Question of the Day – April 30

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Here’s the question of the day.

Question: I have a client who is 66 and applying for Social Security retirement benefits. Is the client eligible to apply for benefits based on her 65 year old ex-spouse’s record, and able to switch to her own benefit at age 70?

Answer: Yes, if the conditions described below are met.

Here’s what the Social Security Administration says about retirement benefits for an ex-spouse:

If you are divorced, your ex-spouse can receive benefits based on your record (even if you have remarried) if:

Your marriage lasted 10 years or longer;
Your ex-spouse is unmarried;
Your ex-spouse is age 62 or older;
The benefit that your ex-spouse is entitled to receive based on his or her own work is less than the benefit he or she would receive based on your work; and
You are entitled to Social Security retirement or disability benefits.

If you have not applied for retirement benefits, but can qualify for them, your ex-spouse can receive benefits on your record if you have been divorced for at least two years.

Finally, here’s a key excerpt from the website about switching benefits later:

(If) your divorced spouse has reached full retirement age and is eligible for a spouse’s benefit and his or her own retirement benefit, he or she has a choice.

Your divorced spouse can choose to receive only the divorced spouse’s benefits when he or she applies online and delay receiving retirement benefits until a later date. If retirement benefits are delayed, a higher benefit may be received at a later date based on the effect of delayed retirement credits.

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Question of the Day – March 7

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The professionals at Advanced Underwriting Consultants (AUC) answer the tax questions posed by producers. Here’s the question of the day.

Question: My client just received a lump sum payment from the Social Security administration in January 2013 representing retirement back pay for 2011 and 2012. In which year is the payment taxable?

Answer: According to the IRS website Social Security back pay is taxable in the year in which it is received:

You must include the taxable part of a lump-sum payment of benefits received in the current year (reported to you on Form SSA-1099) in your current year’s income, even if the payment includes benefits for an earlier year.

However, there are two ways to determine the amount of income to include:

You can use your current year’s income to figure the taxable part of the total benefits received in the current year. OR

You may make an election to figure the taxable part of a lump-sum payment for an earlier year separately, using your income for the earlier year.

You can select the lump-sum election method if it lowers the taxable portion of your benefits.

Under this method you refigure the taxable part of all your benefits (including the lump-sum payment) for the earlier year using that year’s income.

Then you subtract any taxable benefits for that year that you previously reported.

The remainder is the taxable part of the lump-sum payment. Add it to the taxable part of your benefits for the current year (figured without the lump-sum payment for the earlier year).

There are worksheets in Publication 915, Social Security and Equivalent Railroad Retirement Benefits, to help you calculate the taxable portion using this method.

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Question of the Day – August 29

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The professionals at Advanced Underwriting Consultants (AUC) answer the tax and technical questions posed by producers. Here’s the question of the day.

Question: My client is collecting early retirement benefits from social security. She has changed her mind and would like to stop benefits—continuing when she reaches full retirement age. Is that possible?

Answer: Maybe.

Here’s a summary of the rules regarding withdrawal of a Social Security application and suspending payments.

http://www.ssa.gov/retire2/withdrawal.htm

According to the website, applications to begin payments can be withdrawn within a year of the start of benefits if all benefits are paid back. Otherwise, a taxpayer must reach full retirement age before benefits can be suspended.

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Question of the Day – March 1

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Here’s the question of the day.

Question: I am working with a widow to help her apply for the Social Security benefits to which she might be entitled. She was only married to her deceased spouse for a short time. Is she entitled to benefits under his account?

Answer: Here are the kinds of benefits that a widow might be entitled to, according to the Social Security Administration’s website.

If you are the widow or widower of a person who worked long enough under Social Security, you can:

receive full benefits at full retirement age for survivors or reduced benefits as early as age 60.
begin receiving benefits as early as age 50 if you are disabled.
receive survivors benefits at any age if you take care of the deceased worker’s child who is under age 16 or is disabled and receives benefits on the worker’s record.

The website also says that generally, a person can qualify for widow’s or widower’s benefits if he or she was married to the deceased worker for at least nine months just before the worker died.

However, you do not need to be married to the worker for any specific length of time if:

You are the mother or father of the worker’s biological child;

You legally adopted the worker’s child while you were married to him or her and before the child attained age 18;

You are the parent of a child who was legally adopted by the worker while you and the worker were married and before the child attained age 18;

You and the worker were married and both of you legally adopted a child under age 18;

You were entitled or potentially entitled to spouse’s, widow(er)’s, parent’s benefits or to childhood disability benefits on the record of a fully insured individual in the month before the month you married the deceased worker;

You were entitled or potentially entitled to a widow(er)’s, child’s (age 18 or over) or parent’s insurance annuity under the Railroad Retirement Act (RRA) in the month before you married the deceased worker;

The worker was married previously to an institutionalized spouse, but was not allowed to divorce him or her under state law. After the spouse died, he or she married you within 60 days;

You were married to the worker at the time of his or her death, you had been married to and divorced from him or her before, and the previous marriage lasted nine months;

The worker’s death occurred in the line of duty while he or she was a member of a uniformed service serving on active duty; or

The worker’s death was accidental. (Note: The worker’s death is considered “accidental” only if he or she received bodily injuries through violent, external and accidental means and, as a direct result of the bodily injuries and independent of all other causes, died within three months after the day he or she received the injuries.)

If the worker could not reasonably have been expected to live for nine months at the time you married him or her, then you cannot qualify for benefits under the last three conditions.

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