New rules for claiming Unemployment Benefits

Mike Sylvester • April 2, 2020

This email was added to our Blog on 4/2/2020.  If you did not get the email we sent to all of our clients please send Shane an email at Shane@sbscpagroup.com and ask Shane to please add you to our email blast list that we are using to keep our clients informed about the emergency legislation that Congress has passed.

April 1 st , 2020

This is a very long email and will affect many of our clients.  This email will affect anyone who is filing a claim for unemployment benefits, and please realize a lot more people can qualify for these benefits under the new laws, and the benefits are much larger than they have been in the past.  Please read the email entirely before contacting The Indiana Department of Workforce Development with your questions.  There is a section at the end of this email that summarizes what we think you should do if you think you are eligible for unemployment benefits after reading this email.  We will provide different sources for you to get more information at the end of this email; please realize we put everything we know in this email to assist you, your friends, and your relatives.  Please do NOT contact us with questions about Indiana unemployment claims because this is not something we can help you with.  This new emergency legislation has given us a lot more work to do in other areas, and we need to focus on those other areas.

This is our second email about the emergency legislation:

This email discusses the emergency legislation Congress passed ordering the states to expand unemployment benefits massively.  These benefits will flow to many people who were not previously eligible, and the amounts paid will in many cases exceed the amount of money workers are paid via their regular jobs.

The third email will be sent by Friday and will discuss the large amounts of loans that will be available to small businesses; in some cases, these loans will be forgiven and actually be considered a grant.

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With these new laws Congress is trying to convince businesses to follow one of two paths.  The first path involves encouraging businesses to lay off workers and for those workers to claim enhanced unemployment benefits.  The second path is for the government to offer loans; some of which will be forgiven and function like grants, meaning some of the loans will not have to be paid back and in turn the businesses will keep their employees on payroll.  Some businesses will follow a hybrid path and do some of both.

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This email is about the first path and discusses the new unemployment provisions.

The Federal government is pouring hundreds of billions of dollars into the state unemployment systems.  To get this money, each state must adopt various provisions that the federal government is forcing them to make to get all of this money.   We fully expect Indiana to comply with all of these provisions; and we expect most, if not all, other states to do the same.

The goal of this program is to allow more workers to apply for unemployment and for them to get their first unemployment check within three weeks of filing.  Further, the federal government is enhancing these benefits.

The goal of the Indiana Department of Workforce Development is to get the first unemployment check out three weeks after the initial claim for unemployment benefits.  We expect the first check to go out three weeks after you submit your claim if your claim meets the standard rules that have been in place for years.  If your claim involves the new rules, we feel it will take you 3-5 weeks to get your first check because they have to reprogram their software, and they are overwhelmed with phone calls and emails.   Further, they have closed their offices to the public.

The Indiana Department of Workforce Development has not had time to issue their new rules, and they are begging people not to call them with questions about the new rules since they need time to write the new Indiana rules, change their software, and train their staff.

Indiana has adopted some of the new rules listed below already, and we expect them to adopt all of the new regulations by the end of this week.  These rules are:

You are eligible for benefits as of the first day you are laid off.

They have to tell you if your claim is denied through the account you set up online, and you can appeal it.

Currently, you have to file a weekly voucher telling them all the income you earned that week and listing the jobs you applied for.  We expect the job search requirements to be lessened or even eliminated but not the obligation to file the weekly voucher online.

Employers will not be held accountable for employees who are laid off due to COVID-19.  This means all Indiana employers will see their tax rates increase 1/1/21, not just those who lay off employees.  The tax increases will be spread across all businesses.

Right now, Indiana allows 26 weeks of unemployment benefits, and we expect this to be increased to 39 weeks.

Indiana will calculate your benefits per their usual rules, and once your claim is accepted, you will be able to see these amounts in your online account.

If you qualify for Indiana unemployment benefits under the new expanded rules, you will be paid the Indiana amount and another $600 per week provided by the federal government.  The additional $600 payment is for a maximum of four months.  Indiana may send one payment per week or two payments per week; they have not decided yet.

Any worker who has been diagnosed with COVID-19 will qualify if they cannot work.

If you have to care for a family member or a member of your household that has been diagnosed with COVID-19, you also qualify for unemployment.

If you are providing care for a child or other person in your household that you have primary caregiving responsibility for and that individual is unable to attend school or attend another caregiving facility that is closed due to COVID-19 and this causes you to be unable to work you qualify for unemployment.

You are unable to reach work due to a COVID-19 quarantine.

You are unable to work because a health care provider has advised you to self-quarantine due to COVID-19.

Any worker who was furloughed by their employer due to COVID-19 will now qualify regardless of wage history.

Any worker that was laid off due to COVID-19 will also be eligible regardless of their work history.

A worker who was scheduled to commence work and now does not have a job due to COVID-19 or is unable to get to work due to COVID-19 qualifies.

The individual has become the primary breadwinner or significant support for a household because the head of the household has died as a direct result of COVID-19.

The worker has to quit their job as a direct result of COVID-19.

Freelancers, independent contractors, gig workers, and the self-employed, in many cases, can now file for unemployment benefits if they were laid off due to COVID-19.  This is not well defined, and the rules are not clear on this.  The Indiana Department of Workforce Development will issue guidelines on this in the next 7-10 days.

Remember you do not qualify for unemployment if:

You can telework with pay, OR you are receiving sick pay, or other paid leave benefits.

Note that you may qualify for partial benefits if your employer reduces your hours to less than your regular full-time workweek.

According to the FAQs posted on the Indiana Department of Workforce Development (DWD) website, “Indiana Unemployment benefits are available to any individual who is unemployed through no fault of his/her own.  If an employer must lay off employees due to the loss of production caused by the Coronavirus, individuals may be eligible for unemployment benefits if they meet the monetary criteria and the weekly eligibility criteria.  Employees must stay in contact with their employer and be available to work when called back.”

Your application will be a regular application under the standard rules and accepted quicker as long as:

You were laid off for lack of work or due to COVID-19 AND In the last year and a half, you earned $7,000 or more in W-2 wages (This is not the exact rules but gets you in the ballpark).

How do you apply:

You apply online through the DWD website, the required visit to a WorkOne office has been waived.  Their website is busy, and their phone lines are just as busy.

When will you get benefits:

DWD says you will get your first payment within three weeks as long as your employer does not fight the claim.  You must file a voucher every week listing all income and your job search efforts if still required by DWD once they implement the new rules.

It is clear that the intent of this legislation is for the federal government to provide hundreds of billions of dollars to state governments.  Those state governments will then change their rules and interpret the new federal laws as best they can.

Our advice is that you do the following and please realize we do not currently know more than is in this email:

If you have questions, please do one of the next or all of the following:

Email DWD at   AskUIContactCenter@DWD.com

Call DWD at 1-800-891-6499

If you contact DWD, you will need to be patient because they are overwhelmed.

Call Congressman Jim Banks’ Office at 260-702-4750, they claim to have people who are experts on the new legislation, and this might be your best bet the next couple of days.

DWD has a great website, and you can find most of your answers there.  They have a COVID-19 section that was last updated on March 26 th , 2020.  You should check their website for updates.

If you think you qualify for unemployment, you should go to the Indiana Department of Workforce Development website and file a claim immediately. The sooner you get the process started, the sooner you will get your first check.     https://www.in.gov/dwd/2362.htm   Filing a claim takes many people an hour or more and needs to be done from a computer or tablet.  Sometimes it can be done from a powerful smartphone; however, many people are having problems using a smartphone.  If you do not have a computer or tablet, you need to get a friend or family member to help you; most public buildings are closed, as are most government offices.

Once you file your claim, watch your email closely and log into your new online account frequently to monitor the status. Remember, if your request is denied, you should call them to discuss, and you should appeal it.  Congressman Jim Banks’ office can help you with this.

Every week you need to log into your online account and file a weekly voucher telling them your earnings, job status, etc. This is important and must be done.

These are tough times, and we are trying to give our clients as much information as we can.  If you have further questions, please reach out to DWD or the office of Congressman Jim Banks.  We are overwhelmed with work due to all of this new legislation, and we honestly have put everything we know about this topic in this email!

SBS CPA Group

Mike Sylvester, CPA

 

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SBS Staffing Changes

By Mike Sylvester • September 11, 2025
Nathan Skinner, one of our four Senior Staff Accountants, is moving back home to Dayton, Ohio. Nathan has been with us for four years since he graduated college in 2021. We wish Nathan success in all of his future endeavors, and we will miss him greatly! His entire family is in Dayton, and we think this move will be great for his family. Nathan's last day at SBS will be either September 18 th or 19 th . If you normally work with Nathan, you will get an email from us letting you know who you will be working with moving forward! If you need something before you get the email; please call Nikkie Reyes at 260-407-5000 and she will connect you to the right person!  SBS CPA Group is hiring, and we will be posting our job opening on Indeed and on our company blog in the next few days. If you know someone looking for a great job in public accounting in Fort Wayne, Indiana, please reach out to Mike Sylvester at Mike@sbscpagroup.com!

New Gambling Loss Rules

By Mike Sylvester • August 27, 2025
The gambling rules for tax year 2026 have changed due to the new tax bill. One Big Beautiful Bill Act (OBBB), was signed into law on July 4, 2025 by President Trump. These changes will affect both casual gamblers and professionals beginning in the 2026 tax year. Those who gamble should understand the new rules. The Old Rule (Through 2025) Historically, the IRS has allowed taxpayers to deduct gambling losses—but only to the extent of their gambling winnings. If you won $10,000 but lost $15,000, you could deduct $10,000 in losses, effectively zeroing out your taxable gambling income. The New Rule (Starting 2026) Beginning with the 2026 tax year, gambling losses will be deductible at only 90% of the amount of winnings. While this may sound like a minor adjustment, the impact is significant. Example: You win $100,000 and lose $100,000 during the year. Under the old rule: You would report $100,000 of income and deduct $100,000 of losses, resulting in zero taxable gambling income. Under the new rule: You can deduct only $90,000 of those losses on your federal income tax returns. That means you’ll still be taxed on $10,000 of “phantom income,” even though you truly broke even. This rule applies to all gamblers, whether you buy the occasional lottery ticket or operate as a professional gambler. How Itemized Deductions Work It’s important to understand that gambling losses are deductible only if you itemize deductions on your tax return. Here’s what that means: Standard vs. Itemized Deduction Every taxpayer can take the standard deduction—a fixed amount based on filing status. For 2025, the standard deduction is $14,600 for single filers and $29,200 for married couples filing jointly. Alternatively, you can choose to itemize deductions if the total of your eligible deductions (mortgage interest, charitable contributions, state and local taxes, medical expenses, and gambling losses, among others) is higher than the standard deduction. Where Gambling Losses Appear Gambling losses are reported on Schedule A, Itemized Deductions, not directly against gambling winnings. You must report all gambling winnings in full as income. Losses are deducted separately on Schedule A, up to the allowable limit (100% through 2025, 90% starting in 2026). Recordkeeping Requirements To claim these deductions, you must keep meticulous records—receipts, tickets, player’s club statements, and a diary of gambling activity. Without proper documentation, the IRS may disallow your deduction even if you had genuine losses. Why It Matters The IRS projects that this change will raise more than $1 billion in revenue over the next decade, but it comes at the expense of fairness. Many taxpayers will now find themselves paying tax on income they never actually earned. Professional gamblers, in particular, may feel the heaviest impact, as their livelihoods often involve large swings of wins and losses. Additionally, because gambling losses are only deductible for those who itemize, some taxpayers may find that the standard deduction provides a bigger benefit—even if it means their gambling losses go unused. This makes strategic planning even more important. Planning Ahead For 2025, the old rules remain in effect. If gambling is part of your financial life, I strongly recommend:  Evaluating whether itemizing makes sense in your situation. Keeping meticulous records of all winnings and losses. Budgeting for higher tax liability in 2026 and beyond, even if you expect to break even. Consulting with a tax professional to explore potential strategies for minimizing the impact. At SBS CPA Group, we’re here to help clients navigate these changes with confidence. If you’d like to review your individual situation and discuss strategies for 2025 and beyond, please reach out to your CPA and we’d be glad to assist. Mike Sylvester, CPA

Energy Tax Credits

By Mike Sylvester • August 27, 2025
Valuable tax credits are expiring at the end of this year. Our clients have claimed hundreds of thousands of dollars of federal energy tax credits the last few years! The One Big Beautiful Bill that passed in July changed the expiration date for the Residential Clean Energy Credit and the Energy Efficient Home Improvement Credit to December 31, 2025. Originally designed to expire in 2032, these credits can lead to substantial tax savings. To meet the Residential Clean Energy Credit requirements, you must install one of the following items in your main home or second home. The home can be new or existing. Homes you rent out do not qualify, but renters who improve the property do qualify. The credit is 30% of the expenditure, including labor. The item must be brand new; used items do not count. -Geothermal Heat Pumps -Wind Turbines -Solar Electric Panels -Solar Water Heaters -Fuel Cells (credit limited by the amount of kilowatt hours and only for main homes) -Battery Storage Systems (with equal to or greater than three kilowatt hours) You can claim all of these in the same year if you qualify for them. There are no limits on the amount of credit you can claim, except for Fuel Cells as noted above. To qualify under the Energy Efficient Home Improvement Credit rules, you would need to install one or more of the following items in a house that you live in that already exists. New homes do not qualify and neither do rental houses. The amount of the credit is 30% of the expense, with maximum limits listed below: -Exterior Doors (up to $250 per door, $500 total; must be main home; cannot include labor costs; for homeowners only-not renters) -Certified Home Energy Audit (up to $150; must be main home; for homeowners only-not renters) -Exterior Windows and Skylights (up to $600; must be main home; cannot include labor costs; for homeowners only-not renters) -Insulation and Air Sealing Materials (up to $1,200; must be main home; cannot include labor costs; for homeowners only-not renters) -Central Air Conditioners (up to $600; can be main or second home; you can include labor costs; homeowners or renters can claim) -Natural Gas, Propane, or Oil Water Heaters (up to $600; can be main or second home; you can include labor costs; homeowners or renters can claim) - Natural Gas, Propane, or Oil Furnaces and Hot Water Boilers (up to $600; can be main or second home; you can include labor costs; homeowners or renters can claim) -Electric Panel Upgrade (up to $600; can be main or second home; you can include labor costs; homeowners or renters can claim) --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -Electric or natural gas heat pumps (up to $2,000; can be main or second home; you can include labor costs; homeowners or renters can claim) -Electric or natural gas heat pump water heaters (up to $2,000; can be main or second home; you can include labor costs; homeowners or renters can claim) -Biomass stoves and boilers (up to $2,000; can be main or second home; you can include labor costs; homeowners or renters can claim) The maximum credit per year is $3,200. You can claim up to $1,200 for anything above the line and $2,000 for anything below the line. Also, new for 2025, it must be from a qualified manufacturer with a PIN or QM Code. (Insulation and Air Sealing Materials are exempt from needing a PIN.) As you can see, the credits can provide substantial savings for you at tax time. You can claim both credits on the same tax return and they do not affect each other’s limits. All items for either credit must meet certain standards-just calling themselves energy efficient is not sufficient. Installation of the improvement needs to occur on or before December 31, 2025-simply ordering it or prepaying for it does not count. Both credits are nonrefundable, which means if the credits are bigger than your tax liability, you will not receive the excess as a refund. In the case of the Residential Clean Energy Credit, any unused credit will carry forward to use in future years. The Energy Efficient Home Improvement Credit does not carry forward. If you have already installed energy efficient improvements this year, make sure to let your tax preparer know. If you still plan to install energy efficient improvements, you may want to consult your tax advisor before making your purchase to make sure you maximize your tax savings.  Mike Sylvester, CPA

Clean Vehicle Credit

By Mike Sylvester • August 26, 2025
If you have been planning to buy a clean vehicle, you will want to act soon. Right now, there are tax credits for both individuals and businesses that can make buying an electric vehicle more enticing. However, the One Big Beautiful Bill will end these tax credits as of September 30, 2025! What is a clean vehicle? The IRS says that a clean vehicle is one that gets plugged in (aka an electric vehicle) or a fuel cell electric vehicle. Currently, if you buy a new clean vehicle for personal use, it can qualify you for the Clean Vehicle Credit. If you purchase a new car, the credit can be up to $7,500. Certain used electric vehicles can earn you a credit of up to $4,000. Tax credits are a dollar-for-dollar savings on your tax bill, so these are substantial savings! To qualify for the credit, the vehicle must meet several guidelines. To see if your vehicle qualifies, you can go to fueleconomy.gov. Also, the following income thresholds must be met: For new vehicles: -Modified AGI in the year of delivery (or the year before delivery) is no more than: -$150,000 if single, -$225,000 if head of household, -$300,000 if married filing jointly -Vehicle cost no more than -$55,000 if a sedan, -$80,000 if a SUV, pickup, or van For used vehicles: -Modified AGI is no more than: -$75,000 if single, -$112,500 if head of household, -$150,000 if married filing jointly -Vehicle cost no more than $25,000 In the case of businesses and tax-exempt organizations, the Commercial Electric Vehicle Credit allows a credit up to $7,500 for vehicles under 14,000 pounds and up to $40,000 for vehicles weighing 14,000 pounds or more. There are no income limits or price caps for businesses to qualify, but there are several eligibility requirements that must be met. You can go to fueleconomy.gov to see if your vehicle qualifies. Before taking these credits, you must make sure you did not get a point-of-sale rebate. Instead of waiting to get the tax credit when you file your taxes, you could have taken the option to take the credit at the time you purchased the vehicle which would have reduced the price you paid for the vehicle. You cannot have both a tax credit and a point-of-sale rebate for the same vehicle. Remember, these credits end September 30 th , 2025 so you must purchase and take delivery of your vehicle by then. Ensure you fill out your tax planner correctly so we can ensure you get these tax credits on your 2025 income tax returns.  Mike Sylvester, CPA

The Tax Professional Industry Is Shrinking

By Mike Sylvester • July 31, 2025
The Tax Professional Industry Is Shrinking The number of Certified Public Accountants in the United States is shrinking, and this trend is only expected to continue—and likely get worse. Three hundred fifty thousand more people have left the accounting industry than have joined it since 2020, and this has been caused by: 75% of CPAs are at or nearing retirement age Fewer people are taking and passing the CPA exam Further, many employees are leaving because they do not like the insane hours and want to focus on improving their quality of life. In our area, one or two firms close each and every year. A lot of firms are consolidating and becoming larger. The total number of firms in our area is half of what it was back in 2008. This is expected to continue. Things are very difficult in our industry, and 530 different potential new clients called our firm last year—and we spent nothing on advertising. Realize we have a total of 950 clients today. Considering we do not advertise, this honestly tells you everything you need to know about our industry. A majority of CPA firms today are not taking on any new clients because they are full—or, more likely, overfull. The three most common reasons why new clients contact us are: Prior CPA retired or died Prior firm got bought out and they dislike the new firm They cannot get questions answered We are still taking on new clients; however, we are being choosy who we onboard. Our firm is fortunate. The average age of the ten people at our firm is 41 years old. Compared to other CPA firms, that is extremely young. We already have four CPAs. We have two employees who we expect will be CPAs within the next year and another who will be an Enrolled Agent. It is a great time to be a CPA! We look forward to working with you for many years! Mike Sylvester, CPA

The Internal Revenue Service is in Trouble

By Mike Sylvester • July 30, 2025
The Internal Revenue Service will lose 25% of its total workforce in early and mid-2025. Many in Congress want to cut the IRS workforce even more next year. The IRS was already struggling to do its job before so many people were let go. For example: The Fort Wayne office was closed, along with many other offices around the country. The phone system is terrible. It is hard to get an agent on the phone, and disconnections are very common. They are issuing a record number of notices to taxpayers. Most of the notices are wrong. Worse, they have removed much of the information that used to be listed on the notices. This makes it much harder to deal with those notices and requires us to call them more and write them more letters. Their computer systems are, in some cases, 40 years old and slowly failing. The IRS has to deal with the newly passed tax laws, which are extremely complicated and will require many new forms and instructions. We have several clients who have had to wait well over a year for items to be resolved, and we expect that to get worse. The IRS has its fifth Commissioner already this year, and the current Commissioner is completely unqualified for the job. The Indiana Department of Revenue (INDOR) is also declining; however, it is more functional than the IRS. INDOR is issuing more notices and has removed a lot of information from their notices as well. INDOR’s budget has been cut by 5% this year and another 5% the following year. It looks as if they will not be allowed to hire anyone for 27 months. Further, the IRS and INDOR both have an aging workforce, and a large number of employees will retire over the next few years. The taxing agencies are getting harder to deal with, and we expect the IRS will be very difficult to deal with. All of this will be difficult for both you and our firm to deal with it. That being said, we are developing a plan to deal with it!  Mike Sylvester, CPA

One Big Beautiful Bill

By Mike Sylvester • July 29, 2025
Congress passed and President Trump signed into law major changes to the federal income tax code. These changes are very complicated and provide tax planning opportunities. Most of these changes are beneficial to taxpayers. Please ensure you read our email newsletters as we will be discussing many of the major provisions over the next few months. The changes are very complicated and: Some only affect certain years Most of them phase out at specified income levels Some require new forms Many require guidance from the IRS to be issued We will attend a large amount of training on these new provisions and do not expect much of the IRS guidance to be available until October 2025. Karena, Brent, and I can be hired to provide tax planning and help you minimize your income taxes. Please reach out to us in October of 2025.  Mike Sylvester, CPA

Why You’re Getting More Tax Notices

By Mike Sylvester • June 25, 2025
Summer has arrived in Fort Wayne, Indiana. Both the Internal Revenue Service and The Indiana Department of Revenue are sending more incorrect tax notices. Worse both have changed their notices to provide little, or any information, forcing us to reach out to them and talk to them to find out what their notice means. Both agencies are struggling due to budget cuts. We expect this to get worse over the next couple of years. We are happy to help you with tax notices; however, they currently take a long time to resolve, and we charge separately for resolving tax notices. The Internal Revenue Service is in complete disarray due to DOGE cuts and some reports show that the IRS may only answer 16% of phone calls they receive next tax season. Further, we are seeing it take the IRS years in some cases to respond to notices, and it now often takes them 6 to 12 months to process amended returns, old year returns, and returns for those who are deceased.  The tax agencies are much harder to deal with than they were five years ago; and we expect this to get worse due to budget cuts.

TaxDome Implementation

By Mike Sylvester • June 25, 2025
SBS CPA Group implemented TaxDome this year. Our clients really like the easy-to-use portal, and more than half of our clients are using this platform. We expect that number to grow significantly. We like TaxDome and have received great feedback from our clients. A copy of your tax returns is in TaxDome. You can retrieve them yourself any time. If you need help please reach out to Nikkie Reyes at Admin@sbscpagroup.com or call her at 260-407-5000 and she can help you retrieve a copy of your tax returns from TaxDome or, if needed, she can get them to you in another way. If you have not opted into TaxDome, please opt in. Just email Nikkie or call her and she will help you opt in. If you are married and file a joint return both of you need to opt into TaxDome. Opting into TaxDome is not required for current clients next year. We really like TaxDome, and you will too. Please give it a chance. Mike Sylvester, CPA

Social Security And Retirement: What You Should Know In 2025

By Mike Sylvester • June 17, 2025
The Original Purpose of Social Security: A Three-Legged Stool Social Security is a cornerstone of the United States' social safety net. Many Americans depend on this program to fund their retirement. The most recent data available from the Social Security Administration highlights the program's critical role in retirement planning. Social Security benefits account for approximately 30% of the income for individuals ages 65 and older. Retirement income was envisioned as a three-legged stool consisting of pensions, personal savings, and Social Security, each contributing one-third. The program was never intended to serve as the primary source of retirement income. Many Lower-Income Retirees Rely Heavily On Social Security 51.8% of individuals ages 65 and older depend on Social Security for half or more of their income. 24.7% of people in this age group rely on it for 90% or more of their income. Statistics Regarding Which Retirees Depend On Social Security The extent of reliance varies significantly by income quintile ; note the first quintile is the lowest 20% of taxable income and the fifth is the highest 20%: In the 1st quintile, 64.1% rely on Social Security for 90% or more of their income in retirement. In the 2nd quintile, 47.8% rely on Social Security for 90% or more of their income in retirement. All the way up to the 5th quintile, none of whom rely on Social Security for 90% or more of their income in retirement. Can Social Security Survive Beyond 2033? The program faces significant challenges. Without reform, Social Security will not be able to pay full benefits by 2033 . This presents a critical issue for Congress, as reductions in benefits are politically and socially untenable. Many changes are being made to the program via the Department of Government Efficiency. Further The Social Security Fairness Act was passed into law on January 5 and this brought more changes to the program. How Social Security Benefits Are Calculated Despite its importance, many people are unaware of how their Social Security benefits are calculated. Since the Social Security Administration ceased mailing statements in 2011, individuals must proactively set up an online account to access this information. The benefit formula is intentionally progressive, favoring lower-income earners by replacing a higher percentage of their income. For higher-income earners, Social Security becomes less significant as a percentage of their total retirement income. Terminology For Calculating Your Social Security Benefit 1. Credits: To qualify, individuals must earn 40 credits. In 2025, one credit is earned for every $1,810 in covered earnings (most often wages), with up to four credits given annually. 2. Average Indexed Monthly Earnings: The AIME figure is based on a worker's 35 highest-earning years, adjusted for inflation. If fewer than 35 years of earnings exist, zeros are averaged in. 3. Primary Insurance Amount: This is the monthly benefit a person receives at full retirement age. PIA is calculated using a formula adjusted annually for inflation. 2025 Social Security Payout Example: How The Formula Works Bend points are critical to the calculation and can be used to ensure you draw as much as possible in retirement. For a retiree with an AIME of $7,391 (This is annual wages of $88,692 in 2025 dollars): • 90% of the first $1,226 = $1,103.40 • 32% of the amount between $1,226 and $7,391 = $1,972.80. • Total PIA = $3,076.20 (before Medicare premiums). Strategies To Maximize Your Social Security Benefits To optimize benefits: • Aim for an AIME of at least $1,226, as the first tier yields a 90% replacement rate. • Understand that amounts above $7,391 are replaced at only 15%. Reviewing your lifetime earnings is crucial to ensure accuracy. Errors are far easier to correct early on than later on, when reconstructing decades-old income records may be challenging. Will Your Social Security Be Taxed? What Retirees Should Know Since 1983, up to 85% of Social Security income has been subject to federal taxes, depending on other income sources. This makes the program more progressive but also adds complexity to retirement planning. Consider discussing this with your tax professional and financial planner. When Should You Start Collecting Social Security? When to begin drawing Social Security benefits is a critical decision, particularly for married couples. Meeting with a qualified financial planner may be appropriate. Starting benefits early results in reduced monthly payments, while delaying up to age 70 increases them. Careful analysis and planning are essential to maximize lifelong benefits. Final Thoughts: Why Understanding Social Security Matters More Than Ever Social Security is a vital program for most Americans. Understanding its mechanics and planning effectively can significantly impact your retirement security and should be carefully considered before retirement. I do some consulting on this topic and if you want to hire me to do some Social Security planning please send me an email at Mike@sbscpagroup.com . Mike Sylvester, CPA