First of all, some basics. Calculation of the benefits you will receive are based on your body of work over a period of forty years. The five years that you earned the least amount are dropped, and the other 35 are averaged to determine your monthly payment. Those who did not work do not get benefits. This is based on a set system where an individual must have worked 40 quarters during their life, and a minimum amount must have been earned during these 40 quarters in order to be considered for Social Security benefits.

A spouse who did not work is eligible for 50% of their working spouses full retirement benefits, and 100% after they die. If a spouse divorced someone after being married at least 10 years, they are eligible for 50% of that spouses full retirement age benefit, if they wait until age 70. At 60 this number is 37.5%.

SS retirement benefits can be started as early as 62 years of age. This does not mean that you have to start receiving benefits when you are 62; you can wait until you are as old as 70. If you choose to start getting benefits at an earlier age, your monthly payments will be smaller. There is a graduated scale involved with the calculations for payments; a 62 year old will get approximately 30% less than one who waits until they are 70. This percentage drops as you near 70.

The SSA, or Social Security Administration, uses your birth date to define retirement age. If you are planning on retiring in 2011, for instance, your retirement age is most likely 66 or 67 years of age; full retirement age means you will get 100% of your benefits.

One consideration to make when deciding when you will retire is that although your monthly payments will be lower if you retire early, this does not mean that you will receive less money in the long run. The reduction takes into account the fact that if you retire at 62 you will end up getting a lot more payments before you pass away than if you retire at 70, and recalculates your monthly benefits based on this. So there is actually no penalty for retiring early.

There are other advantages to waiting until 70 to start Social Security benefits. These individuals can immediately get retirement credits, which can boost monthly payments by 5 to 8%. These credits are assigned based on age; if you are born after 1943 you get 8%. These benefits stop going up when you reach 70.

So, unlike what you may hear from friends and family, there is no disadvantage or penalty involved for retiring early. On average, everyone who retires between the ages of 62 and 67 should see the same amount of money over their lifetime; the difference is in the amount of the monthly benefit check.

There are other considerations. If it is in your plans to continue working after retiring early, you should know that you will need to continue to pay SS taxes on all earning, even if you are receiving benefits. If you are not at full retirement age, there is an earnings cap of $14,160; this goes up to almost $40,000 after reaching full retirement age.

Once again, this should not be seen as a penalty. If you work when receiving benefits, and happen to go over the cap, some of your earnings may be taken from you, but these will be credited to you after full retirement age, and could mean higher payouts later. This is one of the most complicated aspects of Social Security benefits, but is also one of the most beneficial to you in the long run.

Getting to the point where you are considering whether to retire early or wait until full retirement age can be an intimidating time in your life. With many people nowadays deciding to work after retirement, it has become more important than ever to know exactly what is involved when filling out your Social Security paperwork. Understanding all the benefits and implications behind the Social Security system can help ease some of the stress involved with the numerous decisions that need to be made at this important point in your life.

1. More audits. With the government needing the revenue, audits are simply on the rise. Your chances of getting audited rise if you have higher income, self-employed, or posted huge write-offs.

2. Don’t delay. Not acting within the period stated (30 days) will make the audit a final assessment giving you less chance to fight back.

3. Get an accountant. It might cost you a few hundred to a few thousand but at least you have someone who knows how the system works.

4. Less talk, less mistakes. Don’t provide any other information beyond what’s given. You might incriminate yourself.

5. Talk to the auditor’s supervisor. If you’re not satisfied with the auditor’s findings go one higher up and negotiate with his boss. They have more authority to make concessions.

Some people think that tax refunds are “free money” windfalls that can immediately be earmarked as disposable income. Thing is, you should have a good idea of what amount you’re entitled to and classify it as part of your regular income.

As such, you should be spending it carefully and wisely and not eye that new widescreen LCD with lust now that you have money to buy one.

Before spending your money on unnecessary things, be sure that you use it to solve your money issues first.

Pay your credit card balance. Whatever balance you may have in your credit card is bound to bite you back with interest. Repay as much as you can with your refund.

Pay your mortgage. Be happy if you still have a home and able to keep up with the mortgage. So why not get ahead of your payments and trim some off using your tax refund?

Boost your savings account. Why spend it anyway? Stash it in your savings account. Money saved.

With the government facing a deficit, the IRS is really looking to maximize the opportunity to collect internal revenue that offering rewards for those who’d be turning in tax cheats is still part of the IRS’ program. Now’s your time to get revenge on that tax evading boss or ex.

The informant program has been around for almost a century and a half. Snitches can get up to 15% of the amount underpaid up to $10 million. So if you know a multi-million tax cheat, fess up and be a millionaire.

This is why if you’re doing anything illegal, best let no one know about it. Not your best friend. Not your wife. And not even some random stranger you meet in some weird place. Sometimes these things would just come around and bit you in the butt. Best option still is not to do anything illegal at all.

If you want to rat someone out, the information is available on the IRS Web site, or call the IRS tip line at 1-800-829-0433.

Source: CNN

It’s February and April’s near. Are you readying your tax forms yet? Not everyone’s spending is the same so there might be a chance that you’re doing any one of these activities that can actually be considered tax breaks.

Hire someone while working nonprofit. If you hire a babysitter to take over your parental duties when working for someone else pro bono, then the money you spend on your babysitter can be tax deductible. How cool is that? But then again, it’d only work if you do have charity work. Seems pointless to spend on a babysitter and work pro bono just for a tax break.

Charge your “vacation” expense. Caveat: If you decide to take your family on your business trip, only your expenses will be counted as tax deductible. So even if you get a hotel suite for the family, you can only subtract the expense for a single room.

Deduct work-relocated moving expenses. Need to move out to another locale for that new job that you’ve just landed? Since your move will be work-related, you can possibly deduct your moving expenses from your tax filing.

Pamper yourself (on doctor’s orders). The whole zen and relaxation thing has been acknowledge by many doctors to aid your healing. Medical expenses are tax deductible so your monthly massages that help improve your circulation might just warrant a bit of discount in the taxes.

While these tax breaks are typically available, always check with a tax professional before filing your return on which you applied any of these.

Source: MSNBC