Making a Fresh Start for 2020? Here’s Help

Some people like to start their New Year’s off with a clean slate, going through the past year’s documents and organizing, tossing, or shredding anything they don’t absolutely need. However, many don’t, in part because we’re not sure exactly what documents we need to keep, and which we can toss. This article from AARP Magazine provides the missing information so you can get started: “When to Keep, Shred or Scan Important Papers.”

Tax Returns. Unless you’re planning on running for office, the last three years of tax returns and supporting documents are enough. That’s the window the IRS has to audit taxpayers. But there are some exceptions: if you are self-employed or have a complex return, double that number to six years, which is how much time the IRS has to audit you, if it suspects something’s fishy.

Regardless of how you earn your income, visit MySocialSecurity.gov account before shredding to make sure that your income is being accurately recorded. Having your tax records in hand will make it easier to get any figures fixed.

As for documents regarding home ownership, keep records related until you sell the house. You can use home-improvement receipts to possibly reduce taxes at that time.

Banking and Investments. If you or your spouse might be applying for Medicaid to pay nursing home costs, you’ll need to have five years of financial records. That includes bank statements, credit card statements, and statements from brokerage or financial advisors. This is so the government can look for any asset transfers that might delay eligibility.

If that’s not the case, then you only need banking and financial statements for a year, except for those issued for income-related purposes to provide the IRS with a record of tax-related transactions. Your bank or credit card issuer may have online statements going back several years online. However, if not, download statements and save them in a password protected folder on your home computer.

Stocks and bonds purchases need to be kept for six years after filing the return reporting the sale of the security. Again, this is for the IRS.

If you have a stack of cancelled checks, shred them. Most every bank and credit union today have an electronic version of your checks.

Medical Records. These are the documents you want to organize and keep indefinitely, especially if you have had a serious illness or injury. The information may make a difference in how your physicians treat you in the future, so normal or not, hang on to the following documents: surgical reports, hospital discharge summaries and treatment plans for major illnesses. Put these in a password-protected folder in your computer or a secure cloud-based account, so they can be shared with future healthcare providers. You should also keep immunization and vaccination records. The goal is to have your own medical records and not to rely on your doctor’s office for these documents.

Maintain proof of payments to medical providers for six years, with the relevant tax return, in case the IRS questions a health care deduction. If you have questions consult your elder law attorney.

Reference: AARP Magazine (August 5, 2019) “When to Keep, Shred or Scan Important Papers”

Could You Lose Your Social Security Benefits to Creditors?

What if you are retired and the only income you have is your Social Security benefit? “Can Creditors Come After Your Social Security Benefits” is the question posed by Yahoo! Finance. While for the most part, you don’t have to worry about creditors coming after your Social Security benefits, there are others who can get them, if you haven’t paid certain debts.

Personal loan payments, credit card payments, or medical bills are usually not able to take your Social Security benefits. But there are some exceptions you’ll need to know about:

  • The IRS will not blink at taking up to 15% of your benefits, if your taxes are not paid.
  • If you owe on student loans, the loan companies can come after your Social Security benefits, even if the debt is decades old.
  • The same is true if you are behind on either child support or alimony payments.

As long as your outstanding debt is not tax-related, the first $750 of your benefits is protected from being garnished. However, if you’re behind on child support or alimony, you could lose more than 50% of those benefits.

There are steps to take if debt is an issue. First, if you owe money to the IRS, contact the local IRS office to work out a payment plan. They will almost always work with people to reach an agreement on an installment payment agreement. This will avoid having your benefits garnished.

If you’re behind on student loan payments, reach out to the lender and work out an arrangement. If you can prove that your financial situation is dire, you might be able to come up with a deferred payment plan or change the repayment schedule.

If things are really bad, consider filing for bankruptcy. If you do, realize that not all your debt will be dischargeable. For the most part, the same debts that can cause Social Security benefits to be garnished, like overdue taxes and student loans, are not forgivable by a bankruptcy. If those are your key issues, bankruptcy is not your best option.

This might be a situation where a bankruptcy attorney or a debt settlement firm is needed. Be very cautious about working with a debt settlement firm, to be sure that they are credible and trustworthy. The firm or the attorney will be able to help negotiate the debts. Remember that the ultimate goal of any creditor is to get paid, and sometimes getting paid half of the amount is better than not being paid at all.

Your best bet is to approach this problem and tackle it before you file for Social Security. If your sole source of retirement income is compromised, you want to contact the local county Office for Aging services to find out what kind of help is available in your community. Don’t leave this hanging and hope that it will be resolved by itself.

Reference: Yahoo! Finance (April 27, 2019) “Can Creditors Come After Your Social Security Benefits”