Janell A. Israel & Associates
1585 Kapiolani Blvd.,
Suite 1604, Honolulu, Hawaii 96814 Phone: 808-942-8817
January 2019 Tax Newsletter
Tips for a Faster Refund
As the tax filing season
approaches, there are steps you can take now to speed up the filing process.
The faster your return is filed, the faster you get your refund. Even if you
end up owing money to the IRS, knowing the amount due sooner gives you more
time to come up with the funds needed to pay your tax bill. Here are things you
can do now to get organized:
- Look for your tax forms. Forms W-2, 1099, and 1098 will
start hitting your mailbox. Look for them and get them organized. Create a
checklist of the forms to make sure you aren't missing any.
- Don't wait for Form 1095s. Once again, proof of health
insurance coverage forms are delayed. The deadline for companies to
distribute most Form 1095s to employees is pushed back to March 4. The IRS
is OK with filing your return prior to receiving the proof of insurance
form as long as you can provide other forms of proof. Remember, 2018 is
the last year of penalties if you do not have adequate insurance coverage.
- Finalize name changes. If you were recently married or
had a name change, file your taxes using the correct name. File your name
change with the Social Security Administration as soon as possible, but be
aware of the timing with a potential name conflict with the IRS.
- Collect your statements and sort
last year's tax return, gather and sort your necessary tax records. Sort
your tax records to match the items on your tax return. Here is a list of
the more common tax records:
- Informational tax forms (W-2, 1099, 1098, 1095-A,
plus others) that disclose wages, interest income, dividends and capital
- Other forms that disclose possible income (jury
duty, unemployment, IRA distributions and similar items)
- Business K-1 forms
- Social Security statements
- Mortgage interest statements
- Tuition paid statements
- Property tax statements
- Mileage log(s) for business, moving, medical and
- Medical, dental and vision expenses
- Business expenses
- Records of any asset purchases and sales
- Health insurance records (including Medicare and
- Charitable receipts and documentation
- Bank and investment statements
- Credit card statements
- Records of any out of state purchases that may
require use tax
- Records of any estimated tax payments
- Home sales (or refinance) records
- Educational expenses (including student loan
- Casualty and theft loss documentation (federally
declared disasters only)
- Moving expenses (military only)
you are not sure whether something is important for tax purposes, retain the
documentation. It is better to save unnecessary documentation than to later
wish you had the document to support your deduction.
- Clean up your auto log. You should have the necessary
logs to support your qualified business miles, moving miles, medical miles
and charitable miles driven by you. Gather the logs and make a quick
review to ensure they are up to date and totaled.
- Coordinate your deductions. If you and someone else may
share a dependent, confirm you are both on the same page as to who will
claim the dependent. This is true for single taxpayers, divorced
taxpayers, taxpayers with elderly parents/grandparents, and parents with
While you are organizing your
records, ride the momentum to start your filing system for the new year. Doing
so will make this process a breeze this time next year!
Hey Alexa. Are you Making Me Dumb?
3 concerns to
consider while living with a smart speaker
Smart speakers like the
Amazon Echo and Google Home are popping up everywhere. According to a Nielsen
study from last September, nearly one of every four U.S. households has a smart
speaker - 40 percent of those homes have more than one. For some, the speaker
is an easy way to play music, for others it's a unique way to easily access the
Internet for information and control other Wi-Fi enabled products. However,
there are some questions regarding whether or not it's a good idea to own one.
Here are three concerns to consider if you own or are thinking of purchasing a
- Is it spying on me? Privacy is a major concern
regarding smart speakers. Once powered up and connected to your Wi-Fi, it
is listening in your home 100 percent of the time. Listening is its core
function - it needs to hear you say the "wake" word to then
process your question or command. Amazon claims that it only starts
recording once it wakes up, but there is no way to know for sure.
Ultimately you need to decide if the benefits of owning a smart speaker
outweigh the risk of potentially giving up some privacy.
- Will it make me unintelligent? Ever since the internet became
available on handheld devices, the need to think through problems has
decreased. It is often debated that having the answers to almost
everything at our fingertips can suppress cognitive development. According
to the National Center for Biotechnology Information (NCBI) that line of
thinking might not be correct. The study of the relationship between brain
development and technology is still in its infancy and test results are
often counter-intuitive. The conclusion? No one knows! Given this, as a
buyer you should be aware of the possibility of dynamic changes in the way
we think, especially children. One idea is to limit the time the device is
on, just like monitoring use of cell phones, computers and tablets.
- Will I lose my manners? A smart speaker doesn't require
you to say "please" and "thank you" to get what you
want. A simple command is all that is required. The Atlantic published an
article pondering how giving verbal commands to a smart speaker with the
"casual rudeness" that is required could possibly change the way
you talk to people over time. A good defense against losing your
politeness is to be self-aware of your speech to others. According to a
study by the European Journal of Social Psychology, it takes 66 days to
create a habit. Set a reminder on your smart speaker (wink) for two months
from now to politely remind yourself to pay attention to your vocabulary.
While there is no shortage of
opinions regarding the use of smart speakers in the home, it's up to you to
decide if it fits with your lifestyle. If you are torn, Amazon and Google have
smaller versions (Echo Dot and Google Home Mini) that are relatively
inexpensive. You can try it out for a while and see how you like it. If it goes
well, you can spring for the larger model and move the smaller version to
another room in the house. If it goes poorly, you can sell it or give it to
How to Raise a Financially Savvy Child
If you have children (or
grandchildren) you have an opportunity to give them a jump-start on their
journey to becoming financially responsible adults. While teaching your child
about money and finances is easier when you start early, it's never too late to
impart your wisdom. Here are some age-relevant suggestions to help develop a
financially savvy young adult:
- Preschool – Start by using bills and coins
to teach them what the value of each is worth. Even if you don't get into
the exact values, explain that a quarter is worth more than a dime and a
dollar is worth more than a quarter. From there, explain that buying
things at the store comes down to a choice based on how much money you
have (you can't buy every toy you see!). Also, get them a piggy bank to start
saving coins and small bills.
- Grade school – Consider starting an allowance
and developing a simple spending plan. Teach them how to read price tags
and do comparison-shopping. Open a savings account to replace the piggy
bank and teach them about interest and the importance of regular saving.
Have them participate in family financial discussions about major
purchases, vacations and other simple money decisions.
- Middle school – Start connecting work with
earning money. Start simple with babysitting, mowing lawns or walking
dogs. Open a checking account and transition the simple spending plan into
a budget to save funds to make larger purchases. If you have not already
done so, it is a good time to introduce the importance of donating money
to church or charity.
- High school – Explain the job application and
interview process. Work with them to get a part-time job to start building
work experience. Add additional expense responsibility by transferring
direct responsibility for things like gas, lunches and expenses for going
out with friends. Introduce investing by explaining stocks, mutual funds,
CDs and IRAs. Talk about financial mistakes and how to deal with them when
they happen - try to use some of your real-life examples. If college is
the goal after high school, include them in the financial planning
- College – Teach them about borrowing money
and all its future implications. Explain how credit cards can be a good
companion to a budget, but warn of the dangers of mismanagement or not
paying the bill in full each month. Discuss the importance of their credit
score and how it affects future plans like buying a house. Talk about
retirement savings and the importance of building their retirement
Knowing about money - how to
earn it, use it, invest it and share it - is a valuable life skill. Simply
talking with your children about its importance is often not enough. Find
simple, age specific ways to build their financial IQ. A financially savvy
child will hopefully lead to a financially wise adult.
Taking a Home Office Deduction
A great tax reduction
idea, if done right!
extensive communication channels, and other new technologies make it easier to
run your business out of your home. If you qualify, many home business expenses
are deductible. Think you might qualify? You must first pass these tests.
- Trade or business use test. To qualify for business use of
your home you must use part of your home for a qualified trade or
business. This profit seeking activity must not be a hobby in the eyes of
- Exclusive use test. You must use part of your home
exclusively for your business activity. Blending personal use within the
same space as your business activity can disallow the business use of home
deductions, however, there does not need to be a permanent barrier between
this space and the rest of the house.
- Regular use test. In addition to having a
qualified business activity in an exclusive area of your home, you must
also use it "regularly" for your business activity. The IRS
applies judgment in this area to determine the facts and circumstances around
what it deems to be regular use.
- Principal place of business test. To deduct your home office
expenses, the home location must also be your principal place of business.
That does not mean there cannot be other business locations, just that
your home office must be your primary location. You might also have
multiple business activities. In this case, you could meet the test for
one of your businesses to qualify to take the deductions. With multiple
locations, the considering factors are:
- The relative importance of the activities performed
at each location
- The amount of time spent at each location
- The primary place used exclusively and regularly
for administrative or management activities
- Whether there are other fixed locations for
Types of deductible
This chart from the IRS gives
some direction on the types of expenses that are deductible. As always, proper
substantiation is required to take the deduction, so keep all receipts and
statements in an organized fashion.
Expenses only for the
business part of your home.
Painting or repairs only
in the area used for business.
Deductible in full. *
May be only partially
deductible in a daycare facility.
Expenses for keeping up and
running your entire home.
Insurance, utilities, and
Deductible based on the
percentage of your home used for business. *
Expenses only for the parts
of your home not used for business.
Lawn care or painting a
room not used for business.
IRS Publication 587
* Subject to the deduction limit
Sound confusing? Perhaps. If
the additional work of tracking specific expenses is too much to handle, a
simplified home office deduction calculation is also available to small
businesses to lower their tax bill. Please call should you need help in navigating
this part of the tax code.
IRS Announces 2019 Mileage Rates
Mileage rates for travel are
now set for 2019. The standard business mileage rate increases by 3.5 cents to
58 cents per mile. The medical and moving mileage rates also increase by 2
cents to 20 cents per mile. Charitable mileage rates remain unchanged at 14
cents per mile.
2019 Standard Mileage
Standard Mileage Rates
Here are 2018 rates for your
reference, as well.
2018 Standard Mileage
Standard Mileage Rates
Remember to properly document
your mileage to receive full credit for your miles driven.
As always, should you have
any questions or concerns regarding your tax situation please feel free to
This information is not intended to be a substitute for specific
individualized tax advice. We suggest that you discuss your specific tax issue
with a qualified tax advisor.
information is believed to be from reliable sources, however we make
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