Janell A. Israel & Associates
November
2005 Online Newsletter
Happy Thanksgivings!
What's New: IRS announces changes
* New form for
vehicle contributions. The IRS has created Form 1098-C, a new form that is to be
used by charities to report taxpayer contributions of vehicles, boats, and
airplanes. Copy B or C of the form can be used to provide the taxpayer with
substantiation of his donation to the charity.
* IRS interest
rates increase. For the final quarter of 2005, IRS interest rates will be 1%
higher than third-quarter rates. Interest charged on individual underpayments
of tax and paid by the IRS on tax overpayments will be 7%. Interest on
corporate underpayments will also be 7%, though underpayments in excess of
$100,000 will be charged 9%. The interest rate on corporate overpayments is 6%;
if the overpayment exceeds $10,000, the interest rate paid is 4.5%.
Consider the tax issues in caring for elderly parents
As the population
in the
If you provide
more than half of your parent’s support, you may be able to claim your
parent as a dependent on your tax return. To be eligible, your parent
can’t earn more than $3,200 (in 2005), excluding their nontaxable social
security and disability income.
What if you and
your siblings all pitch in to support a parent? Anyone who contributes at least
10% of the total support can be the one to claim the $3,200 exemption if all of
you agree in a multiple support agreement.
Even if a
parent’s income exceeds $3,200 this year, you can still deduct the
medical expenses paid on the parent’s behalf, as long as you provide more
than half of his or her support. Don’t forget to include health and
long-term care insurance, nursing care, and certain medical related home
improvements.
If you hire
someone to take care of your parent while you work, you might qualify for a tax
credit. Your parent must be physically or mentally incapable of caring for
himself.
Unmarried
individuals who support a parent can file their tax returns as “head of
household.” To qualify, your parent doesn’t need to live with you.
Instead, as long as you pay more than half of the cost of maintaining your
parent’s main home, including a rest home or nursing facility, you
qualify for this preferential tax treatment.
For more
information about the tax issues affecting caregivers and their parents, please
give us a call.
Be prepared: How to lessen the blow of a disaster
When recent
hurricanes slammed into the
How can you
financially prepare your family or business for disaster? Here are some tips.
For
individuals
* Keep a small
amount of cash on hand. If a disaster strikes, ATM machines may not be usable
and businesses may not accept credit cards, so you’ll want to have enough
currency to purchase necessities for a few days.
* Keep important
documents in a safe and easily accessible place. Consider keeping important
documents - including legal papers, insurance policies, birth certificates, and
vehicle titles - in a small fireproof safe near your home’s most likely
exit.
* Keep an
up-to-date inventory of your household possessions. You can easily create such
an inventory by walking through your house with a video camera and describing
each item that comes into view. Such an inventory record will prove invaluable
for insurance recovery.
* Keep backups of
important documents and records. These could be paper copies or scanned
electronic copies and should include financial data files. These records should
be kept away from your home in a safety deposit box or other secure location.
As recent events
have shown, advance preparation for disasters can make the difference between
inconvenience and financial failure. If you need help preparing a disaster
plan, give us a call.
For businesses
* Establish an emergency
plan. Use the plan to evaluate areas of risk and prioritize business
operations. What are the key functions that must continue to take place for the
business to operate without interruption? The plan should also describe
recovery strategies that will allow the business to operate if disaster
strikes. Such strategies should address loss of premises, software and
hardware, communications, machinery, and vital information. Finally, the plan
should be periodically tested and reviewed. This could involve simulating
disaster situations and talking with employees about how the plan should be
implemented.
* Backup your
day-to-day operational data. This can be done via computer tapes that are taken
offsite, nightly backups sent to an Internet company, real-time backups while
employees work, or any combination of these. The goal is to make sure your
vital business information is protected and secure.
* Maintain
commercial insurance. Visit your insurance agent periodically to ensure that
your business has adequate coverage and can get needed funds in the event of
disaster.
What's New: Survey shows college costs increasing
The annual survey
of college costs conducted by the College Board shows tuition and fees
increased in the last year at twice the rate of inflation.
Tuition and fees
at four-year public universities increased 7.1%, putting the average cost now
at $5,491. With room and board added in, the cost of attending a public
university averages $12,127 for one year.
Education at a
private school averages $21,235 for one year’s tuition and fees, a 5.9%
increase over the previous year. Room and board brings the private school
average cost to an annual $29,026.
Don’t put all your eggs in one basket
Even if
you’re not an investment expert, you’re probably familiar with the
term “diversification.” It means not putting all your eggs in one
basket. Diversification calls for choosing the right mix of investments to keep
a balance between risk and return.
* Choose the
right investment mix. While there is no single asset mix appropriate for all
investors, most people should have some combination of stocks, bonds, and cash
in their portfolio. The right investment mix for you depends on your age,
income, family responsibilities, and your tolerance for risk.
* Take a look at
your mutual funds. Many mutual fund investors believe that they are
well-diversified, even though they aren’t. For example, it’s
possible that different mutual funds own many of the same stocks or similar
stocks in the same industries. Whether you’re thinking about buying a
fund for the first time or you already own several of them, it pays to do a
little digging. All mutual funds are required to publish a list of their
complete holdings at least twice a year. Get the most recent portfolio list for
your funds and compare them for overlapping investments.
* Consider the
big picture. When you review your portfolio for diversity, consider the
investments both inside and outside your retirement accounts. They are parts of
the same picture. Doubling up on the same investment in both types of accounts
may decrease your diversification and increase your risk.
* Keep an eye on
your 401(k). As a general rule, you should avoid being too heavily invested in
any one company’s stock, including that of the company for which you
work. If your employer matches your 401(k) contribution with company stock,
consider other investments for your own 401(k) contributions and for the money
you invest outside your 401(k) plan. When you’re allowed to do so,
consider selling enough company stock to rebalance your 401(k).
Don’t risk
your financial future by putting too many eggs in one basket. If we can help
evaluate your situation, give us a call.
Take a break
l
Pay taxes with a smile
“It would
be nice if we could all pay our taxes with a smile, but normally cash is
required.”
Anonymous
l
Obituary for Mr. Sense
Today I mourn the
passing of my beloved old friend, Mr. Common Sense.
Mr. Sense had
been with us for many years. No one knows for sure how old he was since his
birth records were long ago lost in bureaucratic red tape.
He will be
remembered as having cultivated such value lessons as knowing when to come in
out of the rain, why the early bird gets the worm and that life isn’t
always fair.
Common Sense
lived by simple, sound financial policies (don’t spend more than you
earn) and reliable parenting strategies (adults, not kids, are in charge).
His health began
to rapidly deteriorate when well intentioned but overbearing regulations were
set in place. Reports of a six-year-old boy charged with sexual harassment for
kissing a classmate; teens suspended from school for using mouthwash after
lunch; and a teacher fired for reprimanding an unruly student, only worsened
his condition. Mr. Sense declined even further when schools were required to
get parental consent to administer aspirin to a student; but could not inform
the parents when a student became pregnant and wanted to have an abortion. Finally,
Common Sense lost the will to live as the Ten Commandments became contraband;
churches became businesses; and criminals received better treatment than their
victims.
Common Sense
finally gave up the ghost after a woman failed to realize that a steaming cup
of coffee was hot, she spilled a bit in her lap, and was awarded a huge
settlement.
Common Sense was
preceded in death by his parents. Truth and Trust, his wife, Discretion; his
daughter, Responsibility; and his son, Reason. He is survived by two step
brothers; Mr. Rights and Ima Whiner. Not many attended his funeral because so
few realized he was gone. If you still remember him, pass this on; if not, join
the majority and do nothing.
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The information
contained in this newsletter 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 the ONLINE ADVISOR, or for
assistance with any of your tax, business, or financial strategy concerns,
contact our office
Notice required
by U.S. Treasury Regulations: Be aware that this communication is not intended
to be used, and it cannot be used, for the purpose of avoiding penalties under