Janell A. Israel & Associates

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

June 2016 Tax Newsletter

What's New in Taxes:

You May Need to Amend Your Estimated Tax Payments

If you're a calendar year taxpayer, the due date for the second installment of 2016 federal estimated income taxes is June 15. Now's the time to determine whether the amount you calculated back in April will be enough to avoid penalties. Why not wait until the end of the year to make adjustments? Because estimated tax payments are generally due quarterly, and penalties are assessed on amounts that are unpaid for each quarter.

Reasons to amend your estimates include changes in your income, adjustments, deductions, credits, or exemptions. Your goal is to pay enough estimated tax between now and the end of the year to avoid underpayment penalties but not so much that you have a large refund on next year's federal income tax return. Contact us for help.

Do You Have to Make Estimated Tax Payments?

If most of your taxable income is from wages, the tax withheld from your paychecks is probably enough to cover what you'll owe on your federal return. However, if you have income from sources not subject to withholding, you'll generally have to make up any shortfall by paying quarterly tax estimates. For example, if you have recently switched from working as an employee to owning a business, you may need to make estimates to account for both the FICA and withholding portion of your taxes.

Another reason you may need to make estimates: Acquiring income-producing property. If the property provides enough extra income, quarterly estimates may be necessary even though taxes are being withheld from your wages, pensions, or retirement plan withdrawals.

Be aware that if you are supposed to make estimates and don't, the result may be a penalty plus interest. Here are the rules.

General rule. You'll generally need to make estimates if your withholding is less than 90% of your tax liability. There are exceptions, such as the "safe harbor" rules.

Safe harbor rules. When your adjusted gross income (AGI) is $150,000 or less, you can avoid underpayment penalties if you pay in 100% of last year's tax liability. If your adjusted gross income was more than $150,000 for 2015, during 2016 you generally have to pay 110% of the tax shown on your 2015 return. There's no penalty if your underpayment is less than $1,000. Special rules apply to farmers and fishermen.

Due dates. The first quarterly payment for 2016 was due on April 18. The second payment due date is June 15, and the third is September 15. The final 2016 payment is due on January 16, 2017.

If you have a significant change in your income, take time now to review your estimated payments. Contact us with any questions.

What's New in Finances:

Budgeting: Are You In The Minority?

According to a 2016 Financial Literacy Survey conducted by Harris Poll, 40% of Americans track spending with a budget. That number has been pretty much the same for the past decade. Are you one of those 40%? Or are you one of the majority – the 60% who do not have a budget? If you don't currently have a budget, you may also be part of the 32% of Americans who say creating a budget is a top financial goal.

Mapping out your income and expenses is a wise move. If you'd like to set up a budget but are having problems getting started, let us help.

Even a Simple Budget Can Help You Establish a Nest Egg

Have you tried to budget for retirement in the past? Maybe you did a good job of planning by looking over your expenses and determining where you could make changes to meet your retirement goals. And maybe you lived by your plan for a few days, or even a few weeks. But then the detail of tracking income and expenses got to be more than you were willing to deal with.

If that's the case, here's a simple way to make sure you have a nest egg by the time you're ready to retire: Set aside a fixed percentage of every dollar that comes in for retirement investing. For example, say you earn $100,000 a year. You could decide to save 10% of that amount. Do you think that saving $10,000 a year might not make a difference? If you are age 35 and would like to retire in 30 years, $10,000 invested each year will accumulate to $697,000 in that time, assuming a 5% annual return. If you start at age 25, the accumulated value when you're 65 would be $1,268,000.

Perhaps you believe you don't have enough current income to establish a savings program of any size. Are you sure? Ask yourself what you would do if you lost your current job and had to take a job that paid less. Chances are you'd figure out where to cut your spending. Why not apply that discipline now and make your current income provide both a current living and an investment in your retirement?

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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. 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.