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.

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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.