Author Archives: Carol Coburn

Taxpayers Should Stay Alert Because Scammers Don’t Take A Summer Vacation

While many people take summer vacations, data thieves do not. Phishing emails and telephone scams continue to pop up around the country. The IRS reminds everyone to be vigilant to avoid becoming a victim.

Here are some things for taxpayers to remember so they can keep their personal data safe:

  • The IRS does not leave pre-recorded, urgent messages asking for a call back. In one scam, the victim is told if they do not call back, a warrant will be issued for their arrest. Other variations may include the threat of other law-enforcement agency intervention, deportation or revocation of licenses. The IRS will never threaten to immediately bring in local police or other law-enforcement groups to have the taxpayer arrested for not paying.
  • Criminals can fake or “spoof” caller ID to appear to be anywhere in the country, including from an IRS office. This prevents taxpayers from being able to verify the true call number. If a taxpayer gets a call from the IRS, they should hang up and call the agency back at a publicly-available phone number.
  • If a taxpayer receives an unsolicited email that appears to be from the IRS, they should report it by sending it to phishing@irs.gov. Some people might also receive an email from a program closely linked to the IRS, such as the Electronic Federal Tax Payment System. Recipients should also send these emails to phishing@irs.gov.
  • The IRS does not initiate contact with taxpayers by email to request personal or financial information. The IRS initiates most contacts through regular mail delivered by the United States Postal Service.

There are special circumstances when the IRS will call or come to a home or business. This includes situations when a taxpayer has an overdue tax bill or when the IRS needs to secure a delinquent tax return or a delinquent employment tax payment.

What You Should Know: Common Questions Regarding Social Security and Medicare

How are my Social Security benefits calculated?

Your monthly benefit amount is based on your highest 35 years of earnings. Your low earnings years in the beginning of your career are dropped. If you do not have 35 years of earnings, your monthly benefit will be reduced since years without earnings are not counted. You can see what your estimated monthly benefit is by creating an account at The Social Security Administration online at www.SocialSecurity.gov and using the Retirement Estimator tool at www.SocialSecurity.gov/retire/estimator.html.

Will my Social Security benefits by taxed? 

The simple answer is yes, Social Security is taxable. However, to determine if you must pay taxes on your Social Security benefits depends on your income level. According to the IRS, a quick way to find out if you will pay taxes on your Social Security income is to take one-half of your Social Security income and add that to all other income, including tax exempt interest. This number is known as your “combined income”. If your combined income is above $25,000 if you are single (or head of household) or $32,000 for married filing jointly, your benefits may be up to a maximum of 85% taxable.
For married couples filing jointly, you will pay taxes on up to 50% of your Social Security income if you have a combined income of $32,000 to $44,000. If you have combined income of more than $44,000, you will pay taxes on up to 85% of you Social Security.

When should I file for my Social Security retirement benefits?

You can start receiving benefits as early as age 62. However, the longer you wait, up to age 70, the higher your monthly benefit will be…for the rest of your life. You may be able to earn up to 32% more in monthly benefits by waiting. You should not delay filing past age 70, as there is no increase in benefits after age 70. Your longevity and health are a few of the very important factors to consider when deciding when to file for benefits and whether you should file early or delay filing. Once you have decided to apply, you may do so up to four months before you want your benefits to begin.

What is Medicare and when should I apply for Medicare?

Medicare Part A is for hospitalization insurance and is free for most people. Medicare Part B is for medical insurance and requires a monthly premium. Consider applying for Medicare at age 65 even if you are not applying for monthly Social Security benefits. Because Medicare Part A is free, it pays to enroll as soon as you’re eligible at age 65. Signing up for Medicare Part B may depend on if you have health insurance through your employer and if you are still working. Your company’s group health insurance plan may serve as your primary health insurance. Be aware that signing up for Medicare late may result in an increase in your Part B premium if you do not have group health coverage through your employer. If you are still working and are employed by a company with 20 or more employees and have health insurance through that company, you can delay applying for Medicare Part B without facing a penalty.  You should speak with your employer’s health benefits administrator so that you understand how your current coverage works with Medicare.

We can help

For many people, Social Security is a core component of their income in retirement. We can assist you in understanding this process and in developing a retirement plan that seeks to maximize your benefits.

Details of the Recently Proposed Tax Reform Plan

Proposed Changes for Individuals:

  • Consolidate the current seven income tax brackets into three, with rates on ordinary income of 10 percent, 25 percent, and 35 percent, although the income level at which these rates would apply was not announced
  • Double the standard deduction, which would increase to $12,700 for single taxpayers, and to $25,400 for married couples filing jointly
  • Limit itemized deductions to only mortgage interest and charitable contributions, eliminating the deductions for medical expenses, state and local income and sales taxes, investment interest and other miscellaneous deductions
  • Eliminate the Net Investment Income Surtax of 3.8% imposed on unearned income and gains of high-income taxpayers under the provisions of the Affordable Care Act
  • Provide additional tax relief for families with childcare and dependent care expenses
  • Eliminate the Alternative Minimum Tax
  • Eliminate the Estate Tax

Proposed Changes for Businesses:

  • Reduce the maximum corporate income tax rate from 35 percent to 15 percent and extend it to the individual-level taxation of so-called pass-through entities, such as S-corporations and partnerships
  • Implement a territorial system of taxation in which business would only pay tax on income earned in the United States
  • Impose a one-time tax on corporate earnings realized and held overseas and on which tax had been deferred

Of course, these are all preliminary proposed changes, and we expect the actual final tax law will differ in some or many aspects.  We will provide further information as this legislative process moves forward.  Please contact our office if you would like to discuss how these proposals could affect your business and personal tax decisions.

Claiming Social Security at 70 may not always be the Best Choice

When it comes to Social Security, while delaying claiming until 70 is generally a good idea; it is not always the best choice. We can help you not only by “running the numbers” but by developing a detailed claiming strategy for you. Did you know that the much publicized “restricted filing” option has actually not been eliminated? Did you know that for those born before January 1, 1954 this is still an excellent claiming strategy? We can guide you through the process to maximize your Social Security benefits and provide you with a detailed claiming strategy.

Restricted filing works something like this: the lower wage earning spouse claims Social Security upon reaching full retirement age. The higher wage spouse simultaneously claims spousal benefits (up to 50% of the spouse’s full benefits) while delaying his or her own filing until age 70. So, for the years between 66 and 70, they are collecting one and one half times the spouses benefit! That’s a lot of cash to leave on the table by failing to properly develop a claiming strategy. This may vary with individual circumstance, but can produce a better result than just waiting until 70 to file.

Not only should you be cognizant that the restricted filing is still a viable option for many, but also that we can show you how to maximize your Social Security benefits. There is a lot at stake since lifetime benefits for a working couple can be roughly $1,000,000, and clearly thousands of dollars are at stake.

 Contact us today to discuss your individual circumstances.

How to Maximize Your Social Security Benefits

For most Americans, Social Security is a significant retirement asset. Although an ideal retirement scenario does not depend solely on Social Security, the importance of Social Security as part of a comprehensive retirement plan cannot be ignored. Getting your arms around Social Security can be very complicated. Let us help you deal with the complex benefit formulas and provide you with a calculated decision regarding when to claim benefits in order to maximize this valuable benefit. We will help you determine the optimal age to begin benefits.

We have the resources and skills to provide you with a comprehensive analysis and strategy for claiming Social Security.  We can provide:

  • An introduction to Social Security, explanation of key terms, and an explanation about how your benefits are calculated.
  • An analysis that compares you cumulative Social Security Benefits for different starting dates and life expectancies.
  • Help you determine how to optimize when to begin benefits. Should I start collecting benefits at 62 or wait until 66 or 70?
  • When can, or should my spouse begin taking the spousal benefit?
  • How can I get a 32% monthly Social Security benefits “bonus”?

Contact us today to discuss what information we will need to provide you with your Social Security Analysis and Strategy.

Protecting Yourself against Tax-Related Identity Theft

Tax-related identity theft continues to be an ever-growing national crisis.  The Government Accountability Office (GAO) estimated that in tax year 2013, fraudulent tax refunds misdirected to identity thieves was about $5.8 billion and impacted over 2.4 million U.S. taxpayers.  Unfortunately, this fraudulent activity has continued to rapidly expand since 2013.  All taxpayers must be diligent in further protecting themselves from becoming identity theft victims.

As a valued client, we want to share with you some proactive steps and resources to help in your defense of tax-related identity theft. However, should you become aware that you are a victim of identity theft or that your private financial information has been compromised, please contact us immediately for additional information and assistance.

Suggestions to Protect You and Your Family from Identity Theft:

Secure private personal information. Safeguard family names and birthdates, account numbers, passwords, and Social Security numbers. Carefully consider all requests to provide your Social Security number before giving it out and don’t hesitate to ask why your private information is being requested. Secure your Social Security card in a safe or safety deposit box and never in your purse or wallet. Proactively shred all documents that contain personal data before disposing of them, even solicitations and “junk” mail that may unknowingly contain account numbers and personal information.

Monitor personal information shared on social media. Cybercriminals methodically gather data from online sources, including commonly used identifiers such as birthdate, maiden name, pet name, hometown, significant other, and/or children’s information. Be cautious who you communicate with online and be selective before accepting electronic invitations from people you do not know or recognize. Separate what you post publicly from what you post with your personal contacts. Do not post personal and family data.

Secure your computer. Use current versions of antivirus, malware protection, and firewalls and update these programs frequently. Consider having this software updated automatically, as well as using different computers for business and finances than you do for social media and personal matters. Use strong passwords, change them frequently, and do not share them with others.

Beware of impersonators. Criminals utilize sophisticated computer technology, such as dialers and automated questions, to contact thousands of targets daily. Do not provide personal information to callers you do not know. If any caller requests that you verify personal information, be extremely cautious and ask for further confirmation of their identity, such as their telephone number, website, email address, supervisor’s name, and mailing address. The IRS never initiates contact by telephone.

Beware of unsolicited emails and current phishing scams.Don’t open attachments or electronic links unless you know the sender. Internet sites should have a lock symbol to show the site is encrypted. Always beware of entering sensitive data. The IRS never initiates contact with taxpayers by telephone, email, text message, or social media channels.

Monitor your personal information. Review your bank and credit card statements often.

Consider electronic transmission of financial information.No sensitive tax or personal information should be sent via unsecured email, even information being transmitted to our firm or other CPAs, bankers, and/or financial advisors. A secure portal, encrypted email, or physical mailing of sensitive information is necessary.

Order your free annual credit report. Call 1-877-322-8228 or go to www.annualcreditreport.com to request your report and/or search for creditors you do not know. Choose to use only the last four digits of your Social Security number on your report. Consider placing a credit card freeze on your account so only creditors you approve are allowed to access your file.

What to Do if You Become a Victim of Tax-Related Identity Theft:

You may learn that your identity has been compromised by receiving a letter in the mail from the IRS. Alternatively, we may contact you when your personal income tax return is electronically filed and subsequently rejected. If you receive a notice indicating identity theft, please contact us immediately to receive assistance in taking the appropriate steps with the IRS to resolve the matter.

Other ways you may discover your identity has been stolen include:

  • Finding purchases on your credit card that you did not make
  • Discovering withdrawals from an account that you did not make
  • Seeing that your address has been changed for certain accounts, or no longer receiving your regular bills. (Cyber criminals may change your address when filing a return.)

The unfortunate reality is that personal data is already at risk everywhere, but we will work with you to reduce the likelihood of you being victimized by cyber criminals. As your CPA and trusted advisor, we understand the need to protect your privacy and take data protection very seriously. Our security and data integrity meets the highest industry standards established by the IRS and Federal Trade Commission. We have also established protocols to guard access to client files.

Please don’t hesitate to contact us with questions or concerns or if you would like to meet with us to discuss this issue or any of your financial or tax needs.