Janell A. Israel & Associates
1585 Kapiolani Blvd., Suite 1604, Honolulu, Hawaii 96814 Phone: 808-942-8817
March 2017 Tax Newsletter
WHAT'S NEW IN TAXES:
Current Law Still Requires You to Have Health Insurance
On January 20, President Trump signed an executive order asking federal agencies to reduce the economic burden the Affordable Care Act (ACA) puts on American citizens.
Unfortunately, this executive order caused confusion. Many people wondered whether fines would no longer be imposed or if rules no longer needed to be followed. While this may impact how some federal departments behave, it does not impact the law. This includes:
It’s important to realize that unless tax laws actually change, you are expected to follow the laws as they are currently written.
Your Tax Return Can Be Corrected
You may have felt the dread of realizing you made a mistake on your recently filed tax return. Perhaps you received late documentation that could be used for a deduction. Sometimes you can receive a corrected year-end statement for one of your investment providers. The good news is the IRS allows you to correct your return for up to three years after you file your original return.
Oversights and errors are not uncommon, but you need to inform the IRS you are correcting the return by filing a Form 1040X. This amended tax return details what should be changed and it allows you to explain the reason for your change.
Filing an amended return doesn't extend the time the IRS has to examine your returns unless your original or amended returns were fraudulently filed. The IRS generally has three years from the date your original tax return was due or from the time it was filed to examine your returns (both original and amended) and to adjust your tax.
While there are exceptions, generally if your amended return is properly prepared, your chances of being audited are probably no greater than they were on your original return.
It's important to consider the size of the refund or balance due before you rush to amend your return. If you are owed a small refund, it may actually cost you more to amend your tax return than to leave the return as originally filed.
If you've discovered income or deductions that you should have reported on your income tax return, give us a call. We can help you set the record straight and pay only the tax actually due.
What's New in Finances:
Two Steps to Reducing Your Credit Card Debt
The Federal Reserve recently announced that it expects to raise interest rates three times in 2017. These rate hikes could affect interest rates on your credit cards, so now may be the perfect time to get serious about paying your credit cards off.
Here's a two-step program to reduce your debt:
Step 1. Do your homework. Start by pulling together all your recent credit card statements. Make a list of the balance you owe on each card, the interest rate, and the minimum payment due. Also note the amount of interest you were charged in the latest month..
Look back in your records and add up the balances from a year ago. If the total you owe has increased in the last year, it means you're falling further behind. That's even more incentive to focus on debt reduction.
Now figure out the total payment you can afford to make on your cards each month. Stretch you budget as far as possible. Note whether you can make more than the minimum payment. If not, you may need to get advice from a reputable nonprofit credit counseling service.
Step 2. Follow through on your plan. Make the largest payment your budget will allow on the card with the highest interest rate. Do what you can while staying current with the minimum payments on all your other cards. When the balance on the first card is paid off, don't use it again. Move on to the card with the next highest interest rate. Meanwhile, make the commitment to use credit cards only when absolutely necessary and put any new charge on the card with the lowest interest rate..
Check your progress after a few months. If necessary, modify your plan and stretch your budget again to increase your payments. Paying off credit card debt takes time and isn't easy, but you'll be more prepared for potential economic uncertainty ahead.
Six Facts About Traditional IRAs Everyone Should Know
Individual Retirement Accounts (IRAs) are among the most common accounts used for retirement savings. Almost anyone can have one and they offer great tax advantages. Here are six facts about Traditional IRAs everyone should know.
Fact 1: You can contribute up to $5,500 to a Traditional IRA ($6,500 if age 50 or older) for 2016 and 2017, as long as your taxable compensation for the year was at least that much.
Fact 2: Non-working spouses can contribute to Traditional IRAs as long as the couple files a joint return and the working spouse’s compensation equals or exceeds the sum of the non-working spouse’s contribution and the working spouse’s contribution.
Fact 3: When you contribute to a Traditional IRA, you may be able to deduct some or all of your contributions from your taxable income.
Fact 4: Your income level can limit your IRA tax benefit. There is no income limit for Traditional IRA contributions, but not everyone is eligible to receive a tax deduction. If you are covered by an employer-sponsored retirement plan, such as a 401(k), your deduction may be limited. For 2016, single taxpayers can take a full deduction with modified adjusted gross income (MAGI) up to $61,000 and a partial deduction up to $71,000 ($62,000 – 72,000 in 2017). Married taxpayers filing jointly can take a full deduction with MAGI up to $98,000 and a partial deduction up to $118,000 ($99,000 – 119,000 in 2017).
Fact 5: Everyone can consider making a contribution. Even if your income exceeds the deduction limits, you can still make nondeductible contributions. Those nondeductible contributions may be withdrawn tax-free when you take distributions in retirement. Since you effectively paid taxes on the money in the year of the contribution, you don't have to pay taxes again later.
Fact 6: You may be able to make contributions for a prior year. You have until the tax return filing deadline (not including extensions) to make IRA contributions for the tax year. Therefore, you have until April 18, 2017, to make contributions for 2016.
Of course, there are other considerations when determining if a Traditional IRA is right for you. Call our office with questions.
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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