social security

THE TAX ATTIC with Jerry Coon

July 19, 2012 // 0 Comments

Affordable Care Act, Social Security In a 5-4 split decision, the Supreme Court ruled that the Patient Protection and Affordable Care Act was constitutional. The Court ruled that Congress has the power and authority to create and pass a law that taxes people for not complying with the law. In this case, if a person doesn’t sign up for health insurance, there will be a penalty in the form of a tax to be paid as part of the person’s tax return for failing to comply. Interesting concept: tax for noncompliance. That concept all by itself might keep Action Tax Service going well into the foreseeable future. Now that even the Supreme Court agrees that Congress can use the tax return to get us to do something, the possibilities are absolutely endless. Of course, if Congress gets too carried away with this tax for noncompliance, they will still have to answer to us, their ultimate bosses. For example, it might be hard to vote for an incumbent who votes to pass a law that would tax anyone who doesn’t take their one-a-day vitamin or who doesn’t walk 500 steps per day or who drives a car more than 100 miles a day unless 80 of those miles are driven in a hybrid. Like I said, the possibilities are endless. I was hoping to retire sometime in the next 20 or 30 years, but now, with this development, I’m not sure I will make it. Just think of all of those people who will need help on their tax returns to calculate those noncompliance taxes. Americans are an independent lot and a certain number of people will go right just because most everyone else is going left and especially so if someone at the head of the line is demanding that everyone go left. The defenders of the law, the administration, had hoped that the law would be upheld as a manner of regulating commerce under the Commerce Clause. The tax argument was more or less an add-on argument. I believe the theory is to throw as many things at the wall as possible and perhaps one of them will stick. It worked. The Supreme Court ruled against the Commerce Clause argument and said that Congress […]

THE TAX ATTIC with Jerry Coon

July 12, 2012 // 0 Comments

Myths involving Social Security Last week, two significant developments occurred that affect Rockford residents. First, the Environmental Protection Agency (EPA) issued its Preliminary Assessment Recommendation for the Wolverine Worldwide former tannery site downtown. The report concluded that the Michigan Department of Environmental Quality (MDEQ) and Wolverine Worldwide (WWW) can work together on “further site investigation and remediation activities.” The EPA will receive a report at least twice a year detailing the MDEQ and WWW activities. While the site does not warrant being named a Super Fund site under the Comprehensive Environmental Response, Compensation and Liability Act at this time, it does warrant further investigation and testing and will be designated as an “Other Cleanup Activity” site. The EPA found that WWW has shown good faith during this entire process and will develop plans in the future with the input and approval of the MDEQ. This is great news for WWW, the City of Rockford, and the residents of the surrounding areas who visit downtown Rockford and enjoy the Rogue River. Stand by for what happens next. That has not been defined as yet, but it has to be better than the site being named a Super Fund site. “Other Cleanup Activity” has a more settling sound to it than Super Fund. The second development occurred last week when the Supreme Court upheld the constitutionality of the Patient Protection and Affordable Care Act or as it is more commonly known as “Obamacare.” I will discuss the significance of the landmark decision next week. There are a number of myths or misconceptions associated with the Social Security system as it stands right now. We are a society of wanting to get things done right now. “Instant gratification” I believe is the term used to describe our impatience with taking a long-term approach to many things. Unfortunately, instant gratification and Social Security do not work together. Accruing benefits is a long-term proposition. A few weeks ago I went over the formula used to calculate a monthly benefit. The Social Security Administration (SSA) uses 35 years of work history in that calculation. In light of the SSA using 35 years, I think one of the biggest myths or misconceptions is that a monthly SSA benefit can be significantly increased […]

THE TAX ATTIC with Jerry Coon

July 5, 2012 // 0 Comments

History of Social Security Three weeks ago, my youngest daughter, Kimberly, received her master’s degree from the Department of Writing, Rhetoric and Discourse from Chicago’s DePaul University. At the department’s awards banquet, Dr. Deborah Brandt, professor emerita of English at the University of Wisconsin-Madison, gave the keynote speech, titled “Taking Writing Seriously.” DePaul couldn’t have picked a more appropriate speaker or topic for a group of writing, rhetoric and discourse journalism students who take writing very seriously. The gist of her speech was that writing has traditionally taken a back seat to reading in the public’s battle to obtain literacy. Dr. Brandt espoused the theory that while teaching students to read can open the student’s world to reading other people’s written words, teaching students to write can tap into the student’s inner world. I’m paraphrasing here since I was sitting in an auditorium without the ability to take notes, but she basically asked a question in the terms of “Is it more valuable to be able to read what others think or is it more valuable to be able to write what others may read?” That’s a darned good question. Are we putting too much emphasis on reading and not enough emphasis on writing? I have read that some schools with the advent of computers are no longer teaching penmanship. Will this then de-emphasize writing even more? I believe that literacy is important and my definition of literacy is being able to read and to write. Throughout history, being able to wield the influence of the written word has proven to be almost as valuable as wielding a sword. Of course, it’s only valuable if the people you are trying to influence can read and understand what you are writing. Perhaps this is one of those chicken and egg things. Neither is less or more valuable than the other; a literate person can do both. Dr. Brandt would agree with that, I am quite sure. This is third article on the Social Security Administration (SSA). Let’s talk about some SSA history this week. Prior to the implementation of the Social Security Act on January 1, 1937, there were no federal programs to help the elderly. The nation was still in the throes of the Great […]

THE TAX ATTIC with Jerry Coon

August 10, 2011 // 0 Comments

To draw or not to draw  Baby boomers and when to begin drawing Social Security benefits; to draw or not to draw—it’s a prime time discussion topic for millions of baby boomers. To draw benefits at the age of 62 or wait to draw until reaching full retirement age—calculating a break-even point at which it would pay to wait would help in making that decision, but there are many variables that go into the calculation. Some of those variables are numerical and calculable. Other variables are not so black and white. Let’s look at the numbers-related variables first. The penalty for drawing early is the largest factor and is a good place at which to start. For taxpayers with a full retirement age of 65, the penalty for drawing at age 62 is a 20% reduction in benefits. For taxpayers with a full retirement age of 66, the penalty is a 25% reduction and for those with a full retirement age of 67, the penalty is a 30% reduction. For example, a taxpayer born in 1952 has a full retirement age of 66 and would incur a 25% penalty for drawing at age 62. The taxpayer’s benefit at age 66 would be $1,500. The reduced benefit at age 62 would be $1,125. At age 77 and 11 months, the taxpayer would have drawn $216,000 using either monthly benefit amount, so that is the black-and-white break-even point. If the taxpayer lives beyond age 77 and 11 months, it would have paid him to wait until drawing because he could then be drawing $1,500 instead of $1,125. However, if he leaves this world sooner than 77 and 11 months, he would have benefited by drawing early. A large number of these calculators are available on the Internet. Google “Social Security breakeven point” and you will have a variety of choices. There are other factors that are harder to put a finger on. For example, Social Security benefits are increased by a cost-of-living allowance (COLA). The COLA for 2010 and 2011 was 0.00%, but for 2009 it was 5.8%. What will that factor be going forward? Your guess is as good as any of the experts, but I think it’s a foregone conclusion that it won’t be 0.00% […]

The Tax Attic with Jerry Coon

June 17, 2010 // 0 Comments

How can the Social Security system be fixed?     Why does it need to be fixed? Without some adjustments or fixes, the system will be totally bankrupt in about 2037, even though it has a two trillion dollar surplus at this moment in time. If no adjustments are made, when the system goes bankrupt, it will be run on a money-in, money-out basis. According to projections, there will only be enough money coming in to support benefits going out at a 75% level, i.e. benefits will be immediately reduced by 25%. There have been a number of reports issued with ideas of what can be done to put off reaching this 2037 bankruptcy date. According to the U.S. Department of the Treasury’s paper titled “Social Security Reform: The Nature of the Problem,” “Social Security can be made permanently solvent only by reducing the present value of scheduled benefits and/or to increasing the present value of scheduled tax benefits… only these changes can restore solvency permanently.” Translation: Cut benefits and/or raise taxes. The present value of scheduled benefits is calculated to be $13.6 trillion dollars. This figure can be reduced in a number of ways. The bottom line is you and I would draw less in benefits over our retirement years or will pay more in taxes. First, benefits can be cut by 20%. According to the experts, cutting benefits by 20% immediately would put the system on a firm footing for at least the next 75 years and perhaps permanently. No other changes would have to be made. Second, barring this major change, the age at which retirement benefits can be accessed can be raised. Currently, the maximum full retirement age is 65 for those born in 1937 or earlier, increasing to age 67 for those born in 1960 or later. Most everyone, however, can begin drawing at age 62, albeit with up to a 30% reduction in benefits. When President Roosevelt initiated Social Security, benefits could be accessed only when reaching age 65. Back then, coincidentally, the life expectancy was 65 so the system was stacked to not pay out many benefits. There was no drawing at age 62, even with a reduced benefit. Theoretically, if the age 65 life expectancy had been […]

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