What No One Tells You about Social Security Benefits while Filing Taxes

What No One Tells You about Social Security Benefits while Filing Taxes

The system of receiving Social Security Benefits while Filing Taxes was introduced way back in 1935 when the then President, Franklin Roosevelt, signed the Social Security Act. The current regulations governing Social Security Benefits have been through various amendments since their inception. Currently, under the Social Security Benefits, four different types of benefits are paid. These include retirement benefits, disability benefits, dependents benefits and survivor's benefits.

Though you might know that your Social Security Benefits depend on your level of income and for how long you have worked, there are some facts about such benefits which you might not know. Given below are some common facts which no one tells you about your Social Security Benefits:

Social Security Benefits while Filing Taxes

• The 'full retirement age' depends on the year of your birth
  
  While you might know that receiving your Social Security Benefits are more rewarding from or after you reach your full retirement age, do you know the actual full retirement age. While most of us consider 66 to be the full retirement age, the fact is that the actual age depends on the year we are born. If you are born in 1938 or earlier, your full retirement age is 65 years. If you are born between 1943 and 1954, your full retirement age would be 66 years and if you are born after 1960, the full retirement age is actually 67 years. Did you know this?


• Getting benefits after divorce
  
  If you are divorced from your spouse and want to lay a claim to spousal benefits of your ex-spouse, you have to fulfill three important criteria. One, you should remain unmarried for claiming the benefit. Two, your marriage should have lasted for at least 10 years. Three, your spouse should be retired or disabled. However, if you and your spouse are above 62 years of age and have been divorced for more than 2 years, you can start receiving spousal benefits even if your working spouse has not opted for the same.


• The Social Security Benefits are calculated on your average 35-year income
  
  Though the computation of Social Security Benefits varies as per different situations, one thing is constant. The number of years taken for your aggregate earnings is 35 years. If you have worked for more than 35 years, the highest earning years are considered in the calculation. However, if you have worked for less than 35 years, 'zero' value is taken for such years when your income was nil. This, therefore, reduces the value of the benefits you can receive.


• The difference between spousal and survivor benefits
  
  You get spousal benefits being married or being divorced. In either case, your spouse should be alive. However, if your spouse dies, you get survivor benefits. Spousal benefit is 50% of the Social Security Benefit which your spouse is entitled too while survivor benefit is 100% of that amount. When claiming either benefit, you can get only one– either yours or your spouse's. In case of spousal benefit, if your benefit is more than 50% of your spouse's benefit, you would get the higher amount, i.e. your benefit. The same holds true in the opposite scenario where you would get your spousal benefit. In short, when claiming spousal benefits, you can claim only one benefit and let go of the other. In survivor benefit, though, you can collect your survivor benefit and let your own benefit to grow. If you collect your own benefit after 70 years, you can avail of higher payments.


• Spousal and survivor benefits do not increase after the full retirement age
  
  Though you can increase your Social Security Benefit if you delay receiving it post your full retirement age, no increment is available in case of spousal or survivor benefit. Did you know these things about Social Security Benefits? I bet you didn't. Wise men say that knowledge is power and they are not wrong. You should learn the nutty-gritties of Social Security Benefits too so that you can avail the maximum possible benefits.

Labels:
Social Security Benefits, Filing Taxes, Tax Filing, Tax Services, Tax Consulting, Tax Filing Services, Tax Preparation, Tax Representation, 

Choosing the Right Filing Status Can Save Your Hard Earned Money | From Tax Consulting Firm

Choosing the Right Filing Status Can Save Your Hard Earned Money | From Tax Consulting Firm

This Article discussing about Choosing the Right Tax Consulting Firm for Right Filing Status Can Save Your Hard Earned Money. 

Our money is always hard-earned. We work day in and day out to earn our living and so do not like to part with our hard-earned incomes. However, paying income tax is our federal duty and every year we are required to pay tax on our incomes. Our filing status determines the amount of tax we are supposed to pay. There are five distinct types of filing statuses. Did you know that choosing the correct status can help you in saving taxes?

Yes, you heard me right. Despite there being five different statuses, you can qualify for more than one status. In such a case, choosing the most beneficial status (read the status which saves maximum tax) would help you save your hard-earned money. Want to find out how? Let’s breeze through the five filing statuses first.

Tax Consulting Firm | Tax Filing

1.       Single

Divorced, widowed without having dependents, legally separated or married individuals fall under this status. You can also qualify under this status if you are not a primary caregiver to a dependent for more than 6 months or if you do not qualify under any other statuses.

2.       Married filing separately

If you are married and both you and your spouse are earning members, you can opt to file your returns separately. If you choose to do so, your tax filing status becomes ‘married filing separately’.

3.       Married filing jointly

If you are married, you can also file joint returns instead of filing separately. Filing jointly lets you avail good tax exemptions. Moreover, if you are married and your spouse died during the year, you can file your returns under this status for the year in which your spouse died.

4.       Head of household

To qualify for this status, you should be unmarried and should have borne the cost of yourself and a dependent living with you for more than 6 months. You can also qualify for this status if you are married butane living apart from your spouse for more than 6 months and also maintaining a separate home for yourself and a dependent.

5.       Qualifying widow/widower with a dependent child

If you are a widow or a widower living with your dependent child, you qualify for this status. You should be unmarried post your spouse’s death to qualify for the status. Moreover, you can claim the benefit of this status for a maximum of 2 years after your spouse’s death.

These are the five filing statuses for filing your returns.

How the right status saves your money?

If you qualify for one status, you have to file your taxes as per the tax bracket of that status. But what if you qualify for more than one status? For instance, if you are married, you can either file separately or jointly. In these cases, you should choose the status which gives you maximum tax exemptions. Your filing status determines –

·         Your standard deduction – this deduction lets you reduce your taxable income by a specified amount depending on your filing status. For instance, if you qualify for single or married filing separately, you get a deduction of $6300, but for filing jointly or being a qualified widow, the deduction rises to $12,600. Similarly, head of households can claim a deduction of $9300.

·         Your tax liability – the rate of tax applicable on your taxable income depends on your filing status. Different statuses have different tax brackets based on which your tax liability is computed. For instance, if you are married but file separately, any income up to $9275 would be taxed at 10% but if you file jointly, the 10% tax rate would apply to incomes up to $18,550.

So, when you qualify for more than one status, sit with your calculator. Compute your tax liability under each status and then choose the one with the lowest tax incidence. Even the IRS urges you to take advantage of these filing statuses to lower your tax liability and save your hard-earned money. So, now you know how you can save money on your taxes. Just a simple knowledge of your filing status is enough to help you. So, find your status today and lower your tax liability.  

Did you know these tax laws exist? Tax Preparation and Tax Filing from the Best Tax Consultants

Did you know these tax laws exist?

This Article is created and published by Tax Preparation and Tax Filing from the Best Tax Consultants

The tax season is around the corner and I am sure most of you would be in a frenzy to file your taxes at the earliest. Well, good for you. But what if I tell you that you might have missed out on some tax exemptions or deductions while preparing your taxes?
Most Americans consider that the tax laws are a bit complicated and, thus, resort to professionals’ help for preparing and filing their tax returns. Are the laws complicated? They are a bit, yes. Moreover, there are some strange tax laws which most of us are not aware of. Here is a list of such weird federal tax laws. Find out if you have ever heard about them:

Allowance for clay miners
Sagger clay is used in pottery. People who mine this clay get a 14% federal depletion allowance. Quite generous, don’t you think? However, there is a catch to this law. If the clay gets deposited in sewer pipes then the allowance is reduced to 7.5%.

Allowance for shell and rock miners
If you are engaged in extracting oyster shells, clam shells and spodumene mineral, you can also claim the federal depletion allowance of 14%.

Body building, anyone?
Body building can be a lucrative professional choice as the special oils used in preparation of body-building competitions are eligible for tax exemption. You can deduct the cost of these special oils from your taxable income. However, buffalo meat and wheat-grass shots do not qualify for tax exemption and their expenses are included in your taxable income.

It is time to pursue your artistic skills
If you are a performing artist and fulfill some employment conditions, you can claim deductions for expenses incurred during such employment. The employment conditions stipulate that you should be employed by a minimum of 2 employers each paying at least $200, the expenses related to your job should be more than 10% of the income generated from the same job and your adjusted gross income should not be higher than $16, 000. If you fulfill these conditions, enjoy tax exemptions on your job-related expenses.

Breast implants are depreciable
This one takes the cake! If your breast implants are a requirement in your chosen field of work, they are considered as a stage prop. Since the prop is for your business, it comes under the category of business assets which are depreciable over time.

Tax Preparation and Tax Filing

Some weird state tax laws
Yes, even the US states are not far behind in weird tax exemptions and deductions.  Here are some weird tax laws prevalent across some popular US states.

• New York Bagels – if you are in New York and love your bagels, decide how you want to buy them to avoid tax. An uncut bagel is tax exempt. However, if you buy your bagel any other way (like sliced or creamed) you have to part with 8 cents in taxes.
• California and its fruits – buying fruits from kiosks or fruit stalls attracts a 33% tax while buying fruits from the grocery store does not. Strange, isn’t it?
• Arkansas and being natural – if you are in Arkansas and get your body pierced, tattooed or underwent electrolysis, you would have to pay a 6% extra tax. Being natural has its perks, doesn’t it?
• Alabama and Nevada and the playing cards dilemma – as gambling is legal in Nevada, the state gifts you a free deck of playing cards when each return is filed. However, in Alabama, the state charges a 10% on decks with 54 or less playing cards.

With these weird tax laws, it is no doubt that Americans find filing their taxes difficult. With both federal and state tax laws having weird tax deductions or charges, it sometimes becomes difficult to figure out whether you can save tax or have to file an extra tax. The next time you file your taxes, look out for these strange tax deductions and save on your tax outgo.

Choosing a Tax Accounting Services

Choosing a Tax Accounting Services

Do you know that accounting method actually used on the initial return is an election of that method, so tax payers should carefully analyze financial data to ensure that the method is applied properly.

A business must use the same accounting method to figure its taxable income and to keep its books, and the method must clearly reflect its income.

Understanding Accounting Methods

An accounting method is a set of rules used to determine when income and expenses are reported on your tax return. In general, there are four types of accounting methods, which dictate how business transactions are recorded in the business financial books:

• Cash Method – income is recognized in the year received, and expenses in the year paid.
• Accrual Method – Income reported in year it is earned and deduct or capitalize expense in the year incurred.
• Special Method – This method of accounting is for certain item of income or expenses and it’s include for Amortization, Bad Debts, Depletion, Depreciation, Installment Sales.
• Hybrid Method – Any combination of two or more above methods of accounting methods, if the combination clearly reflects business income and use it consistently.

Why Method Matters

The accounting method a business uses can have a major impact on total revenue the business reports as well as on expenses that it subtracts from revenue to get the bottom line.

The core underlying difference between these two methods is the timing of transaction recordation. The timing difference between the two methods occurs because revenue recognition is delayed under the cash method until payments arrives in the business.

Similarly, the recognition of expenses under the cash basis can be delayed until such time as invoice paid.

BASIS FOR COMPARISON	CASH ACCOUNTING	ACCRUAL ACCOUNTING
Meaning	The accounting method in which the income or expense is recognized only when there is actual inflow or outflow of cash.	The accounting method in which the income or expense is recognized on mercantile basis.
Nature	Simple	Complex
Applicability of matching concept	No	Yes
Recognition of revenue	Cash is received	Revenue is earned
Recognition of expense	Cash is paid	Expense is incurred
Degree of Accuracy	Low	Comparatively high

Changing your accounting method

Generally, you can use any permitted accounting method when you file your first tax return and you don’t need any IRS approval for the first time. However, you have to use the selected method consistently from year to year and it must clearly reflect your income.

Any business that wants to change its accounting method, need to take permission from IRS for change in accounting method by using Form 3115 to request a change.

A change in your accounting method includes a change not only in your overall system of accounting by also in the treatment of any material item. A material item is one that affects your income or your ability to take a deduction.

Timing and application process: Applications can be made at any time during the tax year, but the earlier the better. You may also get a six month of extension to file the application so long as your tax return for the year in which the change is requested is filed on time.

The IRS looks at two things when deciding whether or not to approve a request for a change in accounting methods:

• Whether the new method will accurately reflect income
• Whether the new method will create or shift profits and losses between businesses.

For any further assistance regarding Bookkeeping feel free to contact us at  bopmanagers@aotax.com or Phone: 703-584-5533We will be very happy to assist you.