Richard A. Lindsey, CPA

Lindsey & Waldo, LLC – Certified Public Accountants

  • Jul 7

    How to Write Off Katie’s Soccer Camp

    Yes, it is quite do-able. But, like many things in the tax code, the devil is in the details. Let’s see if I can cut through the Tax Mumbo Jumbo for you.

    If Katie (or Bruce) is younger than 13 and goes to a DAY camp (overnight doesn’t work), and you are both working (or “looking for work”) then,…

    Cha-ching.

    You can then choose to pay for the camp using a Flexible Spending Account (FSA) or you can take the child care credit. Remember credits are better than deductions. With both the FSA and the child care credit, other eligible expenses include the cost of day care or preschool, before or after school care, and a nanny or other babysitter while you work.

    The size of the credit depends on your income and the number of children you have who are younger than 13. You can count up to $3,000 in child care expenses for one child, or up to $6,000 for two or more children.

    There are some limitations. The credit is only good for families of a certain income range and the percentage of eligible costs varies with income.

    All told, it’s a good deal which you should take advantage of, if you qualify.

    Bonus… If you have two or more children and child care costs exceed $5,000 for the year, you can benefit from both accounts. You can set aside up to $5,000 in pretax money in your FSA for child care costs, then claim the child care credit for up to $1,000 in additional expenses.

     

    Other strange, but true deductions

    You can pay your significant other (pay attention now) to do legitimate work for you and take a deduction.

    Bruce hired his live-in girlfriend to manage his rental properties. Her duties included finding furniture, overseeing repairs, and running his personal household. He went to Tax Court and fought the IRS which had disallowed the entire deduction. He won a deduction for the portion of his payments which could legitimately be tied to her business work.

    A married couple owned a junk yard and put out cat food to attract wild cats. Why, you might ask? The feral cats they were trying to attract dealt with snakes and rats on the property. That made for a safer junkyard for customers.

    And that made cat food a business deduction. The IRS first thought this was ridiculous, but before the case reached the Tax Court the IRS agreed!

    The details are always important, so be careful and ask us for advice first.

  • May 12

    I’ve written before about what a good tax planning technique hiring your children can be. (See “Hiring Your Children for the Summer: The Job of Last Resort or Just Good Tax Planning,” Taxing Times, June 2015.) It can be an effective way of shifting income from your high rate to as low as zero percent! It can also be good for the kids. However, as a recent tax court decision demonstrates, it’s important to dot your i’s and cross your t’s.

    The case involved Lisa Fisher, a New York attorney, faced with a common dilemma to find summer care for her children, all under the age of nine. So, during the summer, she brought them into her office two or three days a week where they shredded waste, mailed letters, answered phones, greeted clients, and copied documents.

    Fisher took deductions for the $28,770 in wages she paid her kids over a three year period. But, she didn’t keep any payroll files or issue any W-2s. She didn’t keep any records substantiating the work they did or establishing that she paid “reasonable compensation” for the work performed. Nor could she present any documentary evidence, such as cancelled checks or bank statements, to verify that she actually paid them the wages she deducted.

    You know where this is headed. The IRS disallowed the deductions for the children’s wages and imposed an accuracy related penalty. The Tax Court affirmed that decision.

    Bottom line: Hiring your children to work for your business, or rental properties, can be perfectly legal tax planning. But, you have to follow the rules and document everything in order to protect the benefits.

  • Mar 31

    Just prior to Christmas 2015, Congress passed the PATH Act which permanently extended several tax provisions, which had been on a cycle of being temporarily extended for one or two years at a time. (See “Congress Takes a New Tack on Extenders” in the February 2016 issue of “Taxing Times”.) While there were some very important items that were permanently extended by the PATH Act, not everything was. Some provisions which expired at the end of 2016 and may be important to you include:

    • the exclusion from gross income of the discharge of qualified principal residence indebtedness income,
    • the treatment of mortgage insurance premiums as qualified residence interest, which permits a taxpayer whose income is below certain thresholds to deduct the cost of premiums on mortgage insurance purchased in connection with acquisition indebtedness on the taxpayer’s principal residence,
    • the above-the-line deduction for qualified tuition and related expenses, and
    • the 7.5% adjusted-gross-income floor for deducting medical expenses, applicable to individuals age 65 and older and their spouses, which increases to 10% in 2017.

    It is possible Congress will retroactively extend some, or all, of these provisions, but as it currently stands, these provisions have seen the end of the road.♦

  • Feb 3

    How The Tax Code Makes Regular Taxpayers Angry

    Many people think that preparing taxes for a living is a somewhat easy assignment.

    Bless their hearts.

    It’s NOT just “filling in the boxes” and having the spreadsheets or the software spit out the results. I WISH it were so simple. There are three big reasons why it’s much harder than that — even for many professionals.

    1) The tax code is incredibly long. The version of the tax code we are using right now is more than 75,000 pages long (and that is about 186 times LONGER than it was back in 1913 when we started with it) — and it will likely be getting longer this coming year.

    2) The code also happens to be pretty complicated and laden with contradictory incentives. Take this credit, and watch that other credit go bye-bye. Fail to deduct this item, and then you won’t be able to deduct that other item. You get the picture.

    Sorting through all of them is most definitely NOT a task for a computer software program. It requires sitting down with an individual, a business owner, a family, determining what they most care about, and then use that complicated code to plan for it all properly. Really, that’s the only way to do it. Everything else is just “after the fact” clean-up work.

    Which is why it’s so critical to meet with someone before the end of the year to make sure that you’re set up to hold a tax position which represents the real picture of where you really want to be going.

    This is the essence of tax planning. Some may say that this is overstating it — but, after years of doing this, I’ve become convinced that it’s the truth. I’m in the business of helping you fulfill your dreams by helping you hold on to as much income/revenue as possible!

    3) Oh, and as I alluded to previously, there is one more big reason this job is no cupcake — staying up to date with how the law is constantly changing.

    And I’m as patriotic as the next person … but, Congress makes THIS task no cupcake.

    Despite what certain fringe voices might claim (and they cite all kinds of “facts” behind their claims), the truth is that we don’t have the choice to “not file” or “not pay” what the tax laws say we owe. That’s why the IRS audits returns and has all sorts of “encouragements” (liens, refund offsets) to encourage us to file by each April 15, and to do so correctly.

    But, even with automatic payroll deductions, etc. we U.S. taxpayers are trusted to fill out the forms, ensure the correct amount was withheld and let the IRS know what our true final bill was. That’s called tax filing. And if we discover that we owe the U.S. Treasury, then our system (as it stands now) relies on us to send in the necessary payments. This, of course, is what we spend much of our time on around here at Team Lindsey — helping YOU do this ethically, but ensuring you’re not overpaying.

    But, Congress makes this much harder than they need to.

    They do this — probably unintentionally — by tinkering with our tax laws so much. They change them, sometimes slightly, sometimes quite a bit, and they do so constantly. What’s worse is the annual rite of procrastination in the House and Senate. I see this all the time. As a regular course of business.

    And these delays in tax changes — or the decision to make some laws retroactive months later (extenders, estate tax, etc.) — totally screw up basic tax planning, sometimes negating options that could have been used to legally lower a tax bill.

    (Which, incidentally, is why I have to pay so much attention to what’s happening in the legislation NOW, during the offseason. I do this so you don’t have to.)

    So some people fudge their returns. And, unfortunately, they feel justified in doing so.

    One recent example was the first-time homebuyer credit that was created a few years back … then revised … and revised again. Many homebuyers had to “pay back” a credit that was taken under existing law — then later canceled.

    And I know (from conversations with real people) how many felt justified in finding ways to “skim back” (i.e. fudge) that $500 back into their returns because they were annoyed at how Congress handled it.

    And there are plenty of other tax laws with similar histories that tick off filers enough so that they look for ways of getting payback when they fill out their 1040s.

    Now, I’m not condoning these taxpayers’ decisions to “even up” the tax code where they may find it unfair. Life can be unfair and taxes are a part of that often unfair life.

    But, Congress can do a lot to prevent these “they hurt me, so I’ll hurt the tax system right back” attitudes, by doing its tax-writing job in a more rational and professional manner.

    Until it does, well, then, Capitol Hill is going to keep creating bad attitudes.

    But, here’s where some hope comes in…

    For my clients and contacts, you can rest assured that we are paying attention … and that we will be on top of even these woefully-procrastinating legislators. We’ll do all that is ethically possible to make sure you don’t make moves that you’ll regret after the fact.

    And the best way to help us help YOU, is by giving us a call to talk things through NOW, while we can still make a difference with 2016 returns.

    “You can conquer almost any fear if you will only make up your mind to do so. For remember, fear doesn’t exist anywhere except in the mind.” – Dale Carnegie

  • Oct 28

    In what may come as a shock to many of you, the country is broke and is looking for additional revenues. You should know, it will be looking in every nook and cranny to replenish the federal coffers. What you may not know is the Internal Revenue Service seems already to be engaged in revenue-finding-missions. Among the objects of their affection – in the tax audit – are sole proprietors filing Schedule C, and substantiation requirements for every possible deduction.

    The IRS now views the Schedule C as the repository of all manner of evil taxpayer intentions to reduce their tax liabilities (and, from the perspective of the IRS, federal revenues). IRS agents are reportedly beating the bushes of sole proprietors primarily to reduce, or eliminate, claimed deductions as unsubstantiated to increase both income and self-employment tax liabilities.

    All deductions are a matter of legislative grace, and that grace comes with a price: at a minimum to maintain books and records to support the expenditure, and, in many cases, to meet more exacting substantiation standards than the Code imposes as a condition to deductibility in various circumstances. One might not think of charitable contributions as a source of major contention with the IRS, but in the case of non-cash contributions, the taxpayer is technically required to establish, both the fair market value of the property and the property’s adjusted basis. In some cases, the Code requires an appraisal of property (where the value exceeds $5,000) contributed to a charity.

    However, the property’s adjusted basis comes into question in two cases: first in most cases where the property is inventory in the hands of the donor, and secondly, if tangible personal property that is unrelated to the charity’s exempt function, the amount of the contribution is limited to the donor’s adjusted basis in the property. For example, if a taxpayer donates used clothing to a charity that does not distribute them to poor or indigent individuals, the deduction is limited to the lesser of your basis or fair market value. Now, it may seem like common sense that the current value of almost all used clothing is less than what was paid for it but technically, a claim for a deduction of such items requires some proof of both the fair market value and the cost basis of the property.

    And such was the case I recently read about in Surgent’s Tax Issues Newsletter where a taxpayer was denied a claimed $850 deduction for clothing donated to charity. Yes $850! The return was under audit and the taxpayer submitted photographs of all the clothing donated and matched them up to the current list of retail prices published by The Salvation Army and recognized by the IRS– but that wasn’t enough. The auditor wanted purchase receipts of each item to establish the cost basis. Even if the taxpayer was in the 35 percent tax bracket, the amount of tax at issue was only $298. The IRS correctly assumed the taxpayer would throw in the towel rather than incur additional time, effort and costs to substantiate the deduction. So, the IRS pressed the issue hard enough to deny any deduction. Hooray, the deficit was reduced $300!

    From a practical standpoint, trying to establish the cost of most any item of personal property even shortly after its purchase, much less a couple of years down the road, is extremely difficult. So, nothing prevents the IRS from using similar audit strategies where larger sums of money are involved.

    Echoing the motivation Willie Sutton once famously gave for robbing banks, the Internal Revenue Service knows where the money is.

  • Sep 16

    Since 2002, the above-the-line deduction for certain classroom expenses of elementary and secondary schoolteachers was in doubt nearly every other year. The temporary provision was renewed six times as an “extender” item – each time retroactively – until late last year when Congress made it permanent, expanded the deduction to cover professional development expenditures and indexed its $250 maximum amount for inflation. Now, qualifying educators can rely on the deduction each year and potentially realize a greater benefit from it.

    Qualified expenses include ordinary and necessary expenses paid in connection with books, supplies, equipment (including computer equipment, software, and services), and other materials used in the classroom. An ordinary expense is one that is common and accepted in your educational field. A necessary expense is one that is helpful and appropriate for your profession as an educator. An expense does not have to be required to be considered necessary. Expenses incurred to meet the minimum requirements of the educator’s present job or to qualify for a new profession may not be deductible.

    Qualified expenses do not include expenses for home schooling or for nonathletic supplies for courses in health or physical education.

    An eligible educator is a kindergarten through grade 12 teacher, instructor, counselor, principal, or aide in school for at least 900 hours during a school year.

    Naturally, the IRS recommends that educators keep all receipts and other documentation in order to substantiate their qualified expenses.

    Any unreimbursed educator expenses that exceed the $250 ceiling may be claimed as miscellaneous itemized deductions subject to the 2%-of-adjusted-gross-income- (AGI) floor.

  • Jul 21

    NOTICE OF INTENT TO LEVY.

    Admittedly, it’s an intention-grabbing way to start a letter, especially when the return address says Internal Revenue Service. And grab Greg’s attention, it did.

    The Athens, Georgia, veteran said the notice, which arrived earlier this year, cited taxes on three months of income he had failed to include on his 2013 tax return – and this was the first he’d heard of it.

    After leaving the military, then 27-year-old Greg, had taken a job in information technology. “I guess when I filled out my taxes for 2013 I messed something up, so I didn’t get my private sector job included into the taxes owed,” he said. Now he owed the IRS more than $1,700.

    The IRS doesn’t keep track of how many millennials incur tax debt, but a survey by NerdWallet found that they are more afraid of filing their taxes than any other generation. 80% of millennials, defined by the survey as 18 to 34-year-olds, fear they will make a mistake, underpaying or overpaying.

    Millennials are generally financially inexperienced and, increasingly, part of a gig economy—driving for Uber, YouTube ad sales,–that requires more care with their taxes than some are able, or willing, to take. For example, people who work in contract jobs typically don’t have any taxes withheld and need to set up estimated tax payments on their own.

    While 38% of all taxpayers will seek help from a tax pro, fewer than 10% of millennials go to the IRS when they have a tax question, and only about a quarter seek help from a tax professional, the survey found. Instead, they tend to turn to a largely unreliable, if well-meaning, group—friends and family. Millennial taxpayers in particular bemoan the long wait times on the phone with the IRS and the agency’s weird penchant for mail (like, so yesterday).

    If the multiple letters from the IRS urging debtors to set up payment plans are ignored, the IRS will use its resources to grab whatever resources debtors have. If you don’t contact them, the IRS will take action to collect the taxes.

    Someone facing a tax bill that can’t pay can usually set up a payment agreement online. No contact with the IRS necessary.

  • Apr 1

    Each year, more than 26 million people – about 1 in 6 – show a balance due on their tax return. Many of those people can’t pay the amount due all at once. Here are 15 things you need to know about IRS collections before and after you file.

    1. File the return before the due date. I know it may not seem like the thing to do – after all, why tell the IRS you owe them money before you can pay it? It’s tempting to ignore the problem and just not file. But that would only make matters worse. Not filing can mean a very expensive failure-to-file penalty that can add 25% to the balance due. Remember also, an extension is an extension of the time to file, NOT an extension of the time to pay.
    2. The IRS has 10 years to collect. The law grants the IRS a 10-year statute of limitations to collect taxes. For this reason, they are reluctant to agree to payment arrangements that don’t pay the tax owed during that time, or, if they do, are going to require detailed financial statements and other documentation to prove you don’t have the assets or income to pay the debt.
    3. Set up a payment agreement with the IRS. Depending on the circumstances, the IRS can and will file a tax lien to collect money you owe but haven’t paid. The only way to avoid this enforced collection action is to get a payment agreement in place.
    4. There are options available. There are several types of payment agreements with the IRS. The installment agreement is the most common, but it’s also possible to get an extension of up to 120 days just for the asking. In hardship situations, (as determined by the IRS) the IRS may defer collection of your balance under their “currently not collectible” program, or, in rarer circumstances, settle your debt for less than the amount you owe (called an Offer in Compromise).
    5. Most agreements can be made online at IRS.gov. There have been improvements to the online payment arrangement tools at www.IRS.gov. In fact, usage quadrupled in 2015 over 2014. That’s probably because it’s a whole lot easier, and quicker, to do it online than waiting on the phone, or heaven forbid, the U.S. mail.
    6. Some agreements come with a federal tax lien. Extensions to pay and installment agreements are, if set up before the IRS begins collection activity, a sure-fire way to avoid a tax lien. However, if you owe more than $50,000 or you owe more than $410,000 and can’t pay within six years, the IRS will usually file a tax lien. Once the balance is paid off, you can have the lien removed.
    7. You must file all required returns to establish an IRS agreement. Before the IRS enters into an agreement it will require all tax returns for the past six years to be filed. You won’t get one without it.
    8. Use the streamlined installment agreement to get the best terms. The streamlined installment agreement usually comes with the best terms. With balances less than $50,000, you can make equal monthly payments for up to 72 months. If you owe more than that, the IRS will determine the payment based on your income and IRS-allowed expenses. This can create a much higher monthly payment.
    9. Set up direct debit to avoid default. Missed payments result in ugly letters from the IRS, additional fees to reinstate the installment agreement, or, worst case scenario, the installment agreement becoming immediately due and payable. Taxpayers who pay by check are three times more likely to default on their agreement. Direct debit agreements also have a lower set up fee, $52 versus the $120 fee for payment by check.
    10. Avoid defaulting on the agreement. Default can occur when you have a balance due the next year that you don’t have the money to pay. This often occurs because the taxpayer hasn’t made the necessary estimated tax payments or need to increase their withholding. The IRS will charge you a $50 reinstatement fee.
    11. You won’t get any refunds until the balance is paid in full. The IRS will always take any future overpayments and apply them to the installment agreement. Enough said?
    12. Interest and penalties continue as long as the agreement is in place. The IRS currently charges a 3% interest rate on underpayments. Even with an installment agreement, the failure-to-pay penalty is 0.25% per month, or 3% per year. So, in addition to the set up fee, the cost of an installment agreement is about 6% of the balance owed per year.
    13. Don’t forget to request penalty abatement. Failure-to-pay penalties have continued to accrue for the life of the installment agreement. Towards the end of the agreement, if you have a clean three-year compliance history, you can use the first-time abatement procedures to request a forgiveness of the penalties paid for one tax period.
    14. No agreement may mean no passport. Congress passed a law in late 2015 that allows the U. S. State Department to revoke or deny passports to those who owe more than $50,000 to the IRS, and are not in a payment agreement.
    15. An offer-in-compromise may be possible in desperate circumstances. Offers-in-compromise are an over publicized by late night TV arrangement where the IRS forgives some portion of your tax debt. In my experience, they loathe to do it. Their first position is always that you have some assets you can sell, or you have the ability to earn some money in the future that belongs to them. Nevertheless, if you are one of the unfortunate, rare individuals that fit the IRS criteria, you shouldn’t ignore this avenue.

    It’s not unusual for a taxpayer to file and owe. If you owe the IRS and can’t pay, you can look to us for help.

  • Feb 19

    Like Bama’s win over Clemson – you expected it to happen, but they waited until the last minute to make it happen – Congress has once again extended the “extenders”- a varied assortment of more than 50 individual and business tax deductions, tax credits, and other tax saving laws which have been on the books for years, but which technically are temporary because they have a specific end date. This package of tax breaks has repeatedly been temporarily extended for short periods of time (e.g., one or two years), which is why they are referred to as “extenders.”

    Most of the tax breaks expired at the end of 2014. Now, in legislation passed just before the Congressional Christmas break, the extenders have been revived and extended once again, but this time Congress has taken a new tack. Instead of just rolling the package of provisions over for a year or two, it actually made some of the provisions permanent and extended the remaining provisions for either two or five years, while making significant modifications to several of the provisions.

    Key tax breaks for individuals that were made permanent by the new law include:

    • Tax credits for low to middle income earners that were originally enacted as part of the 2009 stimulus package and were slated to expire at the end of 2017: (1) the American Opportunity Tax Credit, which provides up to $2,500 in partially refundable tax credits for post secondary education, (2) eased rules for qualifying for the refundable child credit, and (3) various earned income tax credit (EITC) changes;
    • the $250 above-the-line deduction for teachers and other school professionals for expenses paid or incurred for books, certain supplies, equipment, and supplementary material used by the educator in the classroom; also modified, beginning in 2016, to index the $250 to inflation and include professional development expenses;
    • parity for the exclusions for employer-provided mass transit and parking benefits;
    • the option to take an itemized deduction for state and local general sales taxes instead of the itemized deduction permitted for state and local income taxes;
    • increased contribution limits and carry forward period for contributions of appreciated real property (including partial interests in real property) for conservation purposes; the new law also extends the enhanced deduction for certain farmers and ranchers; and,
    • the provision that permits tax-free distributions to charity from an individual retirement account (IRA) of up to $100,000 per taxpayer per tax year, by taxpayers age 70 ½ or older.

    Key tax breaks for individuals that were extended by the new law include:

    • the exclusion of up to $2 million ($1 million if married filing separately) of discharged principal residence indebtedness from gross income; extended through 2016; the new law also modifies the exclusion to apply to qualified principal residence indebtedness that is discharged in 2017, if the discharge is pursuant to a binding written agreement entered into in 2016;
    • the credit for energy-efficient improvements to principal residence extended through 2016;
    • the deduction for mortgage insurance premiums deductible as qualified residence interest; extended through 2016; and
    • the $4,000 above the line deduction for qualified tuition and related expenses; extended through 2016.

    Key tax breaks affecting businesses that were extended by the new law include:

    • The Work Opportunity Tax Credit was extended through 2019; the new law also modifies the credit beginning in 2016 to apply to employers who hire qualified long-term unemployed individuals (i.e., those who have been unemployed for 27 weeks or more) and increases the credit with respect to such long-term unemployed individuals to 50% of the first $6,000 of wages;
    • 15 year straight-line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements were made permanent;
    • 50% bonus depreciation was extended for property placed in service during 2015 through 2019; the 50% rate is phased down to 40% for property placed in service during 2018 and 30% for property placed in service during 2019;
    • previously increased first-year depreciation cap on trucks and vans not weighing over 6,000 lbs. has been extended through 2017; the increased first year depreciation is lowered for 2018 and 2019 and disappears in 2020; and
    • increase in Section 179 elective business expensing (up to $500,000 annual write-off of eligible business property costs that is phased out as those cost exceed $2 million for the year) is made permanent; also made permanent is the allowance of expensing for computer software and qualified real property.

    Caution: This article contains a general overview of selected tax provisions contained in the PATH Act and does not address all tax provisions contained in the Act. Tax law is constantly changing due to new legislation, cases, regulations, and IRS rulings. Please contact us if you’re interested in a tax topic that is not discussed in this article.

  • Dec 11

    Congress just changed the Social Security benefit rules. On October 30, Capitol Hill lawmakers approved a two-year federal budget deal. As part of that agreement, they authorized the most significant change to Social Security policy seen in this century, disallowing two popular strategies people have used to try and maximize retirement benefits.

    The file-and-suspend claiming strategy will soon be eliminated for married couples. It will be phased out within six months after the budget bill is signed into law by President Obama. The restricted application claiming tactic that has been so useful for divorcees will also sunset.

    This is aggravating news for people who have structured their retirement plans – and the very timing of their retirements – around these strategies.

    Until the phase-out period ends, couples can still file-and-suspend. The bottom line here is simply stated: if you have reached full retirement age (FRA) or will reach FRA in the next six months, your chance to file-and-suspend for full spousal benefits disappears in Spring of 2016.

    Spouses and children who currently get Social Security benefits based on the work record of a husband, wife, or parent who filed-and-suspended will still be able to receive those benefits.

    How exactly did the new federal budget deal get rid of these two claiming strategies? It made substantial revisions to Social Security’s rulebook.

    One, “deemed filing” will only be allowed after an individual’s full retirement age. Previously, it only applied before a person reached FRA. That effectively removes the restricted application claiming strategy, in which an individual could file for spousal benefits only at FRA while their own retirement benefit kept increasing.

    The restricted application claiming strategy will not disappear for everyone, however, because the language of the budget bill allows some seniors grandfather rights. Individuals who will be 62 or older as of December 31, 2015 will still have the option to file a restricted application for spousal benefits when they reach full retirement age (FRA) during the next four years.

    Widows and widowers can breathe a sigh of relief here, because deemed filing has no bearing on Social Security survivor benefits. A widowed person may still file a restricted application for survivor benefits while their own benefit accumulates delayed retirement credits.

    Two, the file-and-suspend option will soon only apply for individuals. A person will still be allowed to file for Social Security benefits and voluntarily suspend them to amass delayed retirement credits until age 70. This was actually the original definition of file-and-suspend.

    Married couples commonly use the file-and-suspend approach like so: the higher-earning spouse files for Social Security benefits at FRA, then suspends them, allowing the lower-earning spouse to take spousal benefits at his or her FRA while the higher-earning spouse stays in the workforce until 70. When the higher-earning spouse turns 70, he/she claims Social Security benefits made larger by delayed retirement credits while the other spouse trades spousal benefits for his/her own retirement benefits.

    No more. The new law says that beginning six months from now, no one may receive benefits based on anyone else’s work history while their own benefits are suspended. In addition, no one may “unsuspend” their suspended Social Security benefits to get a lump sum payment.

    To some lawmakers, file-and-suspend amounted to exploiting a loophole. Retirees disagreed, and a kind of cottage industry evolved around the strategy with articles, books, and seminars showing seniors how to generate larger retirement benefits. It was too good to last, perhaps. The White House has wanted to end the file-and-suspend option since 2014, when even Alicia Munnell, the director of the Center for Retirement Research at Boston College, wrote that “eliminating this option is an easy call … when to claim Social Security shouldn’t be a question of gamesmanship for those with the resources to figure out clever claiming strategies.”

    Gamesmanship or not, the employment of those strategies could make a significant financial difference for spouses. Lawrence Kotlikoff, the economist and PBS NewsHour columnist who has been a huge advocate of file-and-suspend, estimates that their absence could cause a middle-class retired couple to leave as much as $70,000 in Social Security income on the table.

    What should you do now? If you have been counting on using file-and-suspend or a restricted application strategy, it is time to review and maybe even reassess your retirement plan. Talk with a financial professional to discern how this affects your retirement planning picture.