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Economic Times
3 minutes ago
- Business
- Economic Times
What really happens to your social security check after your spouse dies — here's the shocking truth
Social Security survivor benefits can feel confusing at the hardest time of life. When a spouse passes away, many retirees are left asking the same urgent questions about income, taxes, and what support they can really count on. Here are the most common questions people face in this situation. When a spouse passes away, the grief is immediate—but the financial ripple effects can be long-lasting. For millions of American retirees, Social Security isn't just a monthly deposit, it's the backbone of household income. Understanding exactly how survivor benefits work can make the difference between financial stability and a sudden, painful shortfall. When a spouse dies, the grief is overwhelming — and then, just as the fog settles, financial reality strikes. One of the most pressing questions for retirees is: What happens to our Social Security benefits now? The answer isn't simple, but it's critical for every couple to understand long before tragedy strikes. Social Security survivor benefits aren't automatic. They follow a detailed set of rules. According to the Social Security Administration (SSA), a surviving spouse may be eligible if: They are 60 or older (or 50 if disabled). (or 50 if disabled). They are caring for a child under 16 or a disabled child. or a disabled child. The marriage lasted at least nine months, with some exceptions for accidental or military deaths. Divorced spouses may also qualify if the marriage lasted at least 10 years. Remarriage can complicate things: if you remarry before age 60, you generally lose eligibility, but remarriage after 60 (or 50 if disabled) does not disqualify you. ALSO READ: IRS reportedly says $1,390 stimulus checks for eligible Americans are on the way: here are all the details This distinction is often misunderstood. I once interviewed a widow in Florida who had unknowingly remarried at 59, only to discover she had forfeited her survivor benefit — a decision that cost her more than $200,000 in lifetime payments. Here's where the financial shock sets in. You don't keep both checks. You'll receive the higher of the two benefits, but never both at once. At full retirement age (FRA) , you can receive 100% of your late spouse's benefit . , you can receive . If you claim between age 60 and FRA , you'll receive 71.5% to 99% of that amount. , you'll receive of that amount. If you're caring for a child under 16 or disabled, you'll receive 75% regardless of your age. This means the surviving spouse effectively loses one paycheck — often the smaller one, but sometimes a critical chunk of household income. ALSO READ: Social Security August 20 retirees checks: Who qualifies, how much SSA will pay, complete details explained Consider this example, provided by the National Academy of Social Insurance (2024): If one spouse earned $1,200 monthly and the other $600 , the household received $1,800. After one spouse dies, the survivor receives $1,200 — a 33% drop in income overnight. monthly and the other , the household received $1,800. After one spouse dies, the survivor receives — a 33% drop in income overnight. If both earned around the same ($1,200 each), the surviving spouse still keeps only $1,200 — cutting household income in half. For many retirees, this is where financial strain begins. Financial planners call it the 'widow's penalty' — the trap where income falls but taxes don't shrink proportionally. When one spouse dies, the survivor often moves from a married filing jointly bracket to a single filer bracket, which carries higher tax rates at lower income thresholds. In practice, this means that a widow who once paid 12% on combined income may suddenly find herself paying 22% or more on the survivor benefit, even though her income is now lower. According to a 2023 Congressional Budget Office report, the median surviving spouse sees a 25%–30% drop in disposable income within the first year. It sounds almost insulting, but it's part of the rules: the SSA provides a one-time $255 payment to the surviving spouse (if they lived with the deceased or were already receiving benefits). This benefit was set in 1954 — and has never been adjusted for inflation. At today's cost of living, it barely covers a utility bill. Many couples mistakenly assume that between two Social Security checks and savings, they'll be fine. But the loss of one benefit check — combined with higher taxes, rising medical costs, and inflation — can quickly destabilize a household. When I spoke with financial advisor Jane Bryant Quinn, she emphasized that survivor benefits are one of the least understood parts of retirement planning. 'Couples think about how much they'll get together, but rarely about what happens when one is gone,' she said. 'That's where the gaps appear, and where hardship begins.' Planning strategies include: Delaying the higher earner's benefit until age 70, so the surviving spouse inherits a larger monthly payment. until age 70, so the surviving spouse inherits a larger monthly payment. Diversifying retirement income through annuities, pensions, or investments to avoid overreliance on Social Security. through annuities, pensions, or investments to avoid overreliance on Social Security. Reviewing tax strategy in advance, since single-filer penalties can erode survivor benefits. You don't keep both benefits — the survivor keeps the larger of the two. Survivor benefits vary by age — 71.5% to 100% of your spouse's amount. The widow's penalty is real — lower income but potentially higher taxes. Plan in advance — delaying benefits and diversifying income can protect the survivor. Don't rely on the $255 payment — it's symbolic, not a safety net. When a spouse dies, Social Security can be both a lifeline and a rude awakening. Survivor benefits help, but they rarely replace the stability of two checks. Every couple should sit down before retirement and run the numbers — not just for the years they'll share, but for the years when one may have to face the bills alone. Q1: What happens to Social Security when a spouse dies? The surviving spouse keeps only the higher benefit, not both checks. Q2: Who qualifies for Social Security survivor benefits? A spouse age 60 or older, age 50 if disabled, or any age if caring for a child under 16. Q3: How much of my late spouse's Social Security can I get? You can receive 71.5% to 100% of your spouse's benefit, depending on your age when you claim. Q4: What is the widow's penalty in Social Security? It's when income drops after a spouse dies, but taxes often rise because you file as single. Q5: Does Social Security give a death benefit? Yes, there's a one-time $255 payment, but it hasn't changed since 1954 and offers little help today.
Forbes
33 minutes ago
- Business
- Forbes
How Plaintiffs Can Write Off Their Legal Fees Under Big New Tax Law
Many plaintiffs in lawsuits worry that they will be taxed on their gross lawsuit settlement, not on their net settlement after legal fees. Some call it a tax on legal settlements, but the situation is often solvable. Indeed, there are still ways to deduct your legal fees. The deduction for legal fees in employment, whistleblower and civil rights cases has been in the tax code since 2004, allowing legal fee deductions 'above the line,' almost like not having the income in the first place. IRS Says Legal Fees Can Be Income to You Legal fees as income? Why worry about deducting legal fees? Most plaintiffs would rather have the lawyer paid separately and avoid the need for the deduction. Unfortunately, it is not that simple. If the lawyer is entitled to 40 percent, the plaintiff generally will receive only the net recovery after the 40 percent fee. Most plaintiffs assume that the biggest tax they could face would be tax on their net recoveries. But under a U.S. Supreme Court tax cases, Commissioner v. Banks, 543 U.S. 426 (2005), plaintiffs in contingent fee cases must generally include 100 percent in income, even if the lawyer is paid directly, and even if the plaintiff receives only a net settlement. It's just one of many odd rules how legal settlement are taxed. This harsh tax rule usually means plaintiffs must figure a way to deduct their 40 percent fee. Fortunately, in 2004, shortly before Banks was decided, Congress enacted an above the line deduction for employment claims, civil rights claims, and certain whistleblower claims.'' That means plaintiffs claiming a deduction are taxed on their net, not their gross. The deduction covers employment, civil rights, and whistleblower claims. For employment claims, the tax code confusingly says the deduction applies to attorney fees in claims of 'unlawful discrimination.' The definition of what is a claim of unlawful discrimination refers to claims under a long list of laws, including the Civil Rights Act of 1964, ERISA, ADA, ADEA, Title VII, Title IX, NLRA, FLSA, WARN, FMLA, 1983, 1981, and any whistleblower protection or civil rights law. Yet after quite a long list of laws, the tax code adds a catchall that swallows up much more: This catchall also covers legal fees to enforce civil rights. You might think of civil rights cases as only those brought under section 1983. But the deduction extends to any claim for the enforcement of civil rights under federal, state, local or common law. The tax code does not define 'civil rights,' nor does the legislative history or committee reports. But some authorities suggest they are quite broad, that a civil right is a legally enforceable claim of one person against another. In the context of charitable organizations, the IRS even said that, 'We believe that the scope of the term 'human and civil rights secured by law' should be construed quite broadly.' It is not a stretch to suggest that privacy cases, defamation, debt collection and other such cases are civil rights cases. What about credit reporting cases? Those laws arguably implicate civil rights as well. Wrongful death, wrongful birth, or wrongful life cases can likely be brought within the broad scope of civil rights for this purpose to make sure plaintiffs don't pay tax on their legal fees. Of course, if all damages in any of these cases are compensatory damages for personal physical injuries, then the section 104 exclusion should protect them, making attorney fee deductions irrelevant. However, if plaintiffs receive punitive damages, or interest as occurs when a judgement is paid, they need a way to deduct their legal fees. Fortunately, in my view, a defensible tax path often exists to deduct the fees. I believe it is defensible to characterize it as a civil rights case, given IRS authorities that give this term a very broad interpretation. There is not 100% certainty, but I have written many tax opinions in support of a broad view of civil rights for purposes of legal fee deductions. And so far, my IRS audit experience on this issue has been positive, too. To be sure, it would be best if the tax law were amended to make it 100% clear that no plaintiff should have to fear paying taxes on the portions of a settlement or judgment that is paid to their lawyer and does not end up in their pocket. Even so, until the tax law is clarified, there are workarounds for plaintiffs that are often viable to avoid the topsy-turvy result of a plaintiff paying taxes on more money than they net out of a case.
Yahoo
an hour ago
- Business
- Yahoo
How Much Is the Required Minimum Distribution (RMD) if You Have $100,000 in Your Retirement Accounts?
Key Points Once you reach the age of 73, the IRS requires you to make minimum annual distributions from non-Roth retirement accounts. You must calculate your own RMD based on the value of your ordinary IRAs as of the end of the previous calendar year. There is some flexibility as to how and when you complete your required minimum distribution, but you'll still want to be smart about utilizing particular options. The $23,760 Social Security bonus most retirees completely overlook › Will you be 73 years old (or older) at any point in 2025? And, do you have any non-Roth IRAs? If your answer to both questions was "yes," then -- if you haven't yet -- you'll soon be making a taxable withdrawal. The IRS requires it. It's called a required minimum distribution, or RMD, in fact. But what's the minimum $100,000? It depends on your age. The older you are, the more you're required to withdraw every year. For perspective, here's the RMD on this amount of money for a range of ages. 73: $3,773.58 75: $4,065.04 80: $4,950.50 85: $6,250.00 90: $8,196.72 And the number continues rising all the way until you turn 120, at which point your RMD is always 50% of your IRA's value as of the end of the prior calendar year. Housekeeping Your broker or IRA's custodian can provide you with the information you need to determine your yearly RMD. Just know that it's your responsibility to initiate the distribution. There's also some flexibility in how you take your RMD. For instance, you might be able to combine the value of multiple retirement accounts yet take your entire required distribution from just one; 401(k) accounts are an exception to this option, though. You're also allowed to take an in-kind distribution of investments already in your IRA, if you like, rather than taking your RMD in cash. Just be aware that doing so won't change the taxability of your distribution, which the IRS sees and treats as income. As for timing, RMDs should be completed by Dec. 31. The one exception is your first one, which doesn't need to be done until April 1 of the year after you turn 73. You might not want to wait that long, though. Your tax bill comes due for the year the RMD is completed. By waiting, you'll be making two required taxable distributions in the same tax year, potentially pushing you into a higher tax bracket. The $23,760 Social Security bonus most retirees completely overlook If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known could help ensure a boost in your retirement income. One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these Motley Fool has a disclosure policy. How Much Is the Required Minimum Distribution (RMD) if You Have $100,000 in Your Retirement Accounts? was originally published by The Motley Fool Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Time Business News
3 hours ago
- Business
- Time Business News
A Beginner's Guide to ITIN Number and Incorporating Your Business in the U.S.
Starting a business in the United States can be one of the most exciting steps for international entrepreneurs. However, the process often comes with questions about legal compliance, tax filing, and identification numbers. One term you will frequently come across is the ITIN number. If you are planning to incorporate a company in the U.S. but do not qualify for a Social Security Number (SSN), then understanding the ITIN number is essential. In this guide, we will walk you through the basics of what an ITIN number is, why you need it, and how it connects to your U.S. corporation. We will also introduce you to USAIndiaCFO, a trusted partner for international founders who want seamless U.S. business incorporation and compliance services. An ITIN number, short for Individual Taxpayer Identification Number , is issued by the Internal Revenue Service (IRS). It is a nine-digit number that always begins with a '9' and looks similar to a Social Security Number. However, unlike an SSN, an ITIN number is specifically designed for individuals who need to file taxes in the United States but are not eligible for an SSN. For example, if you are a non-resident entrepreneur who owns a U.S. corporation, you may need to file tax returns. Since you don't qualify for an SSN, the IRS allows you to use an ITIN number instead. Many international business owners wonder if they really need an ITIN number. The answer depends on your role and business activities. You will need an ITIN number if: You are a non-U.S. resident who is a shareholder or director of a U.S. corporation. You need to comply with IRS tax filing requirements. You earn U.S.-sourced income but do not qualify for an SSN. You are claiming tax treaty benefits. In short, if you are connected to a U.S. company and have to report income or file taxes, an ITIN number becomes necessary. It's easy to confuse an ITIN number with an EIN (Employer Identification Number). However, they serve very different purposes. An EIN is issued to businesses. Your U.S. corporation will need an EIN to open a bank account, hire employees, and file corporate taxes. is issued to businesses. Your U.S. corporation will need an EIN to open a bank account, hire employees, and file corporate taxes. An ITIN is issued to individuals. If you are a foreign owner or investor in that corporation, you may need an ITIN number to file your personal tax returns. Think of the EIN as the business's ID and the ITIN as the individual's ID for tax purposes. Both numbers may be required for complete compliance. When you incorporate in the U.S., compliance is not optional—it is mandatory. Without an ITIN number, you may face difficulties such as: Inability to file your personal tax return. Losing eligibility for tax treaty benefits. Penalties for non-compliance. Challenges in building credibility with the IRS. On the other hand, with an ITIN number, you can confidently manage your tax obligations. Moreover, it signals to the IRS that you are committed to proper reporting, which strengthens your business reputation. Applying for an ITIN number may sound intimidating, but the process is straightforward if you follow the right steps. Here's a beginner-friendly overview: Prepare Form W-7 – This is the official IRS form for applying for an ITIN number. Gather Supporting Documents – Typically, you need your passport and documents that prove your foreign status. Submit the Application – You can apply through IRS-authorized Acceptance Agents or directly with the IRS. Wait for Processing – It usually takes 7–11 weeks to receive your ITIN number. Since accuracy is critical, many entrepreneurs prefer professional assistance to avoid rejections or delays. Navigating U.S. incorporation and compliance can feel overwhelming, especially for international founders. That's where USAIndiaCFO comes in. As a specialized consulting firm, USAIndiaCFO helps non-U.S. residents incorporate businesses in the United States, apply for ITIN numbers, and manage ongoing tax compliance. Here's how USAIndiaCFO supports you: ITIN Application Assistance – They guide you through every step of the ITIN application process to ensure quick approval. – They guide you through every step of the ITIN application process to ensure quick approval. Company Incorporation – Whether you want to form a C-Corporation or LLC, USAIndiaCFO helps you choose the right structure. – Whether you want to form a C-Corporation or LLC, USAIndiaCFO helps you choose the right structure. EIN Registration – They handle your EIN application, so your corporation can operate smoothly. – They handle your EIN application, so your corporation can operate smoothly. Tax Compliance – From annual filings to IRS reporting, they ensure you never miss a deadline. – From annual filings to IRS reporting, they ensure you never miss a deadline. Expert Guidance for International Founders – Their team specializes in helping entrepreneurs from India and other countries start businesses in the U.S. By partnering with USAIndiaCFO, you avoid confusion, reduce delays, and focus on growing your business instead of worrying about paperwork. As a beginner, it's easy to make mistakes that delay your ITIN application. Be sure to avoid: Submitting incomplete forms. Using expired passports or documents. Confusing ITIN with EIN requirements. Ignoring deadlines for tax filings. With expert help from USAIndiaCFO, you can skip these errors and move forward with confidence. For international entrepreneurs, incorporating in the U.S. is a powerful step toward global growth. However, understanding compliance requirements such as the ITIN number is crucial. Without it, you may face challenges in tax filing and credibility. The good news is that you don't have to handle everything alone. USAIndiaCFO makes the process simple, guiding you through ITIN applications, EIN registration, incorporation, and compliance. With the right partner by your side, you can focus on building your dream business in the U.S. while leaving the complexities to the experts. TIME BUSINESS NEWS
Yahoo
3 hours ago
- Business
- Yahoo
How Much Is the Required Minimum Distribution (RMD) if You Have $100,000 in Your Retirement Accounts?
Key Points Once you reach the age of 73, the IRS requires you to make minimum annual distributions from non-Roth retirement accounts. You must calculate your own RMD based on the value of your ordinary IRAs as of the end of the previous calendar year. There is some flexibility as to how and when you complete your required minimum distribution, but you'll still want to be smart about utilizing particular options. The $23,760 Social Security bonus most retirees completely overlook › Will you be 73 years old (or older) at any point in 2025? And, do you have any non-Roth IRAs? If your answer to both questions was "yes," then -- if you haven't yet -- you'll soon be making a taxable withdrawal. The IRS requires it. It's called a required minimum distribution, or RMD, in fact. But what's the minimum $100,000? It depends on your age. The older you are, the more you're required to withdraw every year. For perspective, here's the RMD on this amount of money for a range of ages. 73: $3,773.58 75: $4,065.04 80: $4,950.50 85: $6,250.00 90: $8,196.72 And the number continues rising all the way until you turn 120, at which point your RMD is always 50% of your IRA's value as of the end of the prior calendar year. Housekeeping Your broker or IRA's custodian can provide you with the information you need to determine your yearly RMD. Just know that it's your responsibility to initiate the distribution. There's also some flexibility in how you take your RMD. For instance, you might be able to combine the value of multiple retirement accounts yet take your entire required distribution from just one; 401(k) accounts are an exception to this option, though. You're also allowed to take an in-kind distribution of investments already in your IRA, if you like, rather than taking your RMD in cash. Just be aware that doing so won't change the taxability of your distribution, which the IRS sees and treats as income. As for timing, RMDs should be completed by Dec. 31. The one exception is your first one, which doesn't need to be done until April 1 of the year after you turn 73. You might not want to wait that long, though. Your tax bill comes due for the year the RMD is completed. By waiting, you'll be making two required taxable distributions in the same tax year, potentially pushing you into a higher tax bracket. The $23,760 Social Security bonus most retirees completely overlook If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known could help ensure a boost in your retirement income. One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these Motley Fool has a disclosure policy. How Much Is the Required Minimum Distribution (RMD) if You Have $100,000 in Your Retirement Accounts? was originally published by The Motley Fool Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
