistance figuring out your 2014 tax payments, give us a call.

What's New in Finances:

Seniors Need To Be Especially Wary of Scams

Seniors are a favorite target of scam artists. According to one survey, seniors over the age of 60 have lost nearly $3 billion a year to financial fraud. Here are a few of the tactics used to bilk seniors of their money.

* Advanced fee to claim winnings. The target victim is told he's won something and just needs to send money to cover fees, insurance, or whatever to claim the prize.

* Computer virus scam. The caller tells the senior that a virus has been detected on his/her computer. The victim is told to log into a website that lets the crook control the computer so the virus can be eliminated. But what happens is that the person's personal information is stolen.

* Grandparent scam. The caller claims to be a grandchild in a crisis situation. The imposter grandchild asks for money to be wired, pleading not to involve the parents.

* Medical scam. The caller claims to be running a special on some medical equipment and needs a deposit and your Medicare/Medicaid information to let you take advantage of the sale.

As people become familiar with each new scam, the con artists find yet another way to cheat people. The FBI gives this advice to avoid becoming a victim of a fraud: Be skeptical of offers that sound good but probably aren't, don't respond to e-mails from people or companies you don't know, and never, never give out any personal numbers or other information.

Disability Insurance Is Important Coverage

Say "insurance" to most people and auto, health, home, and life are the variants that spring to mind. But what if an illness or accident were to deprive you of your income? Even a temporary setback could create havoc with your affairs. And statistics show that your chances of being disabled for three months or longer between ages 35 and 65 are almost twice those of dying during the same period.

Yet people with financial savvy often overlook disability insurance. Perhaps they feel adequately covered through their job benefits. However, such coverage can be woefully inadequate. The fact is, most individuals should consider disability insurance in their financial planning. To get the right coverage for you, take the following steps:

* Scrutinize key policy terms. First, ask how "disability" is defined. Some policies use "any occupation" to determine if you are fit for work following an illness or accident. A better definition is "own occupation," whereby you receive benefits when you cannot perform the job you held at the time you became disabled.

* Check the benefit period. Ideally, your policy should cover disabilities until you'll be eligible for Medicare and social security.

* Determine how much coverage you need. Tally the after-tax income you would have from all sources during a period of disability and subtract this sum from your minimum needs.

* Decide what you can afford. Disability insurance is not inexpensive. Plan to forgo riders and options which boost premiums significantly. If your budget won't support the ideal benefit payment, consider lengthening the elimination period (but be sure that accumulated sick leave, savings, etc., will carry you until the benefits kick in).

Ask your insurance agent about the options available to you.

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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.