Adjusting Your Social Security Earnings Record

What do you do if  your social security earnings record is not correct? It is important because your benefit is based on the highest 35 years of earnings over your work career. If you worked less than 35 years, then the zeros for those years reduce your benefits. A member of my family has been in an epic struggle for two years to change earnings for 2010 from 0 to their self employment income for that year. We started off calling the national social security office and sending in the tax return for that year showing the self employment income to the local social security office. Nothing happened. Then the family member visited the local office to present the papers in person. After a 3 hour wait, the papers were presented and the family member was told to wait 90 days for the papers to be processed. Nothing happened. After another meeting at the local office, the agent said to get the tax transcript certified by the IRS. We learned after a visit to the IRS, that they don't do certifications and the transcript should have been ok as is. At the third meeting at the local social security office, the agent said she would call after she talked to her supervisor. There has been no call. That is where we are now. There are several lessons to be learned from this: the problem has to be fixed at the local social security office, you need a tax transcript to prove your W-2 or self employment income, they won't call you back, and keep copies of all the documents that you give to social security. We are thinking now of trying another local social security office and not leaving until the problem is fixed or they tell us what is wrong.

Double Taxation on Excess 401k Deferrals

If you move from one employer to another and both have 401k plans, you may end up with more than the current $18,000 (additional $6,000 if age 50 or older) maximum deferral for the calendar year. If you don't have the excess withdrawn by the non extended due date of the return, you have to pay taxes twice, once in the year of the excess and then in the subsequent year when the excess is given back to you. This is one of the few places in the tax code where they tax you twice on the same income. Don't let this happen to you.

The Jimmy Carter Rule

President Jimmy Carter thought that business executives were getting away with too much by deducting all of  their business meals so the 50% deduction was born back in the 70's. He was upset about the 3 martini lunch. So now if you take clients out to dinner or pay for meals on business trips only 50% of it can be deducted from  business income. There are exceptions to this rule though that allow a 100% deduction. Some of which include employee parties for the benefit of the rank and file employees, company outings for employees and their guests, meals served in the employer's office for the convenience of the employer, and snacks or beverages provided to employees at the office.

Income Tax on Inheritance

Most assets such as cash, stocks, real estate, and life insurance you inherit from a decedent are tax free unless you live in a state that taxes inheritance. Georgia does not. Some items which create taxable income if you inherit them are most retirement accounts like regular IRAs and 401k plans that have no basis, annuities, final wages, and investment income paid after death.

Social Security Claiming strategies for Married Couples

If you are married and at full retirement age which is currently 66, then you can take advantage of two strategies: file and suspend and filing a restricted application for spousal benefits only. The file and suspend method which just expired on April 29 allowed the higher income spouse to suspend their benefit and earn an 8% premium per year until age 70. The lower earning spouse could then immediately get 1/2 of the higher income spouse's benefit. The second strategy is filing a restricted application for spousal benefits only. This method allows one spouse to get benefits from the other spouse's account while deferring benefits on their own account earning the 8% premium per year until age 70. At age 70, they would switch to their own account. Sometimes it is called get some now and then get more later. The restricted application is available to all those born January 1, 1954 or before. Social security is a very important source of cash flow in retirement.