Determining the best time and best way to take Social Security benefits can make a big difference in the amount you receive over the balance of your lifetime. What is prudent, is understanding how it works and, if appropriate, running calculations prior to making your benefit decision. Here are some things to consider.

Full retirement age is quickly becoming 67. Your full Social Security retirement benefit can be claimed when you reach your target retirement age. This is age 66 for those born between 1943 and 1954. Those born after 1954 have their full retirement age increase by two months per year until full retirement age becomes 67 years old for those born in 1960 or later.

Taking it as early as 62. You may begin taking your Social Security benefit as early as age 62. But if you do so, your full retirement benefit amount will be reduced for each month you are short of your full retirement age. The Social Security Administration estimates up to a 30% reduction in your benefits if you choose to take benefits when you reach age 62.

Delaying the benefit up to age 70. After your full retirement target age, for each year you delay the start of receiving your Social Security retirement benefits (up to age 70), the benefit amount increases by approximately 8%.

Receiving survivor benefits. If a spouse dies, the surviving spouse is eligible to receive a Social Security Survivors benefit. The survivor benefit can be collected by as early as age 60. However, the benefit received is reduced for each month the survivor is short of their own full retirement age. You may not receive both a Survivor Benefit and your own Social Security retirement benefit, but you can switch from Survivor’s Benefits to your own retirement benefits and vice versa.

Taxability of benefits. Up to 85% of Social Security Benefits can be taxable. This can happen when you still work or are taking taxable funds out of retirement accounts.

Life expectancy comes into the calculation. Once you start your Social Security benefits, you will receive them until you pass away. Receiving benefits at an earlier date means receiving more payments over your lifetime, but at a lower benefit amount. Delaying the start means fewer, but higher, payments during your lifetime.

Benefit reduction risk. In addition to having your benefits subject to tax, you can also have your benefits reduced. This may occur when you are not at your full retirement age and you are also receiving wages or business income subject to Social Security tax.

Spousal benefits. Another variable to consider is the availability of receiving spousal benefits instead of receiving your own Social Security retirement benefit.

So what is your best bet? The best tip for all of us is to know how it works long before retirement and develop a plan before you begin receiving Social Security benefits.

Personally Identifiable Information, or (PII), is in the spotlight at the IRS, the Federal Trade Commission (FTC) and the Department of Labor (DOL), plus other federal agencies. Moving beyond the buzz and into understanding what it means for you relates directly to protecting your personal information from would-be thieves.

The Concept

PII is information that identifies you or relates specifically to you. This includes the obvious: name, address, phone number, and Social Security number. It also includes information that identifies your financial data, such as credit card information, emails, account numbers, user IDs, and passwords.

The point is that federal agencies are now focusing on identifying who legitimately has your PII and requiring that they have an active plan to protect it from hackers and thieves. In fact, anyone who has PII or other financial information must now have a Written Information Security Plan to outline how they plan to protect this information.

What you need to know

Your tax information is key PII. As you can imagine, your tax information is loaded with data that’s a target for thieves. So be aware of how you store this information. Also let vendors know you don’t want your Social Security number exposed on any mailed forms like W-2s and 1099s.

Know who has your PII. Be aware who has your personal data and be deliberate about deciding who really needs it. Close unused accounts and ask them to delete their records as soon as possible. Remember, this is not just your bank or tax professional. It includes any vender that stores your credit card number for future transactions or anyone you autopay with a link to your bank account.

Be watchful. As part of the federal requirements, any suspected security breach incident is to be reported to you on a timely basis. But despite these requirements, this does not always happen. So be diligent, and take advantage of the free annual credit report from each of the major credit reporting agencies to double check for any suspicious activity.

Your information is secure. As your tax professional, we protect your personal information and take this task seriously. While no one can guarantee something bad won’t happen (just look at recent cases of data theft at United Health Care and AT&T), it is our obligation to identify personally identifiable information, have a plan to protect it, and be constantly vigilant.

Mention the word IRS and everyone’s blood pressure tends to go up a bit. Unfortunately, thieves know this too and often use the IRS as a threat to get you to fall for their latest scam.

Every year the IRS mentions their dirty dozen tax scams and repeatedly tries to keep us all on alert. A review of recent alerts outlines some common traits of these scams. By being aware of them, you increase the chances of discovering the newest threat, even before anyone becomes a victim. Here are some common traits:

Personal information is always the target. Scammers are always going to ask for personal information. This is typically your Social Security number, your age, address, and birth date.

Getting your ID is a bonus. Thieves would love a copy of your passport or driver’s license. This ID is often required to prove your identity. So a common tax scam is to tell you that you have unclaimed refunds and must prove your ID to get the unclaimed money.

The more significant the threat, the more likely the scam. Threatening arrest, levy of your bank accounts, or sending the sheriff or police to your residence or business are great ways to intimidate. The IRS does not work this way.

The wording doesn’t seem right. If you see an IRS notice with title case or mixed fonts, or perhaps the margins don’t look right, these are all signals that the notice may be fraudulent.

Demands for payment. Demands for payment of any kind over the phone or via email is not how payments to the IRS are made. All payments are paid to the U.S. Treasury. So that request for your credit card number is a clear scam attempt.

Your best defense against scams is to be wary and alert. When in doubt, go to www.irs.gov and contact the agency along with your tax professional. This is the best way to get independent confirmation of any claims being made on your tax record.

The kids are out of school, which means now is a great time to review the rules to deduct eligible summer activities on your tax return. Tax deductible related daycare expenses through the use of the Child and Dependent Care Credit can be a great opportunity to reduce your child care expenses this summer. Here is what you need to know.

What is deductible?

The credit equals 20% to 35% of qualified unreimbursed expenses with a maximum amount of expenses being $3,000 for one person (maximum credit of $1,050) and $6,000 for two or more qualifying persons (maximum credit of $2,100).

How it works

To receive the credit you must:

• have a dependent under the age of 13 or have a spouse or dependent who is physically or mentally unable to care for themselves
• have earned income (wages) to support the dependent
• have qualified expenses (that allow for care while you work or look for work)
• financially support and maintain a home for the dependent
• if married, both you and your spouse must be working or looking for work

Some summertime tips

1. Daycare expenses are the most common qualifying expense for the Dependent Care Credit.
2. In-home daycare during the summer months also qualifies. Your sitter cannot be a dependent, a spouse, or someone under the age of 19.
3. Day camps qualify for the credit.
4. OVERNIGHT camps and summer school/tutoring do NOT qualify.
5. Track the mileage of transportation to and from any qualified activity. For instance, if your daycare provider takes the kids on a field trip, the mileage would be part of the qualified activity.
6. Even cooking and housekeeping expenses can count if at least partly done for the protection and safety of a qualifying person.
7. Placing your child in a day camp while one of you volunteers at a charity would not work in determining qualified dependent care expenses.

Remember to get the provider’s name, address, and Social Security number/Tax ID number. Also retain any receipts and canceled checks to support your proof of payment. This information will be required when you fill out your tax return.

For most taxpayers, you have until April 15th of the following year to contribute up to $7,000 ($8,000 if age 50 or over) into a Traditional IRA or a Roth IRA. Is an IRA an option worth considering for you? If so, which is better?

Traditional IRA

Roth IRA

• Traditional IRA contributions that qualify for pre-tax treatment will allow a larger beginning investment to compound over time versus a Roth IRA.
• Roth IRA contributions, though smaller because of tax treatment, could create earnings that are never taxed.
• Roth IRA accounts have more flexible contribution and withdrawal rules.

So the answer is. . .it all depends. If you think tax rates will be significantly higher when you withdraw your retirement savings, then think seriously about a Roth IRA. This is the case in 2026 when temporary tax laws expire and the maximum tax rate returns to 39.5% (currently 37%).

If you think your retirement account investments will perform well, then perhaps the earnings growth in a Traditional IRA will more than pay for the additional tax at time of withdrawal.

Unless Congress takes action, a number of temporary tax laws are going to expire at the end of 2025. This means you have this year and next to take advantage of the current rules. That doesn’t mean Congress won’t extend the current laws, but why take the chance? Here are some of the larger changes to consider:

• Tax rates will go up, with very different income brackets.

Result: Most taxpayers will be subject to higher tax rates with the top rate moving from 37% to 39.5%. The income subject to these rates will also change dramatically. Now is the time to effectively manage tax brackets to avoid higher rates!

• Many more taxpayers will itemize deductions and have them subject to phase outs.

Result: Standard deductions may go down and your deductions may be lowered if your income exceeds certain thresholds. There is good news as the $10,000 tax limitation will be removed, and currently-excluded deductions are planned to be reintroduced.

• More will be impacted by the alternative minimum tax

Result: Many more families will be subjected to a potential second tax calculation with the higher of the two tax rates being used to tax your income.

• The child tax credit will be reduced, as will the phaseout for qualifying for the credit

Result: Most families with children will see a higher tax bill.

• There will be different capital gain tax rules

Result: Planning sales of assets will be more important than ever and is a tremendous tax planning opportunity to consider prior to the tax change!

• Exemptions will be re-introduced

Result: This tax reduction provision may take some of the sting out of the rollback of temporary tax laws.

• Small businesses may lose their 20% QBI deduction

Result: While small businesses in flow through tax entities, such as S Corporations, partnerships and sole proprietorships, will lose a valued tax break, look for Congress to re-introduce other tax incentives to combat the perceived lack of tax fairness when compared with other countries.

Given these pending changes on the tax horizon, now is a great time to see if you can take advantage of the current tax laws BEFORE they are scheduled to change.

Three of every four Americans got a refund check last year according to IRS statistics. With a little planning, you can maximize the benefit of your refund. Here are some ideas:

Pay off debt. If you have debt, a great spending priority can be to reduce or eliminate it. This is especially true if you have any credit card debt. With rate increases, credit card interest can cripple you financially. Start by paying down debts with the highest interest rates and work your way down the list until you bring your debt burden down to a manageable level.

Save for retirement. Saving for retirement works like debt, but in reverse. The longer you set aside money for retirement, the more time you give the power of compound earnings to work for you. This money can even continue working for you long after you retire. Consider depositing some or all of your refund check into a Traditional or Roth IRA. You can contribute a total of $7,000 to an IRA in 2024, or $8,000 if you’re 50 years old or older.

Save for a home. Home ownership is a source of wealth and stability for many Americans. If you don’t own a home yet, consider building up a down payment fund using some of your refund. If you already own a home, consider using your refund to start paying your mortgage off early. This is especially important if you have a recent mortgage with higher interest rates.

Invest in yourself. Sometimes the best investment isn’t financial, but personal. If there’s a course of study or conference that would improve your skills or knowledge, that could be a wise use of your money in the long run.

Give some of it away. Helping people, and being able to deduct gifts and charity from your next tax return, isn’t the only benefit of giving to a good cause.

While most of us are never audited, when it happens we can often feel overwhelmed. Remember that the IRS auditor performs these audits every day. They know what to look for, and may ask leading questions that are easy to answer incorrectly. Here are some tips to help you when you are in the crosshairs of an IRS audit.

• Timely address IRS correspondence. Do not let any issues raised in an IRS correspondence letter get to a point where a face-to-face examination is required.
• Ask for help. Do this right away. Too many taxpayers think the problem is easy to resolve, but inadvertently say the wrong thing, resulting in another audit issue.
• Understand what’s being asked. Clearly understanding the core question behind the audit can simplify the solution. Why is the IRS asking to see your 1099s? Do they have a form that you do not? Why are they asking about your small business profits? Are they thinking your business is a hobby?
• See the audit the way an IRS auditor is trained to see it. The IRS focuses auditor training in several areas. These are published in Audit Techniques Guides (ATGs) and are available for review on their web site at www.irs.gov (search for Audit Techniques Guides in the search bar). They are invaluable in identifying areas for potential audits, and can help you understand what the IRS likes to question. While most of the ATGs deal with business taxation, reviewing the topics can be useful in understanding where audit risks are most likely and what you can do to prepare yourself in case of an audit.

Common ATG Topics: * Architects * Art Galleries * Attorneys * Business Consultants * Capitalization versus Repairs * Cash-Based Business * Child Care Provider * Construction * Research Credits * Farmers * Hobbies (activity not engaged for profit) * Lawsuit Awards and Settlements * Ministers * Partnerships * Retail * Veterinary Medicine * Wineries and Vineyards

If you have one or more business activities that touch any of these topics, it makes sense to understand how IRS auditors are trained. By reviewing the specific ATG, you can understand the process of an IRS audit and gain some insight into how the auditor will proceed.

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Both your individual tax return AND first quarter estimated tax payment are due. Here is what you need to know.

First quarter due date: Monday, April 15, 2024

The estimated tax payment rule

You are required to withhold or prepay throughout the 2024 tax year at least 90 percent of your 2024 total tax bill, or 100 percent of your 2023 federal tax bill.* A quick look at your 2023 tax return and a projection of your 2024 tax obligation can help determine if a quarterly payment might be necessary in addition to what is being withheld from any paychecks.

Things to consider

• Underpayment penalty. If you do not have proper tax withholdings throughout the year, you could be subject to an underpayment penalty. A quick payment at the end of the year may not be enough to avoid the penalty.
• W-2 withholdings have special treatment. A W-2 withholding payment can be made at any time during the year and be treated as if it was made throughout the year. If you do not have enough to pay the estimated quarterly payment now, you may be able to adjust your W-2 wage withholdings to make up the difference.
• Self-employed. In addition to paying income taxes, self-employed workers must also pay Social Security and Medicare taxes. Creating and funding a savings account for this purpose can help avoid the cash flow hit each quarter to pay your estimated taxes.
• Use your refund. An alternative option to pay your first quarter estimated tax is to apply some or all of your tax refund.
• Pay more in the first quarter. By paying a little more than necessary in the first quarter, you can be in a position to adjust future estimated tax payments downward later this year if your tax obligation trends lower than you originally thought.
• Not sure if you need to make a quarterly payment? Take a quick look at your tax return to see the amount of tax you paid last year. Divide this amount by the number of paychecks you receive each year and compare to your most recent paycheck. Is enough being withheld from each paycheck? Talk to your employer if you decide you need to adjust your withholdings to cover next year’s tax bill.

*If your income is more than $150,000 ($75,000 if married filing separate), you must pay 110 percent of your 2023 tax obligation to avoid an underpayment penalty on your 2024 tax return.