social security

January 31 2023

Are my Social Security benefits taxable?

Individual Taxes, Tax Planning social security

Question: Are my Social Security benefits taxable?

Answer: Up to 85% of Social Security benefits can be taxed. Whether your benefits will be taxed depends upon your total income from both taxable and tax-exempt sources. Once your total income reaches $25,000 ($32,000 for married couples), a portion of your benefits will be subject to income tax.

This is important to know as you start receiving benefits. It may impact how much you are willing to work in a part time job and it may impact the amounts you withdraw from retirement accounts.

January 10 2023

2023 FICA Tax Rates

Tax Law Medicare, social security

Social Security and Medicare income limits and tax rates

FICA tax is a combination of a Social Security tax and a Medicare tax. The Social Security tax is assessed on wages up to $160,200; the Medicare tax is assessed on all wages.

Self-employed individuals pay a self-employment tax which is the equivalent of FICA tax. For 2023, they will pay a 15.3% OASDI tax (the old age, survivors, and disability insurance tax) on the first $160,200 of self-employment income. A 2.9%* Medicare tax is imposed on all net self-employment income.

The earnings limit for retirees under full retirement age is $21,240. Social Security benefits will be reduced $1 for every $2 of earnings above this limit. There is no earnings limit for individuals at full retirement age. (Special rules apply in the first year of retirement.)

Tax	Maximum Tax Rate	Maximum Wage Base	Maximum Tax
Social Security	6.20%	$147,000	$9,932.40
Medicare	1.45%*	No limit	No ceiling

* A 0.9% Medicare surtax is assessed on all wages or self-employment income in excess of $200,000 for singles, $250,000 for joint returns, and $125,000 for those married filing separately.

January 3 2022

2022 Social Security Updates

Planning social security

The Social Security Administration announced a 5.9 percent boost to monthly Social Security and Supplemental Security Income (SSI) benefits for 2022. The increase is based on the rise in the Consumer Price Index over the past 12 months ending in September 2021.

For those still contributing to Social Security through wages, the potential maximum income subject to Social Security tax to $147,000 (up from $142,800 in 2021). A recap of the key amounts is outlined here:

What does it mean for you?

Up to $147,000 in wages will be subject to Social Security taxes, up $4,200 from 2021. This amounts to $9,114 ($8,853.60 in 2021) in maximum annual employee Social Security payments. Any excess amounts paid due to having multiple employers can be returned to you via a credit on your tax return.
For all retired workers receiving Social Security retirement benefits the estimated average monthly benefit will be $1,657 per month in 2022 – an average increase of $92 per month.
SSI is the standard payment for people in need. To qualify for this payment you must have little income and few resources ($2,000 if single/$3,000 if married).
A full-time student who is blind or disabled can still receive SSI benefits as long as earned income does not exceed the monthly ($2,040) and annual ($8,230) student exclusion amounts.

Social Security & Medicare Rates

The Social Security and Medicare tax rates do not change from 2021 to 2022.

Note: The above tax rates are a combination of 6.20 percent Social Security and 1.45 percent for Medicare. There is also a 0.9 percent Medicare wages surtax for those with wages above $200,000 single ($250,000 joint filers) that is not reflected in these figures. Please note that your employer also pays Social Security and Medicare taxes on your behalf. These figures are reflected in the self-employed tax rates, as self-employed individuals pay both halves of the tax.

November 11 2021

Applying for the SS spousal benefit? Get the facts

Retirement benefits, social security, social security benefits

Deciding when to apply for Social Security benefits can be confusing. It’s a decision that can impact your retirement income for decades. Spousal benefits, especially, are easily misunderstood. Here are three questions to consider:

What is a Social Security spousal benefit? As the term implies, it’s income provided under the Social Security program to spouses, current or widowed. (An ex-spouse may also qualify under certain circumstances.) If your spouse or ex-spouse paid into the program, you may be eligible for this benefit, even if you never worked under Social Security.
How much will I receive? Your monthly benefit consists of two parts: the amount based on your own work history and the spousal benefit (if applicable). Let’s say you’re entitled to a monthly benefit of $800 and your higher-earning spouse is eligible for $2,000 a month at his or her full retirement age (FRA). Because half your spouse’s benefit ($1,000) exceeds your own benefit, you’re entitled to a spousal benefit for the difference. In this scenario, you could collect an additional $200 ($1,000 minus $800) each month.
Can I claim a spousal benefit if my spouse isn’t currently drawing Social Security? No. However, if you’re filing based on an ex-spouse’s work record, you may be eligible, even if that person hasn’t filed for his or her own benefits.

The spousal benefit rules are complicated. You’ll want to consider your spouse’s timetable for claiming Social Security benefits, your own benefits, your spouse’s likely longevity (a death can affect widow’s benefits), previous marriage history (if you expect to claim benefits based on a divorced spouse’s work record), and numerous other factors.

Check out the Social Security Administration’s Benefits Planner: Retirement page for more information. Contact us if you have questions about how your Social Security benefits will affect your taxes.

August 8 2018

How to Protect Your Social Security Number from Theft

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Image courtesy of P.D. Mangan at roguehealthandfitness.com

With the dramatic increase in identity theft, what can be done to protect your Social Security Number (SSN) from these would-be thieves? Here are some ideas.

Do not carry your Social Security Card with you. Your parents were encouraged to do this, but times have changed. You will need to provide it to a new employer, but that is about it.

Know who NEEDS your Social Security Number. The list of those who need to have your number is limited. It includes:

Your employer. To issue wages and pay your taxes.
The IRS. To process your taxes.
The State Revenue department. To process your state taxes.
The Social Security Administration. To note your work history and record your benefits.
Your retirement account provider. To enable annual reporting to the IRS.
Banks. To enable reporting to the IRS.
A few others. Those who need to report your activity to the government (example: investment companies.)

Do not use any part of your Social Security number for passwords or account access. Many retirement plans use your Social Security Number to enable you to access their on-line tool. When this happens, reset the login and password as soon as possible.

Do not put your Social Security Number on any form. Unless a business has a legal need for your number, do not provide it. Common requestors of this number are insurance companies and health care providers. Simply write, “not available due to theft risk” in the field that requests your number. If the supplier says they need it, ask them why.

Do not note your full Social Security number on any form. If you are required to give out your number, try marking out the first five numbers. (xxx-xx-1234)

Do not put your Social Security Number on your checks. Certainly not on your pre-printed checks. If requested by the government to place your number on your check to apply your payments, simply put the last four digits on the check.

Never give your number out over the phone or in an email. The only exception is when you make the phone call to a valid source that will need the number to access your account.This list is very limited. It includes calls you make to the IRS, Social Security, your state government, and limited partial numbers to your bank and health care insurance company.

Remember to periodically check your credit with the major agencies to ensure your data has not been stolen. Once stolen, it is often difficult to get a new SSN issued.

Gilliland & Associates, PC is a full-service CPA firm specializing in tax planning for individuals and businesses in the Northern Virginia area. We are based in Falls Church, VA and also service clients in McLean and Tysons Corner, VA. Gilliland & Associates is known for our superior knowledge and aggressive interpretation and application of tax laws. We help you keep more of your earnings by finding you the lowest possible tax on your business or personal tax return. You can connect with us on Google+, LinkedIn, Facebook, and Twitter.

December 19 2017

Your Social Security benefits status is available

IRS Rules, Tax Planning, Tax Tips benefits, Birthday, Retirement, social security

Image courtesy of ddpavumba at freedigitalphotos.net

If you’re not sure where your Social Security benefits stand, you have a way to check. Each year, you should automatically receive a personal Social Security statement three months before your birthday. It shows your year-by-year earnings and estimates of your retirement. It also shows survivors and disability benefits you and your family may be able to receive now and in the future.

If the statement doesn’t show earnings from a state or local government employer, contact them. The work may not have been covered either by a Section 218 agreement or by federal law.

November 29 2017

Get ready to save more in 2018

IRS, IRS Rules, Money Management, Retirement, Tax Break, Tax Law, Tax Planning, Tax Tips 401K, investment, Roth, social security

Image courtesy of Sira Anamwong at freedigitalphotos.net

You can save more for retirement next year using tax-advantaged accounts, thanks to a boost in the maximum 401(k) contribution rate by the IRS. The maximum rate increases by $500 to $18,500, which is the first increase in three years. Those aged 50 or older can still contribute an additional $6,000 on top of that amount. This is good news, because a 401(k) is one of most potent tools in your retirement arsenal. It offers many benefits over other forms of saving, including:

Tax-deferred growth. Pre-tax income of $18,500 invested over 30 years with 6 percent annual cumulative interest will grow to $111,901.92. That’s compared with $67,588.76 of the same amount of income invested after being taxed at the highest rate. While you’ll owe tax on 401(k) withdrawals after retirement, you may be able to manage your 401(k) withdrawals to fall into a lower income bracket.
Roth option. You may opt to make your contributions to a 401(k) as a Roth investment, meaning you invest post-tax income, but you can withdraw from your Roth tax-free during retirement. A mix of traditional and Roth accounts will give you flexibility to manage your income tax rate during retirement.
Company match. Many companies offer to match the first few percentage points of their employees contributions to a 401(k). Even if you can’t max out your contribution, you should try to invest up to your company’s match limit. Otherwise, you’re just leaving money on the table.

While 401(k)s have great utility, they come with a few downsides. Any withdrawals made before age 59 1/2 are assessed a 10 percent penalty fee, in addition to being taxed as regular income during the year they are withdrawn. Any investments in 401(k)s also are limited to a few choices set by your employer’s retirement plan, so a limited number of conventional investment options in mutual funds is one of the trade-offs of using a 401(k). Social Security also gets a boost in 2018

The federal retirement safety net system, Social Security also gets a boost during 2018. The average estimated monthly benefit paid to retirees in 2018 will be $1,404 in 2018, up from $1,377 in 2017. The maximum amount of wages subject to Social Security taxes rises to $128,700 in 2018, up $1,500.

November 13 2017

2018 Social Security changes announced

IRS, Retirement, Tax Planning, Tax Tips benefits, COLA, social security, wages

Image courtesy of Stuart Miles at freedigitalphotos.net

The Social Security Administration stated there will be a 2 percent cost-of-living adjustment (COLA) to monthly Social Security and Supplemental Security Income benefits for 2018. This is the largest increase since 2012. Up to $128,700 in wages will be subject to Social Security taxes (up $1,500 from 2017).

November 18 2014

Self-employeds get tax breaks

Child's earnings, Self-employed, social security, taxes

When it comes to taxes, being self-employed has some advantages. Whether you work for yourself on a full-time basis or just do a little moonlighting on the side, the government has provided you with a variety of attractive tax breaks.

* Save for retirement. When you’re self-employed, you’re allowed to set up a retirement plan for your business. Remember, contributing to a retirement plan is one of the best tax shelters available to you during your working years.

Take a look at the SIMPLE IRA, SEP IRA, or Solo 401(k), and determine which plan works best for you.

* Hire your kids. If your business is unincorporated, employing your child under the age of 18 might make sense. That’s because your child’s earnings are exempt from social security, Medicare, and federal unemployment taxes. This year, your son or daughter can earn as much as $6,200 and owe no income taxes. You get to deduct the wages paid as a business expense.

* Deduct health insurance. Are you paying your own medical or dental insurance? How about long-term care insurance? As a self-employed individual, you may be able to deduct 100% of the cost of these premiums as an “above the line” deduction, subject to certain restrictions.

* Take business-use deductions. Self-employed individuals can also deduct “mixed-use” items directly against their business income. Use your car for business and you can deduct 56¢ per business mile driven. The business-use portion of your computer purchases, Internet access, and wireless phone bills is also allowable. And if you meet the strict requirements, claiming the home office deduction makes a portion of your home expenses tax-deductible.

Please give us a call to find out more about the tax breaks available to self-employed individuals.

Gilliland & Associates, PC is a full-service CPA firm specializing in tax planning for individuals and businesses in the Northern Virginia area. We are based in Falls Church, VA and also service clients in the McLean and Tysons Corner, VA. Gilliland & Associates specializes known for our superior knowledge and aggressive interpretation and application of tax laws, we help you keep more of your earnings by finding you the lowest possible tax on your business or personal tax return. You can connect with us on Google+, LinkedIn, Facebook, and Twitter.

March 7 2013

When to start drawing social security is an important decision

Baby boomers, Financial, investments, Retirement benefits, social security

Over the coming years, millions of baby boomers will reach age 62, the minimum threshold for receiving social security retirement benefits. If recent history is any indication, most of these people (over 70% by some estimates) will take their benefits as early as possible.

But whether you should take social security retirement benefits at the earliest possible age, or defer them until reaching normal retirement age (or even age 70), depends on several factors. Among these are your overall health and life expectancy, your plans to earn income before reaching normal retirement age, anticipated returns on other investments, even your guesses about the future of social security. Like most retirement planning choices, this decision isn’t one-size-fits-all.

For some people, deferring social security benefits isn’t an option. If your savings won’t cover ongoing expenses, you may need to rely on social security income to make ends meet.

But if your circumstances offer more financial flexibility, you may want to consider deferring social security benefits. For each year you delay taking benefits, the payouts increase, up to age 70. Also, if you plan to earn significant income between age 62 and your normal retirement age (age 65 to age 67, depending on the year you were born), putting off your social security benefits may make sense. That’s because any benefits in excess of specified limits ($15,120 in 2013) will be reduced. You’ll lose $1 of benefits for every $2 in earnings above the limits. Fortunately, you won’t lose any social security benefits (regardless of earnings) once you reach full retirement age.

On the other hand, let’s say you’ve accumulated $500,000 in your 401(k) account and expect that account to generate an 8% annual return. Under such a scenario, you might be better off leaving your retirement savings alone and taking your social security benefits early to cover living expenses. Or perhaps your family has a history of health problems and you don’t realistically expect to live into your 80s. Again, taking social security benefits at age 62 might be a good choice.

When it comes to retirement planning, there are no guarantees. When deciding whether to defer social security benefits, take a realistic look at your situation, run the numbers, and give it your best shot. For help with this important decision, give us a call.