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newsletter1.ChoosingthewronglingstatusChoos-ingthecorrectlingstatusisimportantbe-causetaxbracketsdeductionsandcreditsvaryforeachstatus.Youmayfarebetterlingseparatelyevenifyouremarriedsomakesuretocalculatebothscenariosbeforechoosingastatus.YoushouldalsoconsiderlingasHeadofHouseholdifyouresingleandhaveadependentlivingwithyou.YourlingstatusisbasedonyourstatusasofDec.31ofthelingyear.2.NotclaimingallavailabledeductionsandcreditsYoucouldendupwithasmall-errefundoralargertaxliabilitythanneces-saryifyoufailtotakeadvantageofthetaxbreaksavailabletoyou.Doyourresearchandconsidergettinghelpfromataxpre-parerorsoftwaretomakesureyourenotmissinganythinginyourreturn.3.NotclaimingalldependentsYouprob-ablywontforgettoclaimyourchildrenasdependentsbutdidyouknowyoucouldclaimyourparentstooAnyoneyousup-portnanciallyadultchildrenelderlyparentsorotherrelativesmorethantheysupportthemselvesmaybeclaimedasaForfurtherinformationonResourceBankTrustServicespleasecall815748-1616.Filingtaxescanbeatediousprocess.Ifyouplantodoityourselfeitheronlineorwithanold-fashionedpenandpaperitcanbealltooeasytomakemistakes.Ifyouarentfamiliarenoughwiththetaxcodetotakeadvantagesofavailabletaxbreaksyoucouldlosemoney.Clericalerrorsandmathmistakescanleadtotaxauditslatefeesandevenjailtimefortaxfraud.Avoidthefollowingcom-monmistakestoensurethatyougetthroughtaxseasonunscathed.12CommonTaxErrorstoAvoiddependentaslongastheymeettherequire-ments.Evenifyourparentsdontlivewithyouyoumaybeabletoclaimthem.4.ForgettingtoclaimcarryoveritemsSometaxcreditsmustbetakenoverthecourseofseveralyearsiftheyexceedcer-tainthresholds.Commonexamplesincludecharitabledonationscapitallossesandbusinesswrite-offs.Ifyouwerentabletoclaimtheentirecreditinyearspastmakesureyoureclaimingitthisyear.5.NeglectingtocalculatetheAMTTheAlternativeMinimumTaxisaparalleltaxcodewithitsownsetofrules.TaxpayersareexpectedtocalculatetheirtaxburdentwowaysonceundertheregulartaxcodeandonceundertheAMTsrules.Which-everoutcomeishigheristhetaxtheyowe.ManytaxpayersdontcalculatetheirtaxesundertheAMTbecausetheyassumetheyarenteligiblebutthenumberofpeoplerequiredtoleundertheAMTisincreas-ing.IfyoupickthewrongtaxcodetheIRScouldcomelookingfortheremainingbal-ance.PaulNeumannDirectorofTrustServicesSandraSwansonSeniorTrustOfcerApril2014 6.ClaimingthewrongcreditsanddeductionsMakesureyouactuallyqualifyforthecreditsanddeductionsyouclaim.IftheIRScatchesonyoucouldfaceataxauditrecalculationofyourtaxburdenorinextremecasesjailtimefortaxeva-sion.7.NotincludingallsourcesofincomeIfyouworkedatmorethanonejobduringtheyearyoushouldhaveaFormW-2foreachjob.YoushouldalsoincludeapplicableForm1099forotherin-comesources.Missingformsorleavingoutin-comecanleadtotaxauditsoradelayedrefund.Ifyouinadvertentlyleavesomethingoutofyourre-turnyoucanleaForm1040XAmendedReturn.8.MatherrorsItseasytomakemathmistakeswhenyouredoingyourtaxesbyhandandippingbackandforthbetweenforms.Double-checkyourmathbeforelingbecauseamistakecouldloseyoumoneyorgetyouintroublewiththeIRS.9.DirectdepositmistakesYoucannowelecttoreceiveyourtaxrefundsviadirectdeposittoyourcheckingorsavingaccounts.Thiselectioncanhelpyousavemoneyandspeedtheprocessalongbutitsalsoanotheropportunityforerror.IfyouinputthewrongroutingnumberyourreturncouldgotosomeoneelseorbesentbacktotheIRS.10.Forgettingtoincludeyoursocialsecuritynum-berYoumustincludeyourcorrectsocialsecuritynumberinordertoleareturn.Failingtodosocanholdupyourreturnandsubjectyoutolatelingfees.Youmustalsoincludeyourspousessocialsecuritynumberifyoulejointlyaswellasthenumbersofanydependentsyouclaim.11.ForgettingtosignanddateyourreturnYourreturnisnotvalidifyoudontsignanddateit.Failingtodosocouldalsosubjectyoutolatefeesanddelayedrefunds.ToremedythistheIRSwillsendoutasignaturecardforyoutosign.Speeduptheprocessbydouble-checkingthatyoursigna-turesarepresent.12.NotincludingyourpaymentIfyouowetheIRSmoneymakesuretoincludewhatyouowewhenyoule.Ifyouforgetyoumayendupow-inginterestandlatefeeseventhoughyouhadthereturnledontime.AdvancedSocialSecurityStrategiesTheOldAgeSurvivorsandDisabilityInsuranceOASDIProgramcom-monlyknownasSocialSecurityisthelargestandmostwidelyusedinsti-tutionintheU.S.government.InonewayoranotheritaffectsalmosteveryU.S.citizenbutmostarefamiliarwithitbecauseoftheincomeitprovidestoretirees.AswithanygovernmentprogramSocialSecurityhasnumerousrulesandinstructionsforreceivingbenets.Itisimportantforindividualsnearingre-tirementtounderstandtheiroptionsforSocialSecuritypaymentssotheycanmaximizethemoneythegovernmentreturnstothem.TheMechanicsRetirementincomefromSocialSecurityisasimpleprocess.ThegovernmentleviestaxesoncurrentemployeesandplacesthemoneyintotheOASDITrust.Mostofthefundsaredistributedimmediatelytocurrentretireesbutanysurplusesareleftinthetrustforfutureuse.ThesizeofeachpersonsSocialSecuritybenetisderivedfromtheaverageincomeofhisorher35highestincomeyears.Itismeanttosupplementretirementincomenotbearetirementplanallonitsown.FullRetirementAgeThemostimportantpieceofSocialSecurityplanningisunderstandingfullretirementageFRA.ApersonsFRAistheagewhentheycanreceivetheirbenetpaymentsatanunreducedrate.Forpeoplebornin1954orearliertheFRAisage66forthosebornafter1954theFRAis67.Technicallythosebornfrom1955-1959haveanFRAof66andsomeextramonthshowevertokeepthingssimplethiscanbethoughtofasbeingage67.Whileindividu-alscanchoosetobeginreceivingbenetsasearlyasage62theirmonthlypaymentratewillbelessenediftheydonotwaituntiltheirFRA.SimilarlyifapersondefersbenetsbeyondhisorherFRA70isthemaximumageofdefermentheorshewillreceivelargermonthlypayments.Atpresentap-proximatelytwo-thirdsofretireesbegintakingbenetsatage62orshortlythereafter.AgeFactorsTheagewhenretireesstarttoreceivebenetsaffectsmonthlyamountsbe-causetheSocialSecurityAdministrationSSAcalculatespaymentusingaveragelifeexpectancies.Apersonwhotakesbenetsearlymaygetlowerpaymentsbutshouldreceivethemoveralongerperiod.Likewisewaitingforbenetsuntilage70willproducehigherpaymentsbuttheretireewillhavelesstimetoreceivethem.Eventuallythecumulativetotalsofbenetsequalout.IfretireeslivebeyondthistippingpointadeferralonbenetscanprovetobeahugeadvantagehoweveriftheydonotlivethatlongtheydidnotmakeasmuchuseofSo-cialSecurityastheycouldhave.Typicallythetippingpointissomewhereinapersonsearlyeighties. -continuedonpage4Themostfundamentalstrategyisdecidingwhethersmallerearlierpaymentswillbemoreusefulthanlaterlargerpayments.Forthosewithserioushealthissuestakingbenetsatage62maybeanobviouschoiceforgettingthemostoutoftheprogramandassistingwithhighmedicalcosts.Ontheotherendretireesingoodhealthwithsufcientresourcesmaywanttodelaybenetsaslongaspossible.Approximatelyoneoutofeveryfourpeoplewhomakeittoage65willmakeittoage90.Ifsuchlongevityseemspossibleforapersonpatientlywaitingforthelargestpossiblepaymentscanendupbeingagreathelpwhenotherretirementassetsbegintodwindle.InadditiontodelayingbenetsapersoncanincreasetheirSocialSecurityincomebycontinuingtowork.SinceSocialSecurityisdeter-minedfromaworkerstop35incomeearningyearsstickingaroundatajobcanhelpapersonraisehisorheraverageincomeespeciallyifheorshehaslessthan35yearsofincomeonrecord.MarriageandSocialSecurityMarriagecanbeanexcellenttoolforextractingmorebenetsfromSocialSecurity.Severalusefulstrategiescanbeaccessedbecausecoupleshavespousalbenetsjointsurvivabilityandtheabilitytotransfermonthlypayments.UsingbothincomesandbenetclaimscarefullyacouplesretirementplanscangainsignicantvaluefromSocialSecurity.ThemostcommonlyusedpartofacouplesSocialSecuritybenetsisthatasurvivingspousecanexchangehisorherbenetforthedeceasedsbenet.ThisoftenencouragesthehigherearningspousetodelaybenetsuntilheorshehasreachedFRAorage70.Thatwaynomatterwhichspousediesrstthesurvivorwillbeguaranteedthehighestpossiblepayoutrate.TheothermajorcomponentofSocialSecurityplanningforcouplesistheabilityforapersontoelectabenetequaltohalfofhisorherspousesFRAbenet.Knownasthespousalbenetthiscanbehelpfultocoupleswhenthereisasignicantdisparityinaverageincomes.Therearetwoqualierstospousalbenetsthough1spouseAmustinitiatehisorherbenetsbeforespouseBcanclaimthespousalbenetand2ifspouseBtakesspousalbenetsbeforereachingFRAheorshewillgetlessthanhalfofspouseAsbenetandwillautomaticallyactivatehisorherpersonalbenetsreceivingwhicheverishigher.CouplesStrategiesCouplescantakeadvantageofSocialSecuritytogainextramoneyiftheyorga-nizetheiruseofspousalbenets.Anopportunityiscreatedbecauseretireesareallowedtoswitchfromspousalbenetstotheirpersonalbenetslateron.Theprocesscangetverytrickyandretireesshouldalwaysseekprofessionaladvicewhenplanningthebestwaytoproceed.SocialSecurityallowsretireeswhohavereachedtheirFRAtosuspendactivebenets.Oncesuspendedcreditsbuildupandincreasethevalueofmonthlypay-mentsforwhenthebenetsresumedistribution.Thismeansapersonisabletoactivatehisorherpersonalbenetsallowhisorherspousetoactivatethespousalbenetandthenimmediatelysuspendthepersonalbenetsuntilage70where-upontheywillpayatahigherrate.Thingsgetinterestingwhenthepersontakingspousalbenetsgetsolder.ProvidedheorshewaiteduntilhisorherFRAtotakeoutthespousalbenetsthespousewillbeabletoswitchtohisorherpersonalbenetswheneverdesired.Unlessthereisasignicantdifferencebetweenearningsthespousewillwanttoswitchovertopersonalbenetsatage70.Thisstrategyissignicantbecauseitallowsbothspousestogetthemaximumpersonalpaymentsatage70whilealsoallowingonespousetoreceivespousalbenetsforafewyearsprior.Thisstrategyhasnoimpactonpersonalbenetsandcanbethoughtofasawaytogetfreemoneyfromsocialsecurity.Forbothspousestoreceivethemaximumbenetatage70itisextremelyimportantthatneitherspouseactivatebenetsbeforetheirFRAs.AspousewhoactivatespersonalbenetsbeforehisorherFRAwillnotbeabletosuspendthemuntilheorshereachesFRAatwhichpointsomeofthedefermentcredithasbeenlost.MoreimportantlyifthespouselingforspousalbenetstriestoclaimthembeforehisorherFRASocialSecuritywillautomaticallyenrollhimorherinbothpersonalandspousalbenetsdistributingwhicheverhasthehighervalueandruiningthestrategy. Theinformationpresentedhereisnotspecictoanyindividualspersonalcircumstances.Totheextentthatthismaterialconcernstaxmattersitisnotintendedorwrittentobeusedandcannotbeusedbyataxpayerforthepurposeofavoidingpenaltiesthatmaybeimposedbylaw.Eachtaxpayershouldseekindependentadvicefromataxprofessionalbasedonhisorherindividualcircumstances.Thesematerialsareprovidedforgeneralinformationandeducationalpurposesbaseduponpubliclyavailableinformationfromsourcesbelievedtobereliablewecannotassuretheaccuracyorcompletenessofthesematerials.Theinformationinthesematerialsmaychangeatanytimeandwithoutnotice.ResourceBankdoesnotprovidetaxorlegaladvice.Copyright2014.ZywaveLPallrightsreserved.SurvivorsAsmentionedhavingthehigherwageearnerinamarriagewaituntilage70totakebenetscansecurethemaximumbenetamountforeitherspouseshouldonesurvivetheother.Howeverinsomecasesofanearlierdeaththesurvivorsbenetcanbeusedtoasignicantadvantage.AsurvivorsadvantagewithSocialSecuritycomesfromthesurvivorsbenetbeingtreatedseparatelyfromhisorherpersonalbenet.AsurvivorisentitledtothedeceasedsfullbenetathisorherFRAortakereducedbenetsstartingasearlyasage60.Asurvivorisalsoallowedtoswitchfromsurvivorbenetstopersonalbenetswheneverheorshewouldlike.Thismeansthatapersoncanbeginreducedsurvivorbenetsatage60andthenswitchtopersonalbenetswhenthepayoutrateishigheratFRAorage70.Alternativelyaspousecanwithdrawhisorherpersonalbenetsatage62andthenswitchtothefullsurvivorbenetatFRA.PlanningCarefullyBecausetheSSApubliclyliststhemethodtheyusetocalculatebenetsitisveryeasyforanyonetoestimatetheirSocialSecurityincome.Whetherplanningasanindividualorasacoupleyoucanquicklycheckhowyourcurrentretirementplansaffectyourbenetsanddecidetheapproachthatworksbestforyou.WhateveryourstrategywithSocialSecurityitisessentialtodoallyourplanningwiththehelpoftrustednancialadvice.ContactPaulNeumanntoreviewyourcurrentretirementplansandgettheguidanceyouneedtoaccessallthebenetstheprogramoffersyou.