Financial Frontlines®

Medicare.We are receiving many calls from retirees about their Social Security retirement payments decreasing. This payment decrease can be traced back to the increase in Medicare Part B premiums. Medicare Part B premium increases apply to higher income beneficiaries with a modified adjusted gross income greater than $85,000 for individuals and $170,000 for couples in 2008. The Part B premium increases also apply to new enrollees in Medicare-Social Security but you obviously don’t notice an premium increase since this is your going-in rate. If you don’t see a premium increase and the resulting decrease in your Social Security payment, you are one of the 75% of Medicare enrollees unaffected by this change because you didn’t meet the income requirement.

Retired Pay. The decrease in military retired pay for some continues to be a popular topic. This is due to the 2009 Stimulus Plan expiring. Last year retirees received a break (decrease) in your federal withholding tax in military retired pay. The withholding tax reduction expired for 2010 so the withholding taxes went back up. For most, this is around $17. That’s the cause of the decrease in retired pay. Chances are you didn’t see a change if you submitted a specific amount of withholding tax to your pay agent (DFAS for most) on an IRS form W-4. The increased withholding taxes are in the tax tables under the categories like “single” or “married filing jointly.” When you stipulate a category, your withholding is determined by the tax tables that changed due to the Stimulus Plan expiring.

Military Eligible for Income Tax Filing Extensions. If you serve outside the U.S. or in a combat zone, you qualify for extensions in filing your income taxes. For outside the U.S., you qualify for an extension if you are outside the U.S. on the due date of the return. You can receive a 2 month extension. If you want more time, file an IRS Form 4868 and check block 8 for out of the country for 4 more months. If you’re in a combat zone, you have an extension for the time served in the combat zone plus up to 180 days starting the day you leave the zone. You could qualify for a longer extension depending on when you left for the combat zone. Assessment and collection deadlines will be extended and you will not be charged interest or penalties attributable to the extension period. The deadline extensions also apply to individuals serving in the combat zone in support of the U.S. Armed Forces, such as merchant marines serving aboard vessels under the operational control of the Department of Defense, Red Cross personnel, accredited correspondents, and civilian personnel acting under the direction of the U.S. Armed Forces in support of those forces. Members of the U.S. Armed Forces who perform military service in an area outside a combat zone qualify for the extension of time provisions if their service is in direct support of military operations in the combat zone, and they receive special pay for duty subject to hostile fire or imminent danger as certified by the Department of Defense. You are able to notify IRS directly of your request for combat zone relief for extensions of deadlines through a special e-mail address: combatzone@irs.gov. For more info on these tax filing extensions see this IRS page.

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