by Daniel Kittell | Accounting News, Fraud, IRS, News, Resources
While a majority of the population is covered by Social Security (SS) to some degree, many do not fully understand the program, resulting in frustration and confusion when it comes time to receive benefits. In an effort to curb miscommunication or misgivings, the Social Security Administration (SSA) has increased its informational output in recent years. The SSA’s 2017 fact sheet provided numerous statistics for future and current recipients, and we’ve outlined the top stats below.
- There are 171 million individuals covered by Social Security
- To qualify for benefits, you must “earn” 40 work credits in your lifetime, with the ability to collect up to 4 credits annually (valued at $1,300 per credit)
- 71% of recipients are retired workers (in 2017)
- SS payouts accumulate 8% from ages 62 to 70, so if you’re close to retirement, a great way to boost your payout is to wait to enroll
- The remaining 29% of benefits will go to the disabled and survivors
- In 2017, approximately 16% of benefits will be received by disabled workers and the remaining 13% goes to survivors of deceased beneficiaries
- In 2017, 62 million Americans will receive $955 billion in benefits
- Funding is acquired from 3 sources: interest on the program’s asset reserves, a 12.4% payroll tax on all earned income and the taxation of the benefits themselves
- 61% of seniors rely on their SS benefits for at least half their monthly income
- 48% of married seniors and 71% of unmarried retirees depend on Social Security for at least half their income
- Of unmarried seniors, 43% rely on benefits for about 90% of their income
- Close to half of single seniors look to Social Security to provide the majority of their income each month
- Most 65 year olds will live approximately 20 more years
- In 1960, the average life expectancy was 70, but it has since increased to 79, which means it is wise to factor in a longer lifespan since the program is only intended to account for 40% of wages in retirement
- By 2035, the senior population is set to grow by 65%
- Currently, those 65 and up number 48 million people, but the impending retirement of many baby boomers means that number could grow to 79 million over the next 18 years
- By 2035, the worker-to-recipient ratio will decline by 21%
- Presently, the worker-to-beneficiary ratio is 2.8-to-1, but experts estimate that ratio could drop to 2.2-to-1 in the next 18 years
- In the event of a long-term disability, about 90% of workers have protection
- While 67% of the private workplace does not offer long-term disability insurance, Social Security covers approximately 90% of workers ages 21 to 64 in the event of a work ending disability
- Of workers ages 20 to 49, about 96% do have protective insurance for survivors
- Since one in eight 20 year olds won’t live to see age 67, at least the majority of those who work in covered employment have survivors protection insurance for surviving spouses and children
- One third of workers report having nothing set aside for retirement
- With a potential 23% cut in benefits in 2034, the fact that 31% of the current working population has no money set aside, leaving them fully reliant on Social Security, is less than promising
In conclusion, although Social Security will be around for the long run, and likely covers more income than many believe, it would be wise to find secondary funding for retirement since Social Security was never intended to serve as your principal source.
by Pete McAllister | Accounting News, IRS, News, Resources, Tax
When disasters strike the American people, it can be a beautiful thing to witness the country coming together to support and rally around those affected. Unfortunately though, there are many who choose to take advantage during times of need.
The IRS issued a recent warning cautioning against potential charity scams in the wake of Hurricane Harvey (and likely Hurricane Irma as well). Some individuals may attempt to impersonate charities in an effort to either receive money or valuable personal information from taxpayers. Scammers may contact you via email, social media, telephone or even approach you in person. The largest percentage of scamming attempts are often made through email, though.
Fraudulent parties can masquerade as charities or associate themselves with known charitable causes by either using similar names or imitating the website of a legitimate charity. These emails may encourage taxpayers to give money or provide private financial information that can be used to apprehend your financial resources, or even your identity. The IRS has provided a set of helpful tips and resources to avoid being taken advantage of:
- Make sure you are donating to recognized, and reputable, charities.
- Do not give or send cash. Most reputable organizations will ask for a check, credit card or some form of reliable online payment system such as PayPal. These avenues provide you with specific documentation of the payment given for both tax and security purposes.
- Be cautious of charities with names similar to known charities, but with just a small difference, or with a different logo. Visit the IRS website for a list of qualified, tax-exemptible charities.
- NEVER give out personal information such as passwords, bank account numbers or Social Security numbers. Trustworthy organizations should not ask you for this type of information in order to donate, so take caution when these particulars are requested.
- Keep records of all charitable donations made. Not only could this help you in the event of fraudulent behavior, but it will be beneficial come tax season when it’s time to make deductions. The IRS website provides a free booklet that includes details on what records to keep and specific tax rules for making tax-deductible donations.
If you suspect you have been a victim of fraud, or been contacted by scammers, visit the IRS website to report phishing schemes.
by Pete McAllister | Accounting News, IRS, News, Resources, Tax
Although the Indiana state legislative session began back in January and concluded in late April, there were many changes made that have just recently taken effect, namely, 45 different taxes and fees that have either been increased or newly imposed.
One increase that has many Indiana residents talking is the 10 cents-per-gallon gasoline tax that took effect July 1. Funds from this tax and the $15 increase for new vehicle registrations will go toward funding a variety of road construction projects around the state.
Other increases or new fees include some imposed on college students, school employees and certain service positions. If they do not have health insurance, college students will now have to pay between $100 and $150 for a mandatory meningitis vaccine, while school employees could see a cost between $30 and $40 for a renewed background check every 5 years if their employer chooses not to cover the cost. Some service positions, such as massage therapists, manufactured-home dealers and social workers, have seen minimal regulation in the past, but will now be required to have state licenses, which could cost anywhere between $10 and $400.
Other fee increases include several within the court system, including DNA sample processing fees, the automated record-keeping fee and notary fees.
A valuable new law enacted during the legislative session is one that requires professional motorsports competitors and other athletes to pay taxes when they work in the state. Although anyone who works in Indiana already incurs income tax liability, many athletes live in other states and have often ignored their Indiana tax obligations. The new law streamlines the process for these athletes to pay their taxes.
Unfortunately, the addition or adjustment of taxes and fees annually is a common occurrence, but state lawmakers try to avoid general tax increases on sales or incomes. Thus, Indiana residents should expect similar fee increases each year to assist with a variety of state projects and deficits, but can hope to avoid large annual income tax hikes, which are a more regular financial burden for most taxpayers.
If you have any questions about the new taxes or how they may impact your taxes or business, please feel free to contact me: pmcallister@mkrcpas.com.
by Daniel Kittell | Accounting News, Fraud, IRS, News, Resources
For years, taxpayers have been told that the IRS will never call to inquire about their taxes or collect unpaid funds. Rather, the IRS has operated under the communication policy that they will contact taxpayers by written notice only. However, immediately following this year’s tax season, in April 2017, the IRS enacted a change in their policy to begin calling individuals with overdue tax bills, but there are specifics to when or why they will contact you via phone.
Unfortunately, as many of us know, dozens and dozens of scam artists exist in today’s world, who will surely be attempting to capitalize on this new policy to con you out of your own money. With that in mind, we have assembled some information regarding the new policy to help you recognize when you’re actually being contacted by the IRS, and when you’re being scammed.
- The IRS has contracted out 4 private collection agencies: Conserve, Pioneer, Performant, and CBE Group
- These agencies will only call individuals with long overdue taxes, namely those with accounts who have not interacted with the IRS in more than 365 days. Thus, if you were a bit late on your April 2017 taxes, you didn’t receive a call in May, and won’t unless they go unpaid through April 2018.
- The IRS will still send written notices first stating your account is being turned over to a collection agency
- There are many practices or tactics used by scam artists over the phone that the IRS will never follow, even when calling though their contracted collection agencies. The IRS will NOT:
- Threaten to deport you, foreclose your property or withdraw your license
- Threaten to bring in law enforcement or other agencies to arrest you for lack of payment
- Demand payment without allowing you to inquire against or appeal the amount owed
- Request immediate payment over the phone. They will never call without sending a bill or notice via mail first
- Ask for credit or debit card numbers over the phone
- Demand a certain form of payment (i.e. a wire transfer, prepaid debit card or iTunes gift card)
If you think you have been scammed, or have an issue with one of the contracted collection agencies, the IRS suggests contacting the hotline for the Treasury Inspector General for Tax Administration at 800-366-4484, or visit tigta.gov. If you do receive a call from someone claiming to be from the IRS and are concerned with the validity of the call in any way, do not send funds. If you have questions about owing taxes or would like to confirm that a call you received is legitimate, contact the IRS directly at 1-800-829-1040.
by Jean Miller | Accounting News, Healthcare, News, Resources, Tax, Tax Planning, Tax Planning - Individual, Tax Preparation - Individual
The Trump administration has wasted little time taking action on many of the promises that were made throughout the campaign. One major proposition made by President Trump was the immediate repeal and replacement of Obamacare. While the replacement of our current healthcare system seems to be pending, the repealing of the current system is certainly at the top of the administration’s list. Although the insurance aspect of the current system would seemingly stick around until the GOP and the Trump administration develop a suitable alternative, the tax aspects of Obamacare could be subject to immediate repeal. Thus, the insurance industry may have until 2018 or 2019 before they saw changes, but the tax industry (and therefore taxpayers) could see effects as early as this year.
How exactly the current administration chooses to repeal the tax aspects of Obamacare could be positive or negative for most taxpayers though. Under current law, there is an individual insurance mandate that penalizes monthly those who do not have insurance coverage, as well as an employer mandate penalizing employers (with more than 50 full-time employees) who do not offer affordable health care. However, if individuals obtain coverage through the state marketplaces and their income is between 100% and 400% of the federal poverty level, they receive a tax credit to assist in paying for their insurance premiums. Additionally, Obamacare levies a 0.9% Medicare tax and a 3.8% net investment income tax on certain high wage earners, or the wealthiest 2% of Americans.
Where repealing taxes associated with Obamacare could be positive for Americans is if Congress removed all taxes while maintaining the premium tax credit (until a replacement system is established). This would mean employers are no longer charged for not providing insurance coverage, taxpayers are not penalized for not having insurance and high wage earners will not be levied the additional taxes discussed above. If Congress chose this route, tax experts estimate that low to middle income wage earners could receive a tax break in the hundreds of dollars, whereas high end wage earners could receive a break in the thousands of dollars.
However, if Congress chose to repeal all tax aspects, including the premium credit, certain tax brackets would most certainly see negative effects. Without the credit, lower income brackets could see their taxes rise by an average of $4,000, middle income brackets could see their taxes rise by an average of $6,000, but higher income brackets would still see their taxes lowered by the thousands of dollars. But, these negative changes would only exist for lower or middle income brackets who currently claim the premium tax credit. Fortunately, at this point, Congress nor the Trump administration has made any claims about what they will do in terms of repealing Obamacare-related taxes, so Americans will simply have to wait and see what direction our nation’s leaders choose and how their wallets will be affected.
by Stephen Reed | Accounting News, IRS, News, Resources, Tax, Tax Planning, Tax Planning - Individual, Tax Preparation - Individual
Now that our 45th President has officially been inaugurated, many of his campaign claims are beginning to take shape, including his tax plan. However, it seems that President Trump’s plan does not align as closely as one might think with the GOP’s plan, which has primarily been outlined by Republican leader Kevin Brady, Chairman of the House Ways and Means Committee. Below is a brief summary of the ways Trump and Brady’s plans differ and what each could mean for taxpayers.
Tax Brackets
Trump and Brady agree in decreasing the number of tax brackets from seven to three, at 12%, 25% and 33% respectively, but they differ in the income ranges for each bracket. Brady’s rates would simply align with the current rates and brackets, meaning taxes would only increase for those who fall under the 10% tax bracket of current law; they would see their rate rise to 12%. Under Trump’s plan, not only would those in the 10% bracket rise to 12%, but some middle classers could see their rate rise to 33%, namely those who make more than $112,500 per year, whereas presently, the 33% rate was not effective until individual income reached $191,651.
Gains/Dividends Rates
Trump would seek to keep the current capital gains and dividend rates, 0%, 15% and 20%, grouping them with his three desired tax brackets. But, aligning the gains and dividends rates would mean both a tax increase as well as an increase from 15% to 20% in gain and dividend rates for many in that middle tax bracket. Brady’s plan varies in that he would apply his tax rates, 12%, 25% and 33%, to gains and dividends rates, while also allowing taxpayers to deduct 50% of their capital gains and dividends and 50% for interest income. Essentially, while certain taxpayers could see an increase in capital gains and dividends rates under Trump’s plan, all taxpayers would see a decrease in their interest/capital gains/dividends rates under Brady’s plan.
Itemized Deductions
While Trump would look to simplify deductions by capping them all at $100,000 if single and $200,000 if married filing jointly, Brady’s would look to eliminate all itemized deductions other than charitable contributions and mortgage interest deductions. Neither plan would be necessarily problematic for lower and middle classes, but some upper classers may take issue with Trump’s deduction caps, and many states and lobbyists may dislike Brady’s elimination of certain deductions altogether.
Standard Deductions/Personal Exemptions
Trump and Brady do agree on increasing the standard deduction, but Brady would increase the deduction from the current $6,300 to $12,000 (if single); Trump would jump up to $15,000. Both plans would also do away with personal exemptions. Taking away personal exemptions could be problematic for families though, which Trump would seek to alleviate by adding child care incentives (although paying for child care in the first place is necessary to get the incentive), while Brady would simply increase the current child tax credit from $1000 to $1,500.
Trump and Brady do align in their desire to lower business tax rates and eliminate estate taxes, but the execution of both differ as well. President Trump has stayed busy signing executive orders in his first weeks in office, but it does not appear that immediate tax reform is among his changes just yet. It does appear, though, that the Trump administration and the GOP need to refine and better align their respective proposals before presenting a finalized plan for tax reform to the American public.
