50+ Lifestyles

Your Social Security

By Christina Vital
Manager
Rock Island Social Security office

MEDICARE PART B OPEN SEASON

If you are eligible for Medicare Part B medical insurance, but you didn’t sign up for it when you first became eligible for Medicare, you will have another opportunity to apply. Open season for Medicare Part B runs from January 1 until March 31, 2010. Better to act early than late — if you miss the deadline, you could have to wait until next year to apply!

Medicare Part B covers some medical expenses not covered by Medicare Part A (hospital insurance), such as doctors’ fees, outpatient hospital visits, and other medical services and supplies.

When you first become eligible for hospital insurance (Part A), you have an initial enrollment period of seven-months in which to sign up for medical insurance (Part B). After that, you have to pay a higher premium — unless the reason you declined Part B was because you were covered through a CURRENT employer’s large group health plan or a large group health plan based on a spouse’s CURRENT active employment, NOT a prior employer’s group health plan. If you wish to apply for Part B under a special enrollment period, you will be required to provide proof from your employer showing that you were covered under their large group health plan as an ACTIVE employee from the time you turned 65 until your recent retirement. For details on this see Medicare’s website at www.medicare.gov .

You are given another opportunity to enroll in Part B during the general enrollment period, from January 1 to March 31 of each year. But each 12-month period that you are eligible for Medicare Part B and do not sign up, the amount of your monthly premium increases by 10 percent for each year that you should have signed up, but failed to do so.

Medicare is made up of four parts:

• Hospital insurance (Part A) that helps pay for inpatient care in a hospital or skilled nursing facility (following a hospital stay), some home health care and hospice care;
• Medical insurance (Part B) that helps pay for doctors’ services and many other medical services and supplies that are not covered by hospital insurance;
• Medicare Advantage (Part C) plans are available in many areas. People with Medicare Parts A and B can choose to receive all of their health care services through one of these provider organizations under Part C; and
• Prescription drug coverage (Part D) that helps pay for prescription medications.

In addition, some people with low income and resources may qualify for extra help to pay for the costs — monthly premiums, annual deductibles and co-pays — related to their Medicare prescription drug plan (Part D). You can learn more about the extra help at www.socialsecurity.gov/prescriptionhelp.

You can learn more about Medicare by reading our electronic booklet, Medicare at www.socialsecurity.gov/pubs/10043.html. You also can call us toll-free at 1-800-772-1213 (TTY 1-800-325-0778) to ask for a copy. Or visit the Medicare website at www.medicare.gov. You also can call Medicare at 1-800-MEDICARE (1-800-633-4227; TTY 1-877-486-2048).

Just remember the Medicare Part B open season runs from January 1 to March 31.

WHAT AN ACCOUNTANT MIGHT NOT TELL YOU ABOUT SOCIAL SECURITY

There are some important things about Social Security that an accountant might not be telling you. And it’s important to know them, because it could mean the difference between a quick, easy move into retirement and a more troublesome transition.

Here are some things you may not know.

• Net, not gross. For people who are self employed, we count your net income, not your gross income, when figuring your credits of coverage and the amount of your future Social Security benefits. Net earnings for Social Security are your gross earnings from your trade or business, minus your allowable business deductions and depreciation. We also use your net income when figuring your benefit amount so a higher net income results in a higher benefit. Your Social Security retirement benefits will be based on your best 35 years of work after indexing those earnings to inflation.
• Credit where credit is due. If you and your spouse own and operate a business together and expect to share in the profits and losses, you may both be entitled to receive Social Security credits, even if there is a partnership agreement between the two of you. For each of you to receive credit for your share of the business income, you must file separate self-employment returns (Schedule SEs), even if you file a joint income tax return. If you don’t file separate Schedule SEs, all the earnings from the business will be reported under only one person’s Social Security number. In that case, only one of you will receive Social Security credits and the valuable protection they provide.
• Household workers are covered. If you are a household worker, your wages are covered under Social Security as long as you earn $1,700 or more in calendar year 2009 (including cash for transportation expenses) unless you were under age 18 during any part of the year. Household workers include babysitters in someone else’s home, maids, cooks, laundry workers, butlers, gardeners, chauffeurs, people who do housecleaning or repair work or anyone employed in or around someone else’s home. Your employer is responsible for completing a form W-2 and withholding Social Security taxes from your pay.
• Don’t forget to report. If you pay a household worker $1,700 or more in cash wages during 2009 to work at your home, you need to deduct Social Security and Medicare taxes and report the wages once a year when you file your tax return. This includes reporting any cash you pay to cover the cost of the employee’s transportation, meals or housing. If you do not report the wages on time, you may have to pay a penalty in addition to the overdue taxes. You also need to prepare a form W-2 to issue to your employee and send a copy to the IRS.

Want to learn more? Just visit our website at www.socialsecurity.gov to learn all about Social Security. For specific questions about taxes, visit the Internal Revenue Service at www.irs.gov. For specific information about self-employment and household workers go to our publications page at www.socialsecurity.gov/pubs and look for the publications If You Are Self-Employed and Household Workers. You can also call us at 1-800-772-1213 (TTY 1-800-325-0778) to request copies of these and other publications.

SSA AND SSI:  WHAT’S THE DIFFERENCE?

It’s a question we receive often, in a variety of ways. “What’s the difference between SSA and SSI?” Or “Are Social Security and Supplemental Security Income the same thing?”
The short answer is no, they’re not. They are major differences! Here’s the long answer.

The Social Security Administration (SSA) is the Federal government agency that administers both Social Security benefits and Supplemental Security Income (SSI) payments. But the two programs are certainly not the same, and the funds come from different places.

Social Security comes in three varieties: retirement benefits, disability benefits and survivors’ benefits. SSI comes in two: disability and aged benefits. SSI checks generally come on the first of the month while Social Security checks come at other times during the month.

Social Security benefits are funded through the Social Security trust funds; your Social Security payroll taxes are earmarked for Social Security benefits. SSI is a welfare program funded through general tax revenue.
Social Security is an insurance program based on individual Social Security taxes paid. In order to collect benefits, a person must have paid into the system and become insured. Most people need about 40 credits, or 10 years of work, to qualify. SSI is a welfare program that pays people with low income and resources who are either disabled or age 65 or older.

Social Security is an “earned right” based on work and payment of Social Security taxes. The more Social Security taxes you pay in, the more you can expect to receive in return. As you work and pay Social Security taxes, you are earning the right to future Social Security benefits. When you get Social Security benefits, what you own, including bank accounts, property, and investments, does not affect your Social Security benefits. SSI is not an “earned right”. SSI is a “needs based” or welfare program. Since SSI is a welfare program, your resources do affect your eligibility for SSI payments.

The U.S. Social Security system was established by the Social Security Act on August 14, 1935. SSI was based on the conversion of state welfare programs created by the amendments of 1972.

One thing that is the same for both Social Security benefits and SSI payments is that you can easily sign up for direct deposit —the safe, quick and convenient way to receive your payments on time, every time. To set up direct deposit, simply complete a direct deposit sign up form at your financial institution.

SSA and SSI may seem only a letter apart, but there’s a huge world of difference between the two programs.

To learn more, visit our website at www.socialsecurity.gov. You can also call us at 1-800-772-1213 (TTY 1-800-325-0778).