Janell A. Israel & Associates

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

October 2015 Tax Newsletter

 

 

WHAT'S NEW IN TAXES:

 

Health Insurers Need Your Social Security Number

 

Among the many provisions in the "Affordable Care Act" is a new information return that "health coverage providers" must file with the IRS. Form 1095-B lets the IRS match your health insurance coverage with the information you report on your personal tax return.

 

Generally, a "health coverage provider" is an insurance company. To complete Form 1095-B correctly, your insurance company may ask you to provide your social security number. The request will come from the insurance company, not the IRS, and may simply be a letter. At present, there is no official IRS form for the insurance company to use to request your social security number.

 

Fraud prevention tip: Verify that requests for personal financial information are valid by contacting your insurance company directly.

 

 

Give Your Kids A Head Start With A Roth IRA

 

Would you like to give your child a head start on smart money habits? Here's a suggestion: Have the child invest in a Roth IRA. Why? The tax-free compounding of contributions and investment returns over your child's lifetime is a great wealth-builder.

 

Here's what you need to know.

 

* There is no minimum age to open a Roth IRA account. All your child needs is earned income, either from a job or from self-employment.

 

* The maximum contribution to a Roth IRA for 2015 is $5,500. Your child can contribute less and you can provide some or all of the cash, up to the amount of your child's earned income..

 

* Your child won't receive a federal tax deduction for a Roth IRA contribution - and will pay no federal income tax on qualified distributions taken after age 59.

 

* You can continue to claim a qualifying child as a dependent on your tax return. Your child is also allowed a federal standard deduction of $6,300 for 2015, which means the first $6,300 of earned income is income-tax free.

 

* If you own a business and can employ your child, you can benefit from additional tax savings, including a payroll deduction for your business. In addition, depending on how your business is organized, you may not have to pay federal payroll taxes such as social security, Medicare, and unemployment. Remember, your child must perform real services and the wages can't be excessive.

 

* An early Roth IRA withdrawal could affect your child's college financial aid. Your child can take withdrawals from a Roth penalty-free to pay for college costs. But those withdrawals generally count as income when applying for financial aid.

 

Are you interested in learning more? Give us a call. We'll help you get started on saving for your child's future.

 

 

WHAT'S NEW IN FINANCES:

 

Talk To Your College Student About Finances

 

A recent study by the American Institute of Certified Public Accountants shows a wide gap between how well college students think they handle money and how well they actually handle money. The survey also found that nearly a third of students taught themselves how to budget.

 

The good news is that 99% of surveyed students said developing money management skills was "extremely" or "very" important, and 84% said they were "extremely" or "very" interested in learning how to make better financial decisions.

 

It's never too late to teach your kids how to handle finances. Involve them in family budgeting discussions and talk about credit cards and student loan debt. Share your knowledge - and your mistakes. Help your kids take ownership of their future by arming them with sound money skills.

 

 

Ex-Dividend Dates Can Bring A Tax Surprise To The Unwary

 

Are you shopping for a mutual fund? Make sure you understand ex-dividend dates to avoid a surprise at tax time.

 

Unlike stocks, a mutual fund is required to distribute its annual income to shareholders. The distributions are often taxable in the form of interest, dividends, and capital gains. The ex-dividend date is the day when shares you purchased no longer have the right to receive the scheduled distribution.

 

Why does the ex-dividend date matter? If you buy shares of a fund before the ex-dividend date, you will receive a taxable distribution - meaning you'll pay taxes on income earned by the fund before you owned it. Since the price of the fund shares before and after a distribution reflect the amount of the dividend, you're converting part of your purchase price into income.

What if you're selling your shares? If you've owned appreciated shares for more than a year, selling them could produce income taxed at favorable long-term capital gain rates, as opposed to receiving distributions taxed at ordinary tax rates.

 

If you own a mutual fund in a qualified retirement account, the annual distribution will not be subject to immediate taxation. In that case, the timing of your purchase is of less importance from a tax standpoint.

 

Mutual fund investing can be advantageous if you know the rules. Give us a call for guidance on the tax implications of your investments.

 

 

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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.

Mutual funds are sold by prospectus. Investors should read the prospectus carefully and consider the investment objectives, risks, charges, and expenses of each fund carefully before investing. The prospectus contains this and other information about the investment company. Please contact your representative or the investment company to obtain the prospectuses.

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. NPC does not provide tax or legal advice.

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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.