The Basics

Medicare open enrollment is upon us.  It can be a daunting time with choices to be made.  Choosing the best Medicare options that will work best for you can be complicated. This is the first of a three-part series which will help you avoid some common Medicare mistakes.

• That magical birthday of 65 is approaching.  Do you have to do anything or does Medicare happen automatically?  Unfortunately, you will have to enroll during what is called your initial enrollment period.  The initial enrollment period begins three months before the month in which you turn 65 until three months after.  If you fail to sign up during your initial enrollment period, there is a general enrollment period from January 1 through March 31 each year.  But, if you enroll in January, February or March, your coverage doesn’t begin until July which impacts your monthly premiums for Medicare Part B which covers doctor visits and other outpatient service. 
• There is often confusion about the special enrollment period.  If you are 65 or older, when you no longer are working and thus don’t have health insurance coverage, or when you no longer have insurance coverage through your spouse, you need to sign up for Medicare.  There is a special enrollment period that lets you sign up without being assessed a late enrollment penalty.  This special enrollment period is only available when you are no longer covered by job-based insurance or for eight months after you no longer have job-based insurance.  (Retiree health insurance of COBRA is not considered job-based coverage.) 
• There is often a misunderstanding about insurance coverage when you are employed when you turn 65.  Some employers can designate Medicare as your primary health coverage when you turn 65 so you need to check with your human resources department or benefit department on this item.  Just because you are employed when turning 65 does not mean you should ignore Medicare enrollment.    You need to determine whether Medicare or your job-related insurance is primary.
• Delaying your enrollment in Part B will cost you.  Your monthly Part B premium could be 10 percent higher if you don’t have job-based insurance. 
• For every 12 months you delay in signing up for Part D (prescription drug costs), your premiums could be 1 percent higher.  If you have job-based prescription drug coverage but lose the same, you will have a two-month special enrollment period to sign up for Part D without a penalty. 

TO BE CONTINUED NEXT WEEK.

You have the luxury of a cleaning person.  A neighborhood kid cuts your lawn or shovels your snow.  You have a great babysitter when you need one.  You have someone who runs errands for you.  It is so nice to have people you rely upon and who can help you out. 

But, wait!  Are these individuals considered household employees?  Are they hired by you to work in or around your home?  Are they working under your direction?  Are you able to control the work or services being provided?  If the answer is yes, then you are an employer and have an employee. 

So, what does that mean?  Well, you may need to address the issue of employment taxes. 

If a household compensated any one person in cash wages of $2,100 or more in 2018, household employment taxes must be paid by the employer.  There are some exceptions, such as family members or people under the age of 18, but certain restrictions do apply. 

The household is also responsible for withholding and paying Social Security and Medicare taxes.  There are also federal unemployment taxes if wages of $1,000 or more were earned in any calendar quarter of 2018. 

The “employees” must be eligible to work in the US.  The employer and the employee must complete and file an IRS Form I-9. The employer may need to secure an Employer Identification Number and issue documents at the beginning of each calendar year for the prior year.  You, as the employer, may need to file a tax return for having household employees.  Also, you should make certain that your homeowner’s insurance covers such individuals providing services to you. 

Now you begin to ask yourself if the services or work being provided to you is worth it.  Well, you can relax if your employees are hired through a business or agency.  There are many cleaning and lawn services available.  When you engage their services, you pay the company and the company pays the employees.  That relieves you of the responsibility to deal with the tax-related issues.  Yes, perhaps the charge for these services might be a little higher, but you don’t have the liability of having household employees.

We are in the midst of hurricane season and while most of us do not have to worry like some, the Internal Revenue Service reminds everyone to develop an emergency preparedness plan. Taxpayers, whether individuals, organizations or businesses, should take time now to create or update their emergency plans.

So, even though we may not be likely to experience a hurricane, there other disasters that could happen – fire, damage from the wind, etc.  What should you do to be prepared? 

• Important original documents such as birth certificates, insurance policies, Wills, Trusts, passports, car titles, etc. should be kept in a fireproof, waterproof container in a secure space.  If you have a safe deposit box; great.  Otherwise, make certain that your storage is substantial.  Those little fireproof boxes may not withstand intense heat, so do your homework on their durability. 
  
  
• Documents such as deeds are always good to have but as long as they have been filed at the Court House, you needn’t worry about them if they are lost. Copies can always be obtained. 
  
  
• It is a good idea to make copies of your important papers, including income tax returns, and give a hard copy or an electronic copy to a trusted individual.
  
  
• If your home was destroyed, how well would you remember EVERYTHING that is in it?  Take photographs or videos of the content which can help support claims for insurance purposes. 
  
  
• The IRS publishes a Disaster Resource Guide for Individuals and Businesses which is available on their website. 
  
  
• If there is a federally-declared disaster, the IRS has trained specialists to help with disaster-related issues.  If a taxpayer is impacted by a disaster outside of a federally declared disaster area whose records are located in a disaster area, they can receive assistance by contacting the IRS. 

Be prepared.  Should you be unfortunate to suffer a disaster loss, know that there are resources to help you through a difficult time.

Everyone wants to make the best return on their hard-earned money and many people shop around to find the best interest rate.  In our world today, we may find better rates at on-line banking sites than we can find in our brick and mortar banks.  BUYER BEWARE!

In working on an estate recently, the decedent had accumulated a nice nest egg.  He was diligent not to put more than the FDIC amount ($250,000) in any one banking institution.  In fact, he had a few accounts with on-line banks to earn a good interest rate.  The administration of the estate had progressed to a point of consolidating the accounts after receiving tax clearance and work toward the distribution of the assets.  All was going well until we attempted to collect the balance of an account that was based in California. 

When sending the request to close out the account, we received a response that we needed to file for an ancillary estate administration in California. (Of course they didn’t tell us this back when we communicated with them to notify them of the account owner’s passing.)  This was news to me as I have worked on many estates where the decedents had accounts in banks in other states but never have I encountered this requirement for a bank account. 

After much research and communications with the bank and a lengthy call with the Probate Department of Los Angeles County, I learned that it was, in fact, a requirement to raise an ancillary estate in California.  Normally this requirement exists only when there is real estate in a non-domiciled state.  We merely get an exemplified copy of the probate proceedings from the local Surrogate or Register of Wills, file it with the county in which the real estate is located and we are good to go. 

Well, sad to say, that is not the case in California.  In addition to the exemplified copy of the probate proceedings, there were several other forms required along with a fee of almost $500.  Once the papers are filed, within a month we will be advised of a hearing date (three to four months out) at which the executor must be present in person or by phone.  After the hearing, if there is no opposition, the court will sign an order to appoint the executor (being the same person who has been acting in New Jersey as executor).  Then, and only then, will the Probate Department – in about a month after the order is signed – issue the documentation needed to present to the banking institution to receive the funds and close out the account. 

Whew, what a process!  So now, we will be waiting for another six months before the beneficiaries can receive this asset. 

So, the BIG question is; was the higher interest rate worth this extra cost, delay and hassle? 

OK, the holiday shopping is done, so what is there to surf on the internet?  Have you ever checked out the IRS website?  I can hear you saying “How exciting!”  But, before you pass judgment on my suggestion, why not take a look at www.irs.gov ?  It just MIGHT have some information which may be helpful to you, such as:

• Where’s My Refund. Taxpayers can check tax refund status 24/7. Updates daily.
• Get Transcript. Access various transcript types online. Taxpayers may also ask the IRS to mail a Tax Return Transcript to them by requesting it online or by calling 800-908-9946. Allow 5 to 10 days for delivery.
• Direct Pay. Make tax payments directly from a checking or savings account. People can view their account balance if taxes are owed.
• Electronic Federal Tax Payment System. EFTPS is convenient and easy. Taxpayers and business can use it for various types of federal tax payments including estimated tax payments.
• Online Payment Agreements. Eligible taxpayers can pay their taxes by easily setting up a monthly payment plan.
• Answers to Tax Law Questions. The Interactive Tax Assistant takes people through a series of questions and provides the answers.
• Forms, Instructions and Publications. Taxpayers can download and view popular tax forms, publications and instructions anytime. Increasingly popular eBooks are available as well as PDF and HTML versions. Accessible versions for people with disabilities and prior year forms are also available.
• Where’s My Amended Return. Taxpayers can track the status of an amended return.

  HAPPY EXPLORING!