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Archive for Social Security

Retirement Plan Contributions In 2018: An Elderly Parent Might Qualify As Your Dependent

Michael Davis, Tax Advisor, Tax Blog, Jamison, Pennsylvania, USA, TaxConnections

The clock is ticking down to the tax filing deadline. The good news is that you still may be able to save on your impending 2017 tax bill by making contributions to certain retirement plans.

For example, if you qualify, you can make a deductible contribution to a traditional IRA right up until the April 17, 2018, filing date and still benefit from the resulting tax savings on your 2017 return. You also have until April 17 to make a contribution to a Roth IRA.

And if you happen to be a small business owner, you can set up and contribute to a Simplified Employee Pension (SEP) plan up until the due date for your company’s tax return, including extensions. Read more

What Is The Best Age To Start Drawing Social Security?

Ensen Mason, Tax Advisor, Tax Blog, Redlands, California, USA, TaxConnections

Of the most common and most difficult questions clients ask me it when should they start their social security benefits. It is an important question in that social security represents a significant amount of money over the course of your retirement. The amount of money you have coming into your household each month will affect how you can spend your retirement years. It is a difficult question because one of the most important factors in the decision is unknown – how long you will be collecting it.
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Why Impose An Inflation Tax?

William Byrnes, Tax Advisor

Raising our Taxes and Killing Social Security via the Republican’s Proposal for an Inflation Tax in Tax Reform

This so-called “Tax Reform” is going to raise our tax burdens while killing social security.  The Republicans have proposed, and Democrats have agreed, that actual inflation should not be recognized in future years, limiting inflation adjustments of tax brackets to increase tax on persons who earn more because of inflation, and decreasing social security benefits by half over 20 years.  This Tax Reform, besides reducing retirement opportunities for public employees, imposes “Chained CPI” (also known as the inflation tax) upon social security benefits to keep them from increasing and upon tax brackets to keep them from increasing as well. But tax brackets not increasing is bad for taxpayers. Tax brackets that do not move up to account for actual inflation require a higher tax rate be paid on future income as actual inflation pushes it into the next bracket.

I thought Republicans wanted lower taxes imposed on people who sweat and toil? Or do Republicans actually want lower taxes only on idle passive investors?

What if I like organic apples?

How’s that again? “Chained CPI” is sold as the savior of Social Security (see Heritage Foundation explanation). The example employed by Heritage in favor of Chained CPI: if apples go up in price, then consumers stop eating apples and eat cheaper oranges instead. What if I prefer apples? What if I am allergic to oranges? To my actual point: it is not a ‘choice of apples versus oranges world. It’s a choice between quality and cheaper (generally imported) goods. Chained CPI over time eliminates the local farmer’s organic apples in favor of the imported, genetically modified, pesticide grown cheap apples. Chained CPI requires that we reduce lean meat (sorry vegans) in favor of affordable fast food.

Chained CPI is a system built on forcing a degrading quality of life onto retirees. 

Compounded over time, it’s a choice between affording medication and going without medication, giving up restaurant dates with my spouse in favor of TV dinners. The monthly annuity from social security, as little as it is relative to a 15.4% pay-in of salary (albeit capped, but so are benefits) over 40 years, could be cut significantly over 20 years (see New Republic explanation) in respect to what it can actually buy in today’s terms. In 20 years when my generations retirees wake up to this death by a thousand substitutions, the monthly social security annuity is so relatively inconsequential, it won’t be worth discussing any longer. Worse, over these 20 years, our tax bills will increase annually via the Chained CPI bracket creep that keeps brackets from adjusting upward as our wages hopefully increase. So inflationary tax takes away our ability to try to mitigate the loss of our catchup retirement and social security. We MUST work, if able, until we drop dead, assuming that we are not substituted for a cheaper wage worker.

Retired, Older Experience Hirer Inflation Than Younger Population  

The Congressional Research Service has published a study that finds that elderly persons actually experience higher inflation than younger ones (see CRS Research Report A Separate Consumer Price Index for the Elderly?).  Instead of going the wrong direction to a Chained CPI, the CRS suggests a CPI for the elderly spending patterns to be called CPI-E.

Follow the impact analysis of the 2018 tax updates after these pass by a team of experts who will map out how these affect your clients and what planning you need to do – TaxFacts Online.

Have a question? Contact William Byrnes

Your comments are welcome!

The SSA Announces Inflation Adjusted Thresholds for Various Tax Levels

Lisa Nason, Tax Advisor

The Social Security Administration (SSA) announced that the maximum earnings subject to the Social Security component of the FICA tax will increase from $127,200 to $128,700 for 2018. This means that for 2018, the maximum Social Security tax that employers and employees will each pay is $7,979.40 ($128,700 x 6.2%).

A Breakdown

A self-employed person with at least $128,700 in net self-employment earnings will pay $15,958.80 ($128,700 x 12.40%) for the Social Security part of the self-employment tax.

The Medicare component remains 1.45% of all earnings, and individuals with earned income of more than $200,000 ($250,000 for married couples filing jointly, $125,000 for married filing separately) will pay an additional 0.9% in Medicare taxes.

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How To Get A U.S. Social Security Number In Canada – Tax Compliance

John Richardson

Why do some Canadians wish to have a U.S. Social Security number?

Many Canadians are in the process of coming into U.S. tax compliance. One might ask: Why would a Canadian citizen residing in Canada wish to come into U.S tax compliance?

There are two reasons why Canadian citizen/residents file U.S. tax returns:

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Social Security Taxes Will Rise For Many In 2017

MileIQ

I hate to be the bearer of bad news but it looks like your Social Security taxes could be going up next year. This is according to a recent announcement by the Social Security Administration. Let’s walk through what the increase is, as well as how you can still find some tax relief.

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Effect of Workman’s Compensation On Taxability Of Social Security Benefits

Harold Goedde

Workman’s compensation for on-the-job injuries is non-taxable if it is to compensate the employee for medical care. But when a person also receives Social Security disability benefits, these benefits can increase the amount of Social Security subject to tax. This article will describe how this interaction occurs and its effect on the amount of taxable Social Security and increase in tax owed.

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Marriage or Divorce

Debra Thompson

Newlyweds and the recently divorced should make sure that names on their tax returns match those registered with the Social Security Administration (SSA). A mismatch between a name on the tax return and a Social Security number (SSN) could unexpectedly increase a tax bill or reduce the size of any refund.

Newlyweds and the recently divorced should make sure that names on their tax Read more

Pay your taxes in cash at 7-11 – start of even better things to come?

One of the ways individuals and businesses can pay their federal taxes if they don’t want to do so or cannot do so via automatic bank withdrawal, credit card or check is to go to their local 7-Eleven-11 store and pay by cash.Per the IRS instructions, the fee is $3.99 and there are some actions that need to be taken online before going to 7-Eleven. That action includes entering your Social Security number. You then get a number to take to 7-Eleven to complete the transaction. The cash limit is $1,000.

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Your Social Security Benefits May be Taxable

If you receive Social Security benefits, you may have to pay federal income tax on part of your benefits. These tax tips will help you determine if you need to pay taxes on your benefits.

Form SSA-1099. If you received Social Security benefits in 2015, you should receive a Form SSA-1099, Social Security Benefit Statement, showing the amount of your benefits. Read more

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