How Much Will Future Retirees Receive in Lifetime Social Security and Medicare Benefits?

How Much Will Future Retirees Receive in Lifetime Social Security and Medicare Benefits?

Millennial couples who would retire around 2060 would approximately be receiving around $2.2 million in the form of lifetime Social Security and Medicare Benefits. This amount would be approximately double of the amount that a couple who would be retiring this year would receive.  The total Social Security and Medicare benefits are expected to rise even more for those generations which are born after the year 1995 if these programs would provide the continued benefits.

The Lifetime Social Security and Medicare Benefits and Taxes are mainly based on the reports for the Social Security and Medicare trust funds. According to the projection of this trust, a single male that is earning an average amount of wage is working every year and is retiring at the age of 65 years would receive benefits of around $570,000. In case of those couples who are going to retire this tax year with one of the spouses having a higher wage and the one earning lower wage the amount that would be received as Lifetime Social Security and Medicare benefits would be around $1,113,000.

With the rise in Social Security and Medicare benefits, the gap which is present between the benefits and the payroll taxes the employees owe will keep on growing. The main reason behind this is that the low cost of Medicare was designed in such a manner that it would only provide cover for the hospital costs; but the program now would provide cover for visits made to doctor, outpatient procedures, drugs prescribed and other categories of medical costs.

The increase in benefit amounts

The amount of Social Security and Medicare Benefits would be seeing a significant increase in future retirees. The most important cause behind this is that there is an increase in Social Security Benefits and the Medicare expenses are increasing due to modern health care services. Moreover, when life expectancies are higher it would imply that the Americans who are going to retire in the future would receive many more years of this benefit.

However, the major cause behind the financing gap which is prevalent between the benefits obtained and the taxes is the decrease in the birth rate starting in the mid-1960s. There has been a resulting shrinking in the number of the workers relative to the retirees and this has a special force in the period in which the Baby Boomers had started collecting these benefits in between the tax year 2008 and the mid of 2030s.

These issues would very soon come under the supervision of one head as the Congressional Budget Office Projects. The Government would not be able to pay complete benefits out of the funds of the trust for Social Security by the tax year 2031. 

The new President Biden has also recommended a further increase in the benefits available for the retirees i.e. approximately 9% on an average for those retiring by the year 2065. Moreover, the work of the Urban Institute reflects the fact that these changes would be able to extend the life span of the Trust funds for Social Security by only 5 years. 

Many workers at present have to face an implicit trade-off irrespective of their level of income.  The Government has promised higher Social Security and Medicare Benefits at an older age, but it has also set a small portion of its budget for the younger people and families for other programs such as student loan balances, children fall, and other programs not related to retirement.

 A large scale budget is the only solution to this trending problem related to Social Security and Medicare Benefits. 


So, it is necessary to understand the issues that have been present across several generations related to retirement and health benefits along with the taxes which would be applicable across the country.

All you need to know about Form 1099-R

All you need to know about Form 1099-R

Form 1099-R is being used by you for reporting the distribution of benefits associated with retirements like annuities or pension plans. Precisely, the Form 1099-R can be used for reporting the distributions which you might have received from your IRA, annuity, pension, or your retirement account. Form 1099-R can be considered as a record to denote any money paid or given to an American other than his employer.  The payer who pays will fill out the Form 1099-R and will send a copy to the payee and to the IRS as well.

Who can receive a Form 1099-R?

As said earlier, the main purpose of Form 1099-R is to record income. You can receive a Form 1099-R due to some of the below-mentioned reasons.

  1. Freelancers and contractors working independently usually get a Form 1099-MISC from their clients. If you are a freelancer or an independent contractor, this form would reflect the money which the client has paid you. Form 1099-R is for employees but it is not the same as the Form W-2.
  2. Form 1099 has a Social Security Number or Taxpayer Identification Number present on it. This indicates that the IRS will know that you have received money and it will also know if that income has not been reported on your income tax return.
  3. If you are receiving only the Form 1099-R, then it does not specifically mean that you would be owing money on that money reported in Form 1099-R. There might be some deductions which can be helpful in the offset of the income

Variations of Form 1099-R

The variations of Form 1099-R includes the following forms:-

  1. Form CSF 1099R
  2. Form CSA 1099R and
  3. Form RRB-1099-R

Mostly, public and private pension plans which are not a part of the Civil Service System use the Form 1099-R. You must receive a copy of the Form 1099-R or some other variation in case of receipt of a distribution of $10 or more amount from your plans related to retirement.

Pension plans and payment of annuity

Retirement benefits are said to be an extension of the compensation which has been arranged by an employer and employee. On most of the contributions made into the retirement plans, income tax is deferred. In simple words, this means you are not liable to pay any income tax on the funds contributed to the Retirement plans until they are withdrawn by you.

Usually, the pension and annuity distributions are being made to the retired employees, employees who are physically disabled and also for the beneficiaries of any deceased employee.


Many employers would have the provision of granting loans against pension plans. Usually, these loans are not taken as distributions and are repaid with interest. The issue of Form 1099-R occurs when you have taken a loan and are not able to make the necessary loan repayment on time.

  1. If this situation arises then the amount which is not being re-paid is treated as a distribution and would be mentioned in the Form 1099-R along with the code L i.e. Distribution Code.
  2. These distributions are treated as deemed taxable income and might be subject to penalties related to early distribution.


By a Rollover, retirement funds can be moved or transferred from one individual to another otherwise known as a custodian without any taxes paid on the money that has been transferred.

  1. By the use of Form 1099-R, direct rollovers can be easily identifiable. This is done by the use of codes G or H in box 7 of the Form 1099-R.
  2. Rollovers can be indirect if you are the owner of the account and you take up the responsibility of the amount in the Retirement Account and would transfer the deposited money into another Retirement Account.
  3. When there is a point when there is an amalgamation of rollover and IRS principles, the distribution made is not taxed. But, you should not forget to report the amount on your tax returns. 

Early distributions

Those benefits which are paid to you before you reach the age of 59 and half years are said to be Early Distributions. For avoiding the misuse of the retirement funds, an extra 10% federal tax is imposed on the Early Distributions.  Many states also levy penalties on these early distributions. This additional tax is applicable on the full amount of distribution which is taxable unless exceptions like disability, death, IRS levy, etc.


Hence, the above-mentioned information about Form 1099 would be helpful in understanding the details about this and be easier for use.

COVID-19 tax relief to the small business owners

COVID-19 tax relief to the small business owners

The pandemic COVID-19 has affected the economic condition across the entire United States. Business owners all over the country are struggling to survive and lower the impact of the pandemic on their business. Meanwhile, the US Government has introduced various forms by which tax relief can be obtained by the small business owners in the year 2020. Most of these changes belong to the FFCRA (Families First Coronavirus Response Act) and the CARES (Coronavirus Aid, Relief and Economic Security Act). These changes in tax regulations would be helpful for the business owners and the employees to survive the crisis caused by the pandemic.

  Employee Retention Credit

 The Employee Retention Credit is a part of the CARES Act which is mainly designed to keep the employees on the payroll during the times of pandemic.

  • The refundable tax credit which is available is 50% of up to $10,000 in the wages that have been paid to the employees by a business owner whose business has been impacted by the COVID-19.
  • This credit is available to all the employers irrespective of the size of the business and it also includes tax-exempt organic
  • There are only two exceptions i.e. State and Local Government and their instrumentalities and those small businesses which take small business loans such as the PPP loans. 

The qualifying employers for obtaining the Employee Retention Credit must fall into either of the two below-mentioned categories: – 

  1. The employer whose business has been suspended completely or partially by the Government because of the coronavirus pandemic during this quarter.
  2. The gross receipts by the employer are below 50% of a similar timeframe in the year 2019. If the employer’s gross receipts are more than 80% of a similar timeframe in 2019, then they are not eligible for the credit after the quarter-end.

 Paid Sick Leave Credit and Family Leave Credit

 Paid Sick Leave Credit is designed in such a way by which the business would be eligible to obtain credit for an employee who has not been able to work because of having symptoms of coronavirus and is being quarantined or self-quarantined.

  • Employees are entitled to the paid sick leave for up to 10 days at the regular rate of pay up to $511 in a day and $5110 in total.
  • Employers are also eligible to receive credit for payment of those employees who are not able to come for work due to caring for a family member who has been affected by COVID-19 or for taking care of a child whose school/daycare is closed due to COVID-19.
  • These employees would receive paid sick leave for up to two weeks at the two-third rate of the employee’s regular payment or up to $200 in a day and $2000 in total.
  • Moreover, employees can also avail paid family and medical leaves which would be equal to two-thirds of their normal pay ranging up to $200 in a day and $10,000 in total.
  • Also, qualifying leave of 10 weeks would be counted towards the family leave credit.
  • Eligible employers or business owners can immediately receive this credit for sick leave and family leave along with the expenses for a health plan and the employer’s portion of Medicare tax on the employee’s leave.
  • The employers eligible for receiving these credits will report their qualified wages and the associated cost of health insurance for each quarter on their employment tax returns for each quarter or by filing Form 941 which begins with the second quarter.
  • In case, the employment tax details of the employers are not enough for covering the credit then the business owner can submit Form 7200 and receive the advance payment from the IRS.

 Deferred Payment of Payroll Taxes

 By the CARES Act, employers are allowed to defer the payment they do for their employee’s portion of the Social Security Taxes. These taxes would have been due in between 27th March 2020 and 31st December 2020. The employers can make these payments in the form of instalmentse. half by the end of 2021 and the other half by the end of 2022.

  • There is no necessity of special election for the businesses for the deferment of their deposits and payments. The IRS is working on the process of revision of Form 941 for reflection of these changes.
  • This option can be availed by most of the employers; however, those employers who have received the PPP loan would be able to defer the payments until receiving notice that their PPP loan has been forgiven.


 So, these credits and tax rules will help the small business owners to save their business and also lower the impact of COVID-19.

All about filing your taxes in the US: The When, the Where and the How

All about filing your taxes in the US: The When, the Where and the How

All about filing your taxes in the US: The When, the Where and the How

In the US, filing your taxes on time is considered quite important. If you are not filing your taxes on time, then you might have to pay heavy penalties. For avoiding paying heavy penalties, you must know in detail some essential aspects related to taxes.

The major aspects which are related to taxes in the US are

  1. When to file the tax returns?
  2. Where to file the tax returns?
  3. How to file the tax returns?

Let us know about each aspect in details.

a. When to file the tax returns?

In case you are a tax filer as per the calendar year, then the end of a particular tax year for you is on 31st December. In this case, you have to finish your process of tax filing by 15th December of each year. Suppose, you are using a fiscal year i.e. tax year which is ending on the last day of any month but not December then you will have to file your tax returns by the 15th day of the fourth month after your fiscal year has been closed.  In case of the tax return for the year 2019, the tax payment due date is 15th April 2020. 

If you are filing your tax returns by the help of mail, then you will have to ensure that the mailing address to which you are sending the document is correct and the documents are deposited on time. In case of filing a tax return by electronic means, you should ensure that the date and time in your time zone must be accurate as it determines whether your tax filing has been done on time or not.

In case, you are not able to file your tax returns by the due date then you will have to request an extension in the time needed to file the taxes. You can use Form 4868 to obtain an extension of 6 months automatically. For this, you will have to pay interest and also there might be a penalty charged on you for non-payment of tax by the due date.

b.Where to file the returns?

If you are filing your tax return electronically, then you should not be worried about the area where it will be sent. In case, you are filing your tax return by physical means or by paper then you will have to send it to the correct address which is mentioned in the form that you are filling. 

If you have a balance to be paid at the time of filing your tax return, then you can make the payment by IRS Direct Pay. In case you are filing your return by paper, then you will fill Form 1040-V and send your cheque or money order along with the form.

  • The cheque or money order which you are going to send must be prepared as payable to “United States Treasury”.
  • You should not staple your tax return, Form 1040-V and payment together. They should be left loose and placed in an envelope.
  • On the front side of your payment, you should include your name, address, TIN, tax year and the category of form which you are including.
  • It is advisable not to send cash along with your return.

c.How to file the tax returns?

You can file your tax returns either by electronic means or you can mail your tax returns in paper form. Mostly, it is advisable to file your tax returns by electronic means as it is convenient and even a faster process.  When you are mailing your tax return, it will take around six weeks to eight weeks for processing. In case, you are preparing your tax returns by using professional software then there might be the need to pay additional fees to file the return.

If filing tax returns by paper form, you should use the Form 1040 or Form 1040-SR. Along with these forms, you also need to attach some other documents like a copy of Form W-2, Form W-2c which is a corrected form Form-W2, Form-W2G and Form 1099-R if a federal income tax was withheld, etc. 

For electronic filing, you will have to use the e-file method. For this, you can use self-select PIN which will act as your digital signature when you are using tax preparation software. The self-select PIN will allow you to make your electronic signature while filing your Income Tax Return by selecting a five-digit PIN. 


So, you must know in detail about these important aspects associated with filing your tax returns in the US. This basic information makes it easier for you to file your tax returns accurately on time thus avoiding heavy penalties. 




New W-4: Adjusting Your Tax Withholding Just Changed

New W-4: Adjusting Your Tax Withholding Just Changed

New W-4: Adjusting Your Tax Withholding Just Changed

The IRS has recently introduced a new Form W-4. Due to this new Form, adjusting your withheld taxes from your paycheck would take a bit longer than usual. The only group that will not be affected by this form is taxpayers who are married and filing jointly.

Form W-4‘s format is long and essentially gets rids of a few allowances that the IRS earlier allowed for you and your family members. The form now asks for even more accurate information, which might even force you to take a look at the previous year’s tax return. It is in line with the Tax Laws that President Trump brought into effect in 2018.

As a taxpayer, it is essential that you get your withheld taxes correct. If you withhold a bit too much, you will impact liquidity or the salary that you take home. And if it is a bit too less, you will owe taxes to the IRS by the end of the year.

Who Needs The W-4?

The new form does not apply to workers unless there is a change in their tax status form the previous year. If your tax status remains the samefrom the last year, you don’t have to file the new W-4 Form. However, new employees and the ones who have had experienced a major life event such as getting married or giving birth to a child must file Form W-4.

The form is also applicable for taxpayers who aren’t too happy about their 2019 taxes. Whether you owe taxes of Uncle Sam or got smaller than expected refund, you must file W-4. Though it might seem a bit complicated, it actually simplifies the process that existed earlier.

 Benefits For Married Couples

Married couples are one of the demographics, that benefit the most from the newly introduced form. As long as both the individuals follow some instructions, the new Form is relatively easier for married couples.Married couples now merely must check a box in the returns. This box indicates that both of them are working and the amount of withheld taxes will be calculated based on that. This process is way simpler than the earlier one, where one had to follow a lengthy worksheet with nine steps to determine how much taxes should a couple withhold from their paychecks.

Though this process is simpler, there is a catch in Steps 3 and 4. Should a couple select the working box, the higher earning spouse must fill out Steps 3 and 4. These ask the taxpayers details about dependents, deductions, any additional withholdings and an additional source of income.The previous step is essential in more than a few ways. Since it plays a crucial role in deciding the taxes that are withheld. If both individually fill additional income Step 4, the amount of taxes withheld from the paychecks will be considerably higher. Similarly, a couple decides to fill in details for dependents or deductions individually, the taxes withheld will be lower. Though it might sound attractive at first, you might end up with a hefty tax bill at the end of the tax season.

Ensure No Surprises

Since it is a new Form, filing it up diligently will ensure that you don’t have to encounter any surprises. One of the easiest ways is to keep the details of the previous year handy. Details such as other sources of income, deductions that you had claimed and tax credits that you received for dependents.

Spending a few minutes to understand and fill the form will ensure that you are neither overdoing or underdoing your withheld taxes.

How to transfer Indian income to the US for an NRI?

How to transfer Indian income to the US for an NRI?

How to transfer Indian income to the US for an NRI?

Many NRIs, PIOs (Persons of Indian Origin) and even American Indians are interested in bringing money earned in India to the US. Indian income ,This scenario mostly arises when people have the immovable property back in India or they have inherited assets in India. This NRIs will try to bring the money associated with these assets to the USA by liquidating the assets.

NRIs or PIOs or American Indians who are interested in bringing such Indian income to the USA have to follow certain procedures. This usually depends on the methods by which the income has been acquired in India such as either by selling of property, an inheritance or gift or by making investments into certain financial instruments.

Selling of property in India by an NRI

 NRIs or PIOs are allowed to sell residential or commercial property in India but not agricultural land or farmland. According to the laws, NRIs are also allowed to bring Indian income earned from the sale of a maximum of two residential properties. The NRI who is selling his property and wants to bring his Indian income to the USA must have an NRO Account i.e. Non-resident ordinary Account.

In case of an NRI selling a property in India, the proceeds of the sale must be credited to the NRO account of the individual. If an NRI is selling a property after three years of the purchase of property then it is a long-term capital gain and a long-term capital gain tax of 20% would be levied on this. There is a limit of $1million which can be transferred from India to the US in a particular calendar year.

To begin the transfer of money from India to the US, the NRI has to obtain a certificate from a Chartered Accountant in India. The Chartered Accountant will issue a ‘Form 15CB’ obtained from the website of the Indian Government’s tax department. This certificate is proof that the money which is being transferred from India to the US has been earned by legal means and also all taxes have been paid. In addition to this, the NRI also has to fill another form online i.e. ‘Form 15CA’. This form is submitted online and a system-generated receipt has to be obtained by the NRI. Form 15CB and this receipt have to be deposited in the bank which has the NRO Account along with an additional ‘Form A2’ and a foreign exchange form.

Inheritance or gift received

The property which has been inherited in India is exempt from any gift tax. However, the amount which is obtained from the sale of inherited property is the capital gains and is taxed depending on the specified tax rates.

NRIs that are selling their inherited property and bringing that Indian income into the US must fill up two forms i.e. ‘Form 3520’ and ‘Form 8938’. Form 3520 has to be signed by NRIs along with their tax returns if they are inheriting any property in India.  This helps in validating the trail of the receipts by the NRI and also checks the basis of his inheritance.

Form 8938 has to be filled by all the USA residents, citizens and green card holders for reporting about their financial assets if the aggregate asset is more than $50,000 in case of single taxpayers and $100,000 for couple taxpayers.

Investments made in financial instruments

Another method by which NRIs can bring money from India to the US is by investing in financial instruments like debt investments and equity investment. For making debt investments, NRIs can invest in NRO Account or NRE fixed deposit account. NRIs can also invest in FCNR deposits which yield high returns and the interest income obtained from FNCR deposits is tax-exempted in nature. NRIs can also invest in direct equities or equity mutual funds.

For the transfer of this income earned in India, the NRI needs to fill the Form 15CB and Form 15CA and proceed with the repatriation procedure.

Hence, the procedure for the transfer of funds from India to the US is not a complicated process and can be carried out smoothly by the help of some expert professionals like CAs.