Best Time to Claim Social Security Benefits

The age that you begin Social Security benefits has a huge impact on the size of your monthly benefit payments. By the age of 62, you will be eligible to claim Social Security benefits. However, you will be eligible for 100% of your retirement benefits at the age of 65. Your monthly benefit amount will be permanently reduced if you start any earlier, and permanently increased if you wait up until age 70. For instance, if you begin your retirement benefits at age 70, the monthly benefit will be 32% larger than if you began at full retirement age.

What is the best age to start your retirement benefits?

Are you still working? Some people, especially construction workers and other physical laborers, are less able to handle work at 62, even though they don't qualify for disability. They may be good candidates for early retirement.

However, if you're still able-bodied and interested in working, you might want to avoid claiming early retirement benefits. If you're earning a high salary, you'll miss the opportunity to boost your Social Security payment amount.

How's your health? If you're convinced - either by genetics, research, or the amount of time you spend in doctors' offices -- that you'll have a shorter lifespan than your peers, it doesn't make much sense to delay your retirement benefits although your benefit payments get permanently reduced.

What's your break-even point? If you had a good idea of when you were to die, you could compare your total benefit payments under all three common scenarios - age 62, full retirement age, and age 70. Financial planners prefer to calculate your break-even point -- that's the age at which two of your total lifetime benefit amounts become equal to each other.

If you expect to live longer than average, it would be smart to delay the start of benefits up to age 70 if possible, so that a larger monthly benefit is received for the rest of your life. That extra money might well be needed in your later years, particularly if you are running low on other retirement resources.

What will you do with the money?  If you plan to invest the money, your investments would need to earn more than 7% annually to equal what you would make by delaying benefits until full retirement age.

Do you have dependents? Your family's dependents and survivors’ benefits may be reduced if you claim early retirement benefits.

Deciding when to start your Social Security benefits can be complex. To learn more about retirement age options and retirement planning, please email info@gkmtax.com.

Pricing, Billing & Collection - What Accounting Firms Can Do To Run Their Businesses More Efficiently and Effectively

Accounting firms provide priceless advice to businesses. However, they often struggle to effectively run their own businesses due to inefficiencies in pricing, billing & collections. Below par performance in these areas can lead to a troubled cash flow, cuts on the bottom line and dissatisfaction among the firm’s personnel.
 How can an accounting firm improve on its billing and collections practices?
Evaluate initial client interview procedures: Formalize your client approval process.
Do not discount your pricing to gain work: Your service value is communicated by all that you do including the pricing. If you undervalue your services, you are selling yourself short.
Try to get retainers from new clients: Three months of fees is an acceptable amount to ask for at the start; after that the retainer can be replenished for ongoing work.
Adopt a centralized approach towards client engagement letters, fee schedules and billing: Your firm's administrator sending out all client engagement letters, fee schedules & billing will ensure consistency in the language and billing and collections practices.
Ensure that bills are clear and brief: With timely bills that shows clearly the products delivered, clients will be more inclined to pay their bill promptly.  This practice increases awareness of the value of your service.  For large unpaid bills, it would be best to ask for the payment in three equal installments via credit card. This allows the client to earn credit card reward points. Communicate with clients regularly. Do not call only when seeking to collect a late payment.
Give everyone who discusses billing and collections access to client spreadsheets: Allow all stakeholders access to client spreadsheets so that detailed information about the client is readily available, allowing for tracking trends and also spot clients who used to settle bills regularly earlier, but stopped doing that now.
A major part of establishing and executing an effective billing process is to levy the right fees, send in bills on time and handle collections professionally and courteously. Accountants also have to communicate their value such that the clients realize the worthiness of the service received. Failure to improve an ineffective billing process hurts the firm’s profits, cash flow and morale. Don’t let this happen to your accounting firm. After all, happiness is a positive cash flow!

Repatriation of home sale funds from India - Article in The Hindu

We live in an age where many youngsters go abroad for higher studies or job and have already settled down in other countries. Many of them are citizens of another country and have only family/ancestral ties to their homeland – India.

The other side of this situation is that the aging parents who are still in India must fend for themselves and find it easier to live in gated communities or in senior citizen homes to have easier access to immediate medical care, companionship, safety and help with errands.

As a result, many of the older generation are selling off independent homes and moving into such gated communities/senior homes. It goes without saying that a substantial portion of sale proceeds is willed to their Non-resident Indians (NRI) children. 

Sometimes, ancestral property is also received by NRIs by way of partition deeds or gifts from parents or grandparents and they prefer to sell the property and repatriate the funds.

Most NRIs who have settled down abroad would like to repatriate these funds from sale proceeds. It may be of use for the education of their children or to buy a property in their adopted homeland.

Additionally, with most countries tightening up on foreign investments and related reporting, it has become a hassle to maintain accounts and property here and then report the same to tax authorities in both countries.

Residents of the U.S. especially face this dilemma as they are required to report every year details of their foreign financials assets held in excess of certain prescribed dollar limits.

Thus, it is essential to be aware of the formalities involved in repatriating funds abroad from India as such repatriation leads to movement of forex and is governed by RBI and FEMA regulations.

General permission is available to the NRIs or Person of Indian Origins to repatriate the sale proceeds of immovable property inherited from a person resident in India.

The NRIs/PIO may repatriate an amount not exceeding USD one million, per financial year, on production of documentary evidence in support of acquisition / inheritance of assets, an undertaking by the remitter and certificate by a Chartered Accountant in the formats prescribed by the Central Board of Direct Taxes.

The sale proceeds of immovable property acquired by way of gift/inheritance should be credited to NRO account only. From the balance in the NRO account, NRI/PIO may remit up to USD one million, per financial year, subject to the satisfaction of Authorized Dealer and payment of applicable taxes.

The capital gains tax is also payable in their country of residence though they can avail credit for the taxes paid in India.

Breaking ties with the homeland is never an easy task, no matter how green the grass may be on the other side. Questions of inheritance, sale and repatriation of funds only add to the confusion.

G. Karthikeyan,

Coimbatore-based

Chartered Accountant.

Street-smart shopkeeper!

Business Talk!

A shopkeeper was dismayed when a brand new business much like his own opened up next door and erected a huge sign which read 'BEST DEALS.' He was horrified when another competitor opened up on his right, and announced its arrival with an even larger sign, reading 'LOWEST PRICES.' 

The shopkeeper panicked, until he got an idea. He put the biggest sign of all over his own shop. It read: 'MAIN ENTRANCE' 

Home loan, tax & necessity - Article in The Hindu Habitat dtd 04/27/2013

Home. No matter who we are or where we are, the word immediately brings to mind recollections of childhood, school, homework, parties and quite a few other memories. A lot of factors go into the decision making process which ends in the purchase of a house. Considering that it is perhaps one of the biggest personal financial investments that any person would make during their lifetime, the decision is not easy to make.

India may be a vast country but most people prefer to stick close to their roots. Language and culture barriers ensure long distance migration is almost never considered. In countries such the U.S., people easily migrate from the east coast to the west because language and culture barriers are almost non-existent. Add to this the fact that the style of living, resources available etc also remain uniform throughout the country. This is also the reason why real estate prices do not vary much in the U.S. In India, however, the real estate market is booming and land prices are at an all-time high. The global market is currently in recession and the effects are rippling and spilling over into the Indian economy as well, slowly but surely. The government has also provided some tax sops to make home buying an attractive proposition even during a recessionary phase.

The Finance Bill 2013 has an additional proviso for first time home buyers (provided the property is self-occupied) in the form of section 80 EE of the Indian Income Tax Act. The concept of first-time homebuyer tax benefits is borrowed from the U.S. This section provides the following:

1. Loan amount should be less than or equal to Rs. 25 kakh while the value of the property should be less than or equal to Rs. 40 lakh.

2. The loan should be disbursed during the current financial year (01-04-2013 to 31-03-2014).

If the above conditions are satisfied, the said buyer may take an additional deduction of Rs. 1 lakh for interest paid on loan under section 80EE. In case the buyer is not able to claim the whole benefit of deducting Rs. 1 lakh under section 80 EE, he also has the option of carrying forward the balance interest for a claim in the succeeding financial year. This is in addition to the standard home loan interest deduction allowed of Rs. 1.50 lakh under section 24(b) if the house is self-occupied and there is no upper limit of deduction of interest in case of the property let out.

G. Karthikeyan,

Chartered Accountant, Coimbatore.

http://www.thehindu.com/todays-paper/tp-features/tp-propertyplus/home-loan-tax-and-necessity/article4659502.ece

Avoiding ID theft during tax season

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Come tax season, there is a heightened threat to financial safety due to identity theft. According to the IRS, identity thieves use a taxpayer's identity to fraudulently file a tax return and claim a refund. Legitimate taxpayers find out that something is wrong only when they go to file their return. Over the last decade, identity theft topped the annual list of consumer complaints received by the Federal Trade Commission.  This number is on the rise because an increasing number of people choose to e-file, but don't take steps necessary to protect their information. 

All of us have at some point or other received emails that talk about a "change in the tax laws" or an "IRS audit". Victims will either be directed to a fake website that will ask for personal and banking information or instructed to download a file (usually a .pdf document) that  will outline the latest changes. The document will contain malware, such as keyloggers, that infects your PC.

Be wary of phone calls from thieves posing as IRS representatives asking to verify information that includes citizenship status, personal data or banking information prior to a tax refund being sent. They may give a reason for verification that states the victim was sent a previous check that no one has cashed.There may also be emails promising refunds that may or may not be legally forthcoming. Once again, the victim will be directed to a fake website that will ask for personal and banking information.

Protecting yourself from tax season ID theft scams are similar to those methods that can protect you all year long. It should include protecting your computer, having the latest anti-spyware and anti-virus software installed and updated.  Files should also be password protected and the wireless connection must be secure.

When you engage the services of a tax preparer, know who you're hiring. There are many fake tax preparation companies that spring up during tax season with intent to steal tax refunds. Check out the credentials of a tax preparation service prior to giving them your personal data.

Forward suspicious IRS emails to phishing@irs.gov. For suspicious phone calls, call 1-800-829-1040 and inquire about the call that you just received.Once you receive a refund, the IRS will not need any additional information from you. Also, normal tax preparation forms ask for all the needed information to process a tax return. You are not required to fill out additional forms or provide additional information in order to release a refund.Use secure paper mail practices when communicating with the IRS. Never send out personal information through a regular public mailbox or from your home mailbox – use your local Post Office.

Remember to file early.The earlier you file your taxes, the less likely you are to be a victim of tax return identity theft. By waiting until the last minute, thieves could have weeks or months to get away with identity theft before you are even aware of it.

Tax season can be stressful enough without the added problems connected with identity theft. Be diligent and aware of potential risks and enjoy your refund when the tax season is over.To learn more, please email info@gkmtax.com.

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How the Healthcare Act will shape up in 2013?

                                     

The Affordable Care Act is a far-reaching topic, changing the way healthcare is accessed and delivered in the US. While many aspects of the Affordable Care Act do not roll out until 2014, the tax component has gone into effect, and taxpayers need to be prepared for the tax bill that accompanies the act.

Medicare Payroll Tax - Thosewho make more than $200,000 annually or any married couple who makes more than $250,000 annually will pay a 2.35% Medicare payroll tax, up from 1.45%. This tax will largely affect taxpayers in high-income households.

Unearned Income Tax -. A surtax of 3.8% will be imposed on unearned income, such as taxable capital gains, dividends, rents, royalties and interest for single taxpayers who make more than $200,000 and married couples who make more than $250,000.

More Limitations on Flexible Spending Accounts - Flexible spending accounts are used to put money away on a pretax basis for eligible medical expenses. In 2013, there is a $2,500 limit to the amount of money you can put in a flexible spending account. The limit for dependent care remains at $5,000.

Cadillac Health Insurance Plan Tax – Asteep 40% penalty for being enrolled in a health insurance policy that costs $10,200 or more for a single member or $27,500 or more for a family will be imposed in 2018. This tax is causing many health insurance carriers to lower costs and many citizens to find a lower-cost health insurance policy.

On the other hand, some Medicare benefits are being cut, and some illnesses or surgeries previously considered appropriate for an overnight hospital stay are now considered outpatient, resulting in increased billings. If you typically claim unreimbursed medical expenses on your tax return: You may not get to do so now — they must be 10 percent of your income, up from 7.5 percent in the past.

The Affordable Care Act is long reaching and affects everyone regardless of what tax bracket you fall into. This legislation is all set to bring in sweeping changes to the US healthcare system, providing better care for patients and ensuring the long-term viability of the industry by embracing the reforms.