Janell A. Israel & Associates
1585 Kapiolani Blvd., Suite 1604, Honolulu, Hawaii 96814 Phone: 808-942-8817
November 2015 Tax Newsletter
What's New in Taxes:
Beware! Tax Scams Old And New
The IRS has issued several warnings recently about scams both old and new.
In the "old" category are unsolicited phone calls from con artists who claim to work at the IRS. According to a press release, the Treasury Inspector General for Tax Administration has received reports of approximately 736,000 contacts since October 2013 and has become aware of approximately 4,550 victims from every state in the country who have collectively paid over $23 million as a result of this scam.
Remember that the IRS will generally contact you first by regular postal mail - not by phone. The IRS will not demand that you pay any tax bill with a prepaid debit card or wire transfer, nor ask for your credit card number over the phone.
A newer scam attempts to profit from the recent flooding in South Carolina. Fraudsters impersonate a charity and attempt to solicit donations as well as personal financial information.
We urge you to hang up immediately on any suspicious telephone calls. You can report scam attempts to the Treasury Inspector General for Tax Administration, the Federal Trade Commission, and the IRS. If you need assistance, we're here to help.
Reduce The Effect Of The Net Investment Income Tax
Year-end tax planning has traditionally included tips for managing ordinary income and capital gain tax.
These long-established strategies are still effective - but now your planning also needs to include ways to manage your exposure to the net investment income tax.
This 3.8% tax applies to the lower of your net investment income or the amount by which your modified adjusted gross income exceeds $200,000 when you're single or $250,000 when you file jointly.
Example. Say you're filing jointly for 2015. Your net investment income for the year is $25,000 and your modified adjusted gross income is $300,000. The tax is $950 (3.8% of $25,000).
Although the term "net investment income" covers most investment income - including capital gains, interest, royalties, dividends and passive income - other items such as distributions from IRAs and qualified plans and active business income are excluded. Be aware the excluded items may still increase your modified adjusted gross income and bring the net investment income tax into play.
Here are planning opportunities to consider before the end of the year to reduce the effect of the net investment income tax.
* Harvest capital losses from securities transactions and use them to offset capital gains.
* Turn a passive activity into an active business by increasing the hours you spend participating in the activity.
* Invest in tax-free municipal bonds or municipal bond funds that won't increase your net investment income or your modified adjusted gross income.
* Sell real estate on the installment basis to spread out capital gain over several years or arrange a like-kind exchange to defer gain.
* Instead of selling appreciated property, donate it to charity and realize a charitable deduction - with no capital gain.
* When possible, defer taxable business income, including bonuses, to 2016 if you expect your income to be lower next year.
Reviewing your options for reducing the net investment income tax is only one part of comprehensive planning. Give us a call. We'll help you factor the net investment income tax into your year-end decisions.
Practice Good Information Security
The IRS recently released an updated version of Publication 4557, Safeguarding Taxpayer Data. Even if you're not in the business of receiving, maintaining, sharing, transmitting, or storing the personal information of taxpayers, looking through the publication may benefit you. Why? Because Publication 4557 contains general processes, best practices, and guidelines for information privacy - and those tips can be useful no matter the type of financial information you acquire, use, and retain about your business partners, customers, and vendors.
For example, the publication contains a checklist that can help you define information security procedures and controls. Topics include risk assessment, facilities security, personnel security, and information systems security.
In today's world, identity theft is not only a concern of big corporations. Protecting valuable business records is a smart move no matter the size of your company.
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.
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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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