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Tax Tip of the Week | How Divorce Affects Social Security Benefits?? October 2, 2019

Posted by bradstreetblogger in : Deductions, General, tax changes, Tax Planning Tips, Tax Preparation, Tax Tip, Taxes , add a comment

Social Security Benefits experts are difficult to find. I am not one. We understand the calculations of Social Security and Self Employment taxes along with some areas (and entity choices) in which they may be minimized. But, the nuances of Social Security Benefits do not fall directly into our world of income taxes, accounting and business consulting.

Social Security Benefits are complicated and a divorce increases this level of complexity.  Practically 50% of USA marriages end in divorces. The following article explains some of these rules and also walks us through an example of a divorced couple.

                                     -Mark Bradstreet

Here’s how a divorce can affect your Social Security situation.

A whopping 91% of Americans over the age of 50 don’t understand what factors determine the amount they can potentially receive in Social Security benefits, a survey from the Nationwide Retirement Institute found.

There are several factors that can affect how much you receive in Social Security benefits, such as the age at which you claim benefits, whether you continue working after you claim benefits, and how much you earned during the years you paid into Social Security.

One factor that’s easy to overlook, however, is divorce. If you are currently divorced and were married for at least 10 years, you or your ex-spouse could be earning more in Social Security benefits than you think.

How divorce affects Social Security

Not all divorced couples are eligible to receive additional benefits once they start claiming Social Security, and there are certain requirements you’ll have to meet.

The first thing to consider is how your benefits compare to your ex-spouse’s. If you’re receiving more in Social Security benefits than your ex-spouse (or if you haven’t claimed yet but are expected to receive more than your ex-spouse), you’re not eligible for any additional money each month. But if you’re receiving less each month than your ex, you may be eligible for an increase in benefits based on your ex-spouse’s work record.

Assuming you’re receiving less than your ex-spouse in benefits, there are a few other requirements you’ll need to meet. First, you and your former spouse need to have been married for at least 10 years, and you cannot currently be married (although it doesn’t matter whether your ex-spouse has remarried or not). In order to start claiming benefits, you also need to be at least 62 years old.

If you and your ex-spouse are old enough to file for benefits but your ex hasn’t claimed them yet, you can still claim your benefits based on their work record if you have been divorced for at least two years. Also, if you’re eligible for benefits based on your own work record, that money will be paid out first. Then if you’re also eligible to receive extra benefits based on your ex-spouse’s record, you’ll receive an additional amount each month.

Exactly how much extra you’ll receive depends on the age at which you claim. In order to receive the full amount you’re entitled to, you’ll have to wait until your full retirement age (FRA) – which is either age 66, 67, or somewhere in between. If you claim before then (as early as age 62), your benefits will be reduced. By waiting until your FRA, assuming you’re eligible to receive benefits based on your ex-spouse’s record, you can receive half of the amount he or she is receiving in benefits.

One last thing to keep in mind is that regardless of how much someone is receiving in benefits based on their ex-spouses record, it doesn’t affect how much the other person or their current spouse receives in benefits. So, if, say, your ex-wife is receiving benefits based on your record, you and your current wife’s benefits will not be reduced as a result.

Social Security in action: A hypothetical example

Figuring out whether you can claim benefits based on an ex-spouse’s record and calculating what you’d actually receive is complicated and confusing. So, let’s look at a hypothetical example to make it a little easier to understand.

Let’s say you and your husband were married 20 years, and you never remarried after the divorce. Your FRA is 67 years old, and if you claim at that age, you’d be receiving $1,000 per month based on your own work record and earnings. Your ex-husband, however, is currently receiving $2,500 per month in benefits. Because you were married at least 10 years, you’re unmarried now, and you’re eligible to receive less in benefits than your ex-spouse, you can apply for benefits based on your ex-husband’s record.

For simplicity’s sake, let’s say you wait until your FRA to claim. By doing so, you’ll receive the full $1,000 you’re entitled to based on your own record. Based on your ex-husband’s work record, you’re eligible to receive half of what he’s receiving, or $1,250 per month. With ex-spouse benefits, you’re not allowed to “double dip” – meaning you won’t receive your $1,000 plus $1,250 based on your ex-husband’s record. Rather, you’ll receive your $1,000 and an additional $250 per month so that your total benefit amount is equal to half of what your ex-spouse is receiving in benefits.

Also, all the normal Social Security restrictions still apply here. So, if, for example, you claim earlier than your FRA, your benefits will be reduced. And if you continue working after claiming benefits, you may see a (temporary) reduction in benefits as well, depending on how much you’re earning.

Social Security benefits can seem complex, and there are many factors that contribute to how much you’ll receive each month. But by understanding how much you’re entitled to and whether you’re eligible for additional benefits, you can maximize your monthly checks – and enjoy a more financially stable retirement.

Credit given to:  Katie Brockman, The Motley Fool This was published on July 1, 2019

Thank you for all of your questions, comments and suggestions for future topics. As always, they are much appreciated. We also welcome and appreciate anyone who wishes to write a Tax Tip of the Week for our consideration. We may be reached in our Dayton office at 937-436-3133 or in our Xenia office at 937-372-3504. Or, visit our website.  

This Week’s Author – Mark Bradstreet, CPA

–until next week.

Tax Tip of the Week | How to Apply for Social Security Benefits and Medicare – the Ins and Outs November 7, 2018

Posted by bradstreetblogger in : General, Tax Planning Tips, Tax Tip, Taxes, Uncategorized , add a comment

How to Apply for Social Security Benefits and Medicare – the Ins and Outs

No matter who you are, we are ALL moving ever closer towards that magical age of drawing your Social Security Benefits and using the Medicare system; unless, of course,  you already are reaping such benefits.  On a regular basis, we receive calls asking how and when to apply for these programs.  The following article very nicely answers these questions.

–    Mark C. Bradstreet, CPA

“Pundits spend a good deal of time advising Americans about the best age to claim Social Security – at age 62, at full retirement age, at age 70 and the like.

But they hardly ever discuss the nuts and bolts of applying for Social Security benefits like they should.

You see, the seemingly simple act of completing an application for your own or your spouse’s retirement or for disability benefits isn’t always as straightforward as you might think. “I had a client once who described this as ‘the most complicated and bureaucratic process known to mankind,’” says Robin Brewton, the chief operations officer for Social Security Solutions.

Here’s what experts say you need to know:

Start three months before you want payments. “It doesn’t take that long to clear a claim—no way,” says Andy Landis, author of Social Security: The Inside Story. “But (starting the process early) allows time to iron out any wrinkles that come up, like finding your military discharge form – DD Form 214, Discharge Papers and Separation Documents – or other documents. Then it’s clear sailing to your first payment.”

Others suggest the same. If you want benefits to start on your 66th birth month go to the Social Security office three months prior to your birth month, says Ted Sarenski, the CEO of Blue Ocean Strategic Capital. “Social Security will only give retroactive benefits six months prior so in no case go to them more than six months past your birth month if you intend to begin benefits on your birth month.”

Most claims are done online these days. You really don’t have to apply for benefits in person anymore. Just go to www.ssa.gov and click on the “retirement” box for retirement, spousal or Medicare claims. “There are great instructions and tips there,” says Landis. “Then it takes maybe 20 minutes to complete the application.”

Other experts agree that online is the best way to apply for Social Security. “I am a firm believer in applying online for benefits,” says Kurt Czarnowski, a principal with Czarnowski Consulting.

Prefer to work with a real live human? You can, of course, still apply in person. But if you choose this route, don’t walk into your local office cold. “You might face a one- or two-hour wait, or worse,” says Landis. Instead, call 1-800-772-1213 to set up an appointment, for either a phone or in-office claim. Of note, the Social Security Administration (SSA) generally doesn’t publish the phone numbers of their local offices. You can find your local office and its business hours at https://secure.ssa.gov/ICON/main.jsp.

Consider this warning from Brewton if you do decide to file in person: “Our experience with our own clients has been that the (SSA) agents have attempted to get them to do something different than the client wanted.”

Word to the wise. The SSA’s phones are staffed from 7 a.m. to 7 p.m. in whatever time zone you’re in. “But they’re swamped mid-day, from about 10 a.m. to 3 p.m.,” says Landis. “Instead, call near either end of the day, like 8 a.m. or 5 p.m. If the recording says it will be a long wait, just hang up and call back at a better time.”

When calling Uncle Sam, Landis recommends always having a magazine or other diversion at hand in case you have to wait.

The two “gotcha” questions. When you file, there are two questions that seem to trip people up, according to Brewton. One: “If you are eligible for both a retirement benefit and a spouse’s benefit, do you want to delay receipt of retirement benefit?” And two: “When do you want benefits to begin?”

So many consumers are confused by the first question, says Brewton. “Some don’t know that they may be eligible for multiple benefits; others just simply don’t understand the question,” she says, noting that the question applies only to those who are still eligible to “restrict the scope of the application to spousal benefits only” or what some refer to as filing a restricted application. This applies only to those who were born on or before Jan. 1, 1954. “Those wanting to receive only spousal benefits must answer ‘yes” to this question,” she says. “If you answer “no,” your own retirement benefits will begin.”

The second question is a “gotcha” because, says Brewton, the field is pre-populated with the earliest possible date for someone to start benefits. “For those who are filling out the application up to four months in advance of when they want benefits to start, they’ll need to change the date in the field,” she says. “If a consumer has carefully crafted a claiming strategy, particularly if it is coordinating retirement and spousal or divorced spouse benefits, the wrong date can cost thousands of dollars and ruin the strategy.”

Use the comment section. Would-be Social Security beneficiaries should always use the comments section near the end of the application to clearly spell out what their intentions are, says Brewton. “If they’re trying to file a restricted application, they should say so,” she says. “If they want to collect divorced spouse benefits at full retirement age and switch to their own later, they should say it in the comments. This is documentation of your intent in the event an error occurs in processing.”

Also, Brewton recommends asking someone to sit with you while you file – a friend, spouse, or family member. “It will help you get a second set of eyes on the questions and your answers,” she says.

Make a mistake? If you discover that you made a mistake during the filing process, the sooner it is addressed, the better. Unfortunately, a correction isn’t easy to pull off and requires substantial documentation, says Brewton. “I recommend that clients who file in person or on the phone get the name of the person who assisted with the filing and have that person read the questions and answers back to the consumer,” she says.

Brewton recommends documenting conversations with dates and times. “I do believe that, given the number of Social Security beneficiaries, actual errors are few,” she says. But they do happen from time to time and they can be significant.

Landis also notes that the SSA will contact you if they have any questions about your application. However, the SSA, just like the IRS, will not email you. “Be aware of scammers trying to get your Social Security number,” says Sarenski.

Ultimately, says Brewton, the best defense against errors is a good offense – a smart claiming strategy that is written down. “If a consumer doesn’t feel heard by the SSA, or if the SSA is trying to convince them that a claiming strategy isn’t possible, the best bet is to walk away and get professional assistance. You can always file later.”

Filing for Social Security disability is the hardest. Those filing for Social Security Disability Insurance tackle it in stages, starting online at www.ssa.gov. “The SSA needs to know all your doctors and hospitals that have information about your medical condition,” says Landis. But here’s a trick of the trade that will save you a ton of work: “If one doctor or hospital has all your records, just list that source and say they have everything,” Landis says. “Then be prepared to wait—it takes months to decide a disability claim. The sooner you start, the sooner it will be done.”

Filing a survivor claim? Most claims can be filed online. Not this one. If you’re filing a survivor claim (widow, widower, or surviving child), you can’t do it online, says Landis. Start by calling 800-772-1213 for a claims appointment.

Don’t be late. Every type of claim has a time limit, especially Medicare, says Landis. “You can file up to three months before you want benefits, he says. “Delaying? Not advised.”

What can you expect after you file? You should be aware of and plan for the fact that Social Security benefits are paid one month in arrears, says Czarnowski. “For example, say someone retires at the end of June and intends to start collecting Social Security benefits effective with the month of July,” he says. “That person won’t receive his/her first payment until August.”

Also note, says Czarnowski, that anyone born between the 1st and the 10th of the month is always paid on the 2nd Wednesday of the month; anyone born between the 11th and the 20th of the month is always paid on the 3rd Wednesday of the month; and anyone born between the 21st and the end of the month is always paid on the 4th Wednesday of the month. “And by ‘paid’ I mean that their payment is ‘direct deposited’ into their bank account on that date,” he says. “This is something that people need to understand and anticipate, and in my experience, many of them don’t.”

Examine your documents. Sarenski suggests examining your “introductory” letter and all other correspondence immediately upon receiving it in the mail from the SSA. “It is best to correct any errors as soon as you know of them,” he says.

More on what you’ll need to complete the process can be found in this downloadable PDF .”

Robert Powell is editor of Retirement Weekly, contributes regularly to USA TODAY, The Wall Street Journal, TheStreet and MarketWatch. Got questions about money? Email Bob at rpowell@allthingsretirement.com.

Thank you for all of your questions, comments and suggestions for future topics. As always, they are much appreciated. We may be reached in our Dayton office at 937-436-3133 or in our Xenia office at 937-372-3504. Or, visit our website.

This Week’s Author – Mark C Bradstreet, CPA

–until next week

Tax Tip of the Week | No. 382 | Social Security Administration Announces Large Increase in 2017 Wage Base November 23, 2016

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Tax Tip of the Week | November 23, 2016 | No. 382 | Social Security Administration Announces Large Increase in 2017 Wage Base

The Social Security Administration (SSA) announced that the maximum amount of wages in 2017 subject to the 6.2% Social Security tax (old age, survivor, and disability insurance) will rise from $118,500 to $127,200, an increase of more than 7%. By comparison, the 2016 wage base was unchanged from 2015.

The maximum amount of Social Security tax a taxpayer could pay will therefore increase from $7,347 in 2016 to $7,886.40 in 2017, an increase of $539.40.

The SSA also announced that Social Security beneficiaries will get a 0.3% increase in benefits in 2017, after receiving no increase in 2016. The average retiree will receive an increase of $5 a month.

Among the other increases is the amount a worker under full retirement age can earn before he or she has Social Security benefits reduced. The limit increases from $15,720 a year to $16,920 for 2017, after which $1 in benefits is withheld for every $2 earned above the limit. Last year, this limit also did not increase because of low inflation.

There is no limit on the amount of wages subject to the other portion of the FICA tax, the 1.45% Medicare tax.

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.
Rick Prewitt – the guy behind TTW

…until next week.

Tax Tip of the Week | No. 264 | No Change to Social Security Depletion Date August 20, 2014

Posted by bradstreetblogger in : General, tax changes, Tax Planning Tips, Tax Preparation, Tax Tip, Taxes, Taxes, Uncategorized , add a comment

Tax Tip of the Week | Aug 20, 2014 | No. 264 | No Change to Social Security Depletion Date

Here’s an article that we thought would interest you…

The Social Security Board of Trustees reports the combined asset reserves of the Old-Age and Survivors Insurance, and Disability Insurance (OASDI) Trust Funds are projected to become depleted in 2033.

This is unchanged from the last two years, with 77% of benefits still payable at that time. The DI Trust Fund will become depleted in 2016, also unchanged from last year’s estimate, with 81% of benefits still payable.

The combined trust fund reserves are still growing and will continue to do so through 2019. Beginning with 2020, the cost of the program is projected to exceed income. The projected actuarial deficit over the 75-year long-range period is 2.88% of taxable payroll—0.16 percentage point larger than in last year’s report.

“The projected depletion dates of the Social Security Trust Funds have not changed, and three-fourths of benefits would still be payable after depletion. But the fact remains that Congress can ensure the long-term solvency of this vital program by taking action,” says Carolyn W. Colvin, Acting Commissioner of Social Security. “The Disability Insurance Trust Fund’s projected depletion year remains 2016, and legislative action is needed as soon as possible to address this financial imbalance.”

Other highlights of the Trustees Report include:

•    Income including interest to the combined OASDI Trust Funds amounted to $855 billion in 2013. ($726 billion in net contributions, $21 billion from taxation of benefits, $103 billion in interest, and $5 billion in reimbursements from the General Fund of the Treasury—almost exclusively resulting from the 2012 payroll tax legislation);

•    Total expenditures from the combined OASDI Trust Funds amounted to $823 billion in 2013;

•    Non-interest income fell below program costs in 2010 for the first time since 1983. Program costs are projected to exceed non-interest income throughout the remainder of the 75-year period;

•    The asset reserves of the combined OASDI Trust Funds increased by $32 billion in 2013 to a total of $2.76 trillion;

•    During 2013, an estimated 163 million people had earnings covered by Social Security and paid payroll taxes;

•    Social Security paid benefits of $812 billion in calendar year 2013. There were about 58 million beneficiaries at the end of the calendar year;

•    The cost of $6.2 billion to administer the program in 2013 was a very low 0.7% of total expenditures; and

•    The combined Trust Fund asset reserves earned interest at an effective annual rate of 3.8% in 2013.

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.

Rick Prewitt – the guy behind TTW

…until next week.

Tax Tip of the Week | No. 257 | Don’t Outlive Your Money: 7 Tips July 9, 2014

Posted by bradstreetblogger in : tax changes, Tax Planning Tips, Tax Preparation, Tax Tip, Taxes, Taxes, Uncategorized , add a comment

Tax Tip of the Week | July 9, 2014 | No. 257 | Don’t Outlive Your Money: 7 Tips

I ran across this interesting article and thought you might like it also….

The scariest financial risk people face in life is running out of money at an old age. I’m 83 and I’m speaking from personal experience. After a long career as a newspaper editor, I retired in 1991 at the age of 60, with my wife, who is 14 years younger and retired in 2004. I’ve learned about financial matters the hard way, and I ghost-write articles like this one to earn some extra income. I’m not scared about running out of money in my lifetime, but I am fearful of not leaving enough money to my wife, who is much younger than I. Let me share with you some financial lessons I’ve learned.

1. DO NOT elect to take Social Security benefits early. If you do take early benefits, you probably will be shortchanged on what you would have received in total payments over the rest of your lifetime. People are living longer these days. You will add 8% a year in payment totals after full retirement age if you can wait until age 70 to take benefits.

2. Downsize your home at the earliest opportunity. Once you become an empty nester, the odds are that you do not need a house as large as the one in which you now live. Sell it and buy a smaller one. Pay cash if at all possible.

3. Consider moving to a retirement community, which can be a highly desirable and cost-efficient place for the elderly to live. Your neighbors in such communities most likely are like-minded and in your age group. Also, such communities are especially designed for elderly living, and most are located near good health-care facilities. Plus, they offer social, educational and recreational facilities designed specifically for the elderly.

4. If you are not already out of debt, get out as soon as possible. When you are not in debt you can live on much less month to month, thereby lessening your chances of outliving your money.

5. If you have two cars, sell one. If you only have one, drive it twice as long as you did in the past. You probably will be driving less at this time in your life, and you can most likely drive your current car much longer without encountering excessive repair bills. If you are in the practice of making monthly car payments, once you’ve paid off your vehicle you can put all of the payments you would have made before into your savings.

6. If you are part of a close-knit family, do not move very far from your children and grandchildren. Life-changing occurrences such as death, divorce and disabilities are easier experiences when you have the support of family members around you all the time.

7. Finally, and most important of all: Continue to save all that you possibly can. The amount that you can save if you follow the previous six recommendations may be considerable. Where and how should you invest it? Seek out a financial adviser that you are sure you can trust and that you are sure is competent, and turn investment decisions over to him or her.

Bob McGinty is a retired newspaper editor who occasionally ghost-writes articles for financial advisers.

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.

Rick Prewitt – the guy behind TTW

…until next week.

New Rules on Getting Replacement SSN Cards November 6, 2013

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Tax Tip of the Week | November 6, 2013 | No. 223 | New Rules on Getting Replacement SSN Cards

SSN Printouts and Replacement Cards

The Social Security Administration’s (SSA) requirements for issuing social security number (SSN) printouts are less stringent than the requirements for issuing replacement SSN cards.

Since SSN printouts have no physical security features, it is easier to counterfeit them, perpetrate SSN misuse and commit identity theft. To resolve this problem, beginning June 24, 2013, if you are applying for a replacement social security card, or simply asking for a printout of your social security numbers, you will need to provide SSA with proof of identity.

Review Getting a Social Security Card for more information on the documents now required to obtain an SSN replacement card or printout.

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.

Rick Prewitt – the guy behind TTW

…until next week.


Updates on Social Security | Tax Tip of the Week | No. 196 May 1, 2013

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Seven New Social Security Rules for 2013

Payroll tax cut ended.  As you probably noticed by now, your payroll check is less than last year.   This is because the payroll tax cut expired at the end of 2012.  In 2011 and 2012 you paid 4.2% of your income into Social Security.  Starting in 2013, the Social Security tax rate has returned to 6.2%.

Higher payroll tax cap.  The payroll tax cap increased by $3,600 for 2013.  This means you will now pay Social Security taxes on $113,700 of your income, up from $110,100 in 2012.  As always, there is no maximum earnings limit on the 1.45% (2.9% if self-employed) Medicare tax.

More online services.  A trip to the Social Security office is no longer necessary to start your Social Security payments.  A growing number of retirees are now claiming benefit payments online.  For the first time in 2012, you could access your Social Security statements online, including your complete earnings history and expected payments.  In early 2013, Social Security added online services including the ability to access a benefit verification letter and payment history.

Reduced office hours.  Social Security offices are reducing the hours they are open to the public to save money and avoid paying overtime to their workers.  Social Security offices nationwide began closing offices 30 minutes early each day starting on November 19, 2012.  Offices will also be closed at noon every Wednesday.

Paper checks will end.  On March 1, 2013 the Treasury department stopped mailing paper checks to Social Security recipients.  The preferred method for retirees to receive benefits is to have the funds directly deposited in their bank or credit union checking accounts.  For those recipients without bank accounts, the funds will be deposited onto a prepaid Direct Express Debit MasterCard.  Note that over 93% of Social Security and Supplemental Security Income (SSI) recipients have already signed up for direct deposit.

Higher earnings limit.  You have the option of receiving Social Security benefits at age 62.  If you continue to work between the ages of 62 and 66 and receive Social Security benefits you might have part or all of those benefits temporarily withheld.   Workers between the ages of 62 and 66 can earn up to $15,200 in 2013, after which $1 in benefits will be withheld for every $2 of income above the earnings limit.  People who turn 66 this year can earn up to $40,080, and then $1 of benefits will be withheld for every $3 earned above the limit.  Earnings after the month you turn 66 are not subject to any earning limits.  Benefits may be recalculated at age 66 to reflect any previously withheld benefits and continued earnings.

Bigger Payments.  Social Security beneficiaries received a 1.7% increase in benefits in 2013 due to the increased cost-of-living index.  Beginning in January 2013, the average Social Security benefit increased from $1,240 to $1,261/month.  The maximum Social Security benefit for someone turning 66 (and receives benefits for the first time) in 2013 is $2,533/month.  The actual amount depends on a formula that considers your lifetime earnings.

As always, give us a call with any questions or concerns you may have.

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.

Rick Prewitt – the guy behind TTW

…until next week.

Answering questions about Social Security | Tax Tip of the Week | No. 53 August 9, 2010

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As you near retirement…
Inquiring minds need to know!

With the Baby Boomer generation (born between 1946 and 1964) coming into the age of retirement, many wonder about their Social Security benefits.  Some of the questions that may arise include:

For more information, visit your local Social Security office, or go online at www.ssa.gov.

We highly encourage you to contact us for tax planning advice prior to signing up for Social Security benefits.

As always, you can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504. Or visit our web site.

Linda Johannes – author of this week’s TTW
Rick Prewitt – the guy behind TTW

…until next week.