How is the Social Security Administration Funded?

How is the Social Security Administration Funded?

Everyone knows about Social Security. We are either receiving Social Security Benefits ourselves or we know someone who is. If we are working, we see the reduction in our paychecks. But how is Social Security funded? In this article, we will discuss the four sources of income that fund Social Security.

The sources of income for Social Security are payroll taxes, net interest income earned on the assets of the trust funds, taxes assessed on Social Security benefits, and reimbursements from the general fund.

Payroll taxes provide most of the funding for Social Security. The employer pays 6.2% and the employee pays the other 6.2%. If you are self-employed, you pay the employer and the employee share of the tax which equals 12.4%.

Any year when the payroll taxes collected are greater than the amount paid out in benefits, the excess is put into a trust fund. This fund invests the money in U.S. Treasury bonds, which earn interest. Any money in this trust can be used to fund Social Security.

People in higher income tax brackets have to pay taxes on any Social Security benefits they receive. These benefits taxes go into the trust fund. There they will be invested in U.S treasury bonds or used to pay benefits.

Investing in a U.S Treasury bond is loaning money to the U.S government in return for interest. The money raised from investments in the bonds goes into the government’s General Fund. Once it is in the General Fund, the government can use the money any way it wants. When the government pays back the loan, it is called reimbursement from the general fund. The money is now back in the trust and can be used to pay benefits.

These are the four sources of funding for the Social Security Administration. Payroll taxes, interest from the U.S Treasury investments, taxes on benefits, and reimbursements from the General Fund keep Social Security bankrolled.


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How will Tax Reform Impact the Mortgage Interest Deduction?

How will Tax Reform Impact the Mortgage Interest Deduction

Tax reform has been a major issue in the United States this year. When President Trump was on the campaign trail, he promised a better tax code that would make the United States more competitive with other nations.

Over the past few weeks, the tax code has been refined and changed through vigorous debate. It looks like the tax reform bill will be signed into law by President Trump soon.

As a taxpayer, it is critical to understand the key changes to the tax code. Some people wrongly assume that the tax code will completely change. In reality, there are just a few key variations to consider.

Standard Deduction

The standard deduction is a fundamental deduction that everyone has the option to use. When filing your taxes, you have the option to itemize your deductions or use the standard deduction. With the new tax reform bill, it is likely that more people will use the standard deduction because it doubled in size.

For people who itemize their deductions, it may make more financial sense to move to the standard deduction. You can itemize expenses like mortgage interest or student loan interest. For people who do not have various deductions, the standard deduction makes the most financial sense.

Mortgage Interest

The mortgage interest deduction is the most common deduction used today. It is most often used by people who own a home with a large mortgage payment. Although the mortgage interest deduction is still available, fewer people will use it when they file their taxes for 2018. There are a lot of people who struggle to understand the tax code. This is why working with a professional tax planner is so important.

Planning your taxes is a long and complicated process. The mortgage interest deduction is not changing, but experts believe that fewer people will use it when filing their 2018 taxes.


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How Many Years Should You Keep Your Bank Statements?

How Many Years Should You Keep Your Bank Statements For?

Storing financial documents can become a burden for someone who isn’t properly organized. However, keeping financial documents is incredibly important, especially way after you’ve initially received them. Standard rules state that you should keep your financial documents for about 6 years. This is incredibly important, as the IRS or other services can go back and ask you to provide financial information regarding a small detail in the past at some point. Failure to provide them with this information can result in a bad situation for you.

However, this information can be somewhat misleading. If you are an individual with a business, it is in your best interest to stick to the 6-year rule. At any point in time, you can be audited for something and will need to provide proper information regarded said audit. As an individual, 22 months is about the proper time when you can consider properly destroying files. However, at the end of the day its in your best interest to keep files for as long as possible. You never know what might come up.

So, what are some ways we can properly store these bank statements? Thanks to technology, we don’t necessarily have to store things physically in a dusty old filing cabinet somewhere. If you have a scanner, you can take it upon yourself to digitally scan these important documents over time (you don’t want to do it all at once, that would be a huge pain!). Save them to a flash drive and store away for safe keepings. Most things are done electronically now days, so it would be in your best interest to provide the digital version of these documents anyway.

Always remember to play it safe when it comes to financials. While it may seem like a burden to keep these documents for long periods of time, it can save you piles of trouble if you simply follow these rules we’ve mentioned above.


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How many years of taxes do you have to keep for a business?

How many years of taxes do you have to keep for a business

As the looming tax season approaches, many taxpayers scramble to find the answers pertinent to their unique employment, investment and business-related questions from qualified accountants. The question of how long to hold on to tax-related paperwork is one of the most frequently-asked questions that preparers and accountants receive each year. While the specific answers vary greatly depending on the type of paperwork in question, the general rule of thumb is to hold on to every tax-related document for 7 years. This general rule of thumb is especially important if you own a business, or if you have a lot of investments or deductions that would flag the IRS and put you at risk for an audit.

Any documents pertinent to business income tax returns or amendments should be kept for 7 years. If you are filing as a sole-proprietor or an LLC, documents such as accounts payable/receivable ledgers, detailed expense reports and invoices should also be kept for 7 years. If canceled checks are pertinent to tax filing, those should also be kept for the maximum of 7 years along with supporting bank account and credit card statements. If you or an employee has suffered an on-the-job injury, those files should be kept for at least 7 years. If workers compensation was involved, it is very important to keep any files for up to 10 years; you can dispose of them 7 years from when the matter was resolved or finalized.

Employment tax records involving pay, pension, and annuity information should be kept on file for 4 years. Business asset receipts such as vehicle titles should be kept until the property is sold. A licensed tax professional can guide you with answers and advice on unique situations you may encounter in your business or as an employee. Always, make sure to use a cross-cut shredder to dispose of important tax and financial documents once you are ready to throw them away.


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Deciding which mortgage lender is right for you

Business partnership. House agent greeting customer in office

A mortgage is a credit facility that is used to buy a house. Many people opt to secure a house through a mortgage loan instead of renting. In this type of loan, the house is registered with the lender’s name. The house is fully transferred to the borrower after all the installments are paid. Many types of lenders give mortgage loans. Some of the most common lenders include:

  1. Direct Lenders

A direct mortgage lender is usually a commercial bank. The borrower, in this case, deals directly with the money lending institution. The lender evaluates the borrower’s paying capability before giving the loan. Some of the benefits of obtaining a mortgage from a direct lender include:

  • A direct lender is reliable in most cases. Brokers at times may give the wrong information to increase their commission. However, with a bank, it’s different. The borrower can access all the information concerning the terms of the loan from the lender.
  • A mortgage from a direct lender is also cheaper than with brokers.
  • Direct lenders process the loan faster than when brokers are involved.

The main disadvantage of obtaining a mortgage from a direct lender is that the borrower does not have the chance of comparing what other lenders are offering.

  1. Mortgage brokers

A broker is usually an individual who advises on the different types of mortgages offered by lenders. The broker gives the borrower a list of lenders from which the borrower chooses the most appropriate. The broker then links the borrower with the lender.

Benefits of brokers:

  • They offer the borrower a variety of lenders. The borrower can choose the best lender from the listed ones.
  • The broker also advises the borrower. This helps the borrower to make a right decision when selecting a lender.
  • With a broker, the lender saves time that could have been used in identifying available lenders.

The disadvantage of brokers:

  • At times, brokers may hike the lender’s charges to make more profit from the borrower. This leads to the borrower paying more for the loan.
  1. Real estate companies

Most construction companies these days are also offering mortgage loans.
The borrower can decide from the available option the most appropriate one. It is essential to understand the lender’s terms and conditions.

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