While no cybercriminal worth his salt would turn down a chance to get his hands on your credit card information, there’s an even bigger prize: your Social Security number, which cybersecurity experts say is now the single most valuable piece of information in terms of being able to steal your identity.
So if our Social Security numbers are such hot property, why do doctors routinely ask for them? The answer isn’t particularly endearing: Your doctor’s office wants your Social Security number so it can better track you down if you don’t pay your bill.
“Healthcare providers and others ask for your SSN because it’s easier for them to track unique individuals that way,” said Mark Nunnikhoven, vice president of cloud research for TrendMicro, an information security company.
Given that Medicare/Medicaid covers roughly 35 percent of Americans, it may be that requesting the Social Security number from all patients is just more expedient for the doctor or hospital. But it’s certainly not best for patients, who may be exposing themselves to identity theft.
When asked for your SSN outside of legally required uses, push back.Mark Nunnikhoven of TrendMicro
In 2017, there were 830 data breaches involving Social Security numbers, representing more than half of the total reported number of breaches. A whopping 158 million numbers were exposed, according to the Identity Theft Resource Center ― more than eight times the number exposed in 2016.
Many of these breaches occurred in the health care industry, where medical records enjoy a long shelf life. The industry has a reputation for being something of a leaky sieve for information that should be kept confidential, according to TrendMicro, which calls the health care sector a “preferred target” for cybercriminals. The health care industry, with hospitals leading the way, reported that 113.2 million health care-related records were stolen in 2015 ― the most ever, according to the Department of Health and Human Services.
Alarmingly, about half of all health care organizations had little or no confidence that they could detect the loss or theft of patient data, and the majority lack the budget to secure their data, according to a 2016 annual study on health care data privacy and security by the Ponemon Institute, a security research and consulting organization.
Only a few organizations actually have a legal right to your SSN, including your employer, banks and lenders, investment funds, the IRS and government-funded programs such as workers’ compensation.
The more your number is out there, the greater the risk of identity theft. Armed with your Social Security number, someone can file fraudulent tax returns in your name, open credit cards, or get official documents like a passport or driver’s license. And it’s a nightmarish bit of data to have stolen. If a thief steals your credit card or bank account number, for example, it’s useful only until the credit limit is reached or you catch on to the hack and close the account. But you can’t close your Social Security number.
And it gets worse: It’s an open secret that a person’s Medicare number includes their Social Security number. It’s printed right out on the front of every Medicare card for the world to see. That is being corrected, however: New cards with randomly assigned Medicare numbers are in the process of being issued to replace the ones that bear Social Security numbers.
Part of the overall problem is that Social Security numbers were never designed to be used as identity authenticators. Decades ago, they began being issued as a way of recording your earnings to determine the amount of benefits you would be paid at retirement or if you claimed a disability. Through the years, they morphed into a popular form of identification ― and, most recently, became coveted by cyber-thieves.
Nunnikhoven said that the issue of our Social Security numbers being used as identifiers ― despite explicit warnings against doing so ― is made more complicated because of decades of supplying it to anyone who asks.
“Most Americans are so comfortable using their SSN that they have the number memorized,” Nunnikhoven said. “Given that it is only supposed to be used for Social Security and other federal government programs, that’s an indicator of a serious issue.”
Still, most health care providers request your SSN for transactions. Nunnikhoven suggests asking what other form of identification the doctor’s office would accept ― say, a driver’s license or a photo ID.
“When asked for your SSN outside of legally required uses, push back,” he said. “Awareness is key to making this shift away from SSN usage happen in a reasonable time frame.”
And, as for those places that just ask for the last four digits? They aren’t doing you any favors either. The first five digits of a person’s number are easy to figure out using publicly available information, according to a 2009 study at Carnegie Mellon University. Those numbers represent where the card was issued and when, so if someone knows where and when you were born, they’re a piece of cake to decode. If a savvy fraudster can get you to tell him the last four of your Social Security number, he’s in business.
Let your doctor know his own advocacy group discourages the practice.
“Our AMA policy is to discourage the use of Social Security numbers to identify insureds, patients, and physicians, except in those situations where the use of these numbers is required by law and/or regulation,” the American Medical Association states on its website.
Crimes against the elderly continue to skyrocket each year, as criminals continue to find more ways to carry out both new and old scams. This information which we received courtesy of the Council on Aging in Nashville is particularly timely.
Last month, the IRS warned of a new email scam that seemed to target Hotmail account users. With this scheme, phishing emails were sent out under the guise of being from the IRS. If you used a link within that email, it redirected you to a Microsoft page, where the user was asked to enter personal and/or financial information.
The websites associated with this particular scam have since been disabled but it is still important to be vigilant. As a new tax season begins, keep in mind scammers will be revving up their efforts to steal YOUR money.
Here are some reminders about the IRS. They will NEVER:
- call about past due taxes without having mailed several notices first
- call to demand payment including threats to involve law enforcement and have you arrested
- call or email asking you to divulge personal and/or financial information
- require payment without allowing you to appeal or even question the amount due
- require you to use a specific payment method like a pre-paid debit card
ask for your credit/debit card and/or bank information over the phone
Sources: Forbes and Internal Revenue Service
The Tax Cut and Jobs Act (TCJA) is now officially law. Both the House and Senate passed the new tax reform bill in December with straight party-line votes and no support from Democrats. President Trump signed it into law right before Christmas. It is the first overhaul of the tax code in more than 30 years.
In this post, we will mostly look at how this tax law is likely to impact seniors and persons with disabilities.
It’s Good News for Most Americans
Retirees, most of whom are on relatively fixed incomes, are probably the most concerned about what the new tax law will mean for them. But, generally, they will be less affected than others because the changes do not affect how Social Security and investment income are taxed. In fact, many will benefit from the doubling of the standard deduction and, with the new individual tax brackets and rates, will be paying less in taxes when they file their tax returns in April, 2019. (Most of the changes will apply to 2018 income, not 2017 income.)
Key Individual Provisions to Know
Here are main provisions in the tax law that could particularly affect retirees and persons with disabilities. These individual provisions are set to expire at the end of 2025 so Congress will need to act before then if they are to continue.
(Mostly) Lower Individual Income Tax Rates and Brackets
There are still seven individual tax brackets and rates, but most are lower. Current rates are 10%, 15%, 25%, 28%, 33%, 35% and 39.6%. Here are the new rates and how much income will apply to each:
Rate Individuals Married, filing jointly
10% Up to $9,525 Up to $19,050
12% $9,526 to $38,700 $19,051 to $77,400
22% $38,701 to $82,500 $77,401 to $165,000
24% $82,501 to $157,500 $165,001 to $315,000
32% $157,501 to $200,000 $315,001 to $400,000
35% $200,001 to $500,000 $400,001 to $600,000
37% $500,001 and over $600,001 and over
Standard Deduction is Almost Doubled
For single filers, the standard deduction is increased from $6,350 to $12,000. For married couples filing jointly, it increases from $12,700 to $24,000. Under the new law, fewer filers would choose to itemize, as the only reason to continue to itemize is if deductions exceed the standard deduction.
Personal and Elderly Exemptions
Currently, you can claim a $4,050 personal exemption for yourself, your spouse and each dependent, which lowers your taxable income and resulting taxes. The new law eliminates these personal exemptions, replacing them with the increased standard deduction.
The blind and elderly deduction has been retained in the new law. People age 65 and over (or blind) can claim an additional $1,550 deduction if they file as single or head-of-household. Married couples filing jointly can claim $1,250 if one meets the requirement and $2,500 if both do.
Medical Expenses Deduction
Currently, people with high medical expenses can deduct the portion of those expenses that exceeds 10% of their income. For example, a couple with $50,000 in income and $10,000 in medical expenses can deduct $5,000 of those medical expenses.
The new law increases this to medical expenses that exceed 7.5% of income. In the example above, the couple would be able to deduct $6,250 of their expenses. Note that this part of the new law applies to medical expenses for 2017 and 2018.
State and Local Tax (SALT) Deduction
The amount you pay in state and local property taxes, income and sales taxes can be deducted from your Federal income taxes—and the amount you can currently deduct is unlimited. The new law limits the deduction for these local and state taxes to $10,000.
Residents in the vast majority of counties in the U.S. claim an average SALT deduction below $10,000. Most low- and middle-income families who currently itemize because of their SALT deduction will likely take the much higher standard deduction unless their total itemized deductions (including SALT) are more than $12,000 if single and $24,000 if married filing jointly.
Originally lawmakers in the House and Senate wanted to repeal SALT entirely, to help pay for the tax cuts, but lawmakers in high-tax states (specifically CA, IL, NY and NJ) fought to keep it in. Those in higher income households in high-tax states will benefit from the SALT deduction.
Lower Cap on Mortgage Interest Deduction
Currently, if you take out a new mortgage on a first or second home, you can deduct the interest on up to $1 million of debt. The new law puts the cap at $750,000 of debt. (If you already have a mortgage, you would not be affected.) The new law also eliminates the deduction for interest on home equity loans, which is currently allowed on loans up to $100,000.
Temporary Credit for Non-Child Dependents
Under the new law, parents will be able to take a $500 credit for each non-child dependent they are supporting. This would include a child age 17 or older, an ailing elderly parent or an adult child with a disability. It is temporary because it is set to expire at the end of 2025 along with the other individual provisions.
Higher Exemptions for Alternative Minimum Tax (AMT)
The AMT was created almost 50 years ago to prevent the very rich from taking so many deductions that they paid no income taxes. It requires high-income earners to run their numbers twice (under regular tax rules and under the stricter AMT rules) and pay the higher amount in taxes. But because the AMT wasn’t tied to inflation, it has gradually been affecting a growing number of middle-class earners. The new tax law reduces the number of filers who would be affected by the AMT by increasing the current income exemption levels for individuals from $54,300 to $70,300 and for married couples from $84,500 to $109,400.
Federal Estate Tax Exemptions Doubled
The new law does not repeal the Federal estate tax, but it eliminates it for almost everyone by doubling the estate tax exemption to $11.2 million for individuals and $22.4 million for married couples. Amounts over these exemptions will be taxed at 40%. The new rates are effective starting January 1, 2018 through December 31, 2025.
Eliminates Individual Mandate to Buy Health Insurance
With the elimination of the individual mandate to purchase health insurance, there will no longer be a penalty for not buying insurance. This is expected to help offset the cost of the tax bill and save money by reducing the amount the federal government spends on insurance subsidies and Medicaid.
The Congressional Budget Office expects that fewer consumers who qualify for subsidies are expected to enroll on Obama Care exchanges and fewer people who are eligible for Medicaid will seek coverage and learn they can sign up for the program. (Estimates of those who are expected to have no health insurance by 2027 are all over the place, ranging from 3-5 million to 13 million.)
Critics, including AARP, claim that eliminating the individual mandate will drive up health care premiums, result in more uninsured Americans and add $1.46 trillion to the deficit over the next ten years, which could trigger automatic spending cuts to Medicare, Medicaid, and other entitlement programs unless Congress votes to stop them.
Some claim the individual mandate helps to encourage younger and healthier Americans to sign up for coverage. Without it, the individual market might lean more toward sicker and older consumers, which might lead some insurers to drop out of the market. 29% of current enrollees on the federal exchange already have only one option in 2018. Others maintain that the mandate is not a key driver for obtaining insurance. About 4 million taxpayers paid the penalty in 2016.
Inflation Adjustments Slowed
The new tax law uses “chained CPI” to measure inflation, which is a slower measure than that currently used. This means that deductions, credits and exemptions will be worth less over time because the inflation-adjusted dollars that determine eligibility and maximum value would grow more slowly. It would also subject more of your income to higher rates in the future.
529 Plans Expanded
529 plans have been a tax-advantaged way to save for college costs. The new tax law expands the use of tax-free distributions from these plans, including paying for elementary and secondary school expenses for private, public and religious school, as well as some home schooling expenses. Educational therapies for children with disabilities are also included. There is a $10,000 annual limit per student.
ABLE Accounts Adjusted
ABLE accounts, established under Section 529A of the Internal Revenue Code, allow some individuals with disabilities to retain higher amounts of savings without losing their Social Security and Medicaid benefits. The new tax law allows money in a 529 education plan to be rolled over to a 529A ABLE account, but rollovers may count toward the annual contribution limit for ABLE accounts ($15,000 in 2018). The new law also changes the rules on contributions to ABLE accounts by designated beneficiaries who have earned income from employment.
What to Watch
Expect some clarifications and strategies as the experts weigh in. There will also undoubtedly be some adjustments as the new tax bill goes into effect. Please don’t hesitate to reach out if you have questions about these new provisions and how they may impact you or those you work with.
A recent report from the Alzheimer’s Association states that one in nine Americans age 65 or older currently have Alzheimer’s. With the baby boomer generation aging and people living longer, that number may nearly triple by 2050. Alzheimer’s, of course, is just one cause of dementia—mini-strokes (TIAs) are also to blame—so the number of those with dementia may actually be higher.
Caring for someone with dementia is more expensive—and care is often needed longer—than for someone who does not have dementia. Because the cost of care in a facility is out of reach for many families, caregivers are often family members who risk their own financial security and health to care for a loved one.
We will explore in this post the issues raised by the costs of care and steps families can take to ease their burden.
Cost of Care for the Patient with Dementia—And How to Pay for It
As the disease progresses, so does the level of care the person requires—and so do the costs of that care. Options range from in-home care (starting at $44,616 per year ) to adult daycare (starting at $17,810 per year) to assisted living facilities ($41,460 per year) to nursing homes ($74,825 per year for a semi-private room). These are the average costs In the Nashville Area in 2017 as provided by Genworth in its most recent study. Costs have risen steadily over the past 13 years since Genworth began tracking them.
Care for a person with dementia can last years, and there are few outside resources to help pay for this kind of care. Health insurance does not cover assisted living or nursing home facilities, or help with activities of daily living (ADL), which include eating, bathing and dressing. Medicare covers some in-home health care and a limited number of days of skilled nursing home care, but not long-term care. Medicaid, which does cover long-term care, was designed for the indigent; the person’s assets must be spent down to almost nothing to qualify. VA benefits for Aid & Attendance will help pay for some care, including assisted living and nursing home facilities, for veterans and their spouses who qualify.
Those who have significant assets can pay as they go. Home equity and retirement savings can also be a source of funds. Long-term care insurance may also be an option, but many people wait until they are not eligible or the cost is prohibitive.
However, for the most part, families are not prepared to pay these extraordinary costs, especially if they go on for years. As a result, family members are often required to provide the care for as long as possible.
Financial Costs for the Family
Women routinely serve as caregivers for spouses, parents, in-laws and friends. While some men do serve as caregivers, women spend approximately 50% more time caregiving than men.
The financial impact on women caregivers is substantial. In another Genworth study, Beyond Dollars 2015, more than 60% of the women surveyed reported they pay for care with their own savings and retirement funds. These expenses include household expenses, personal items, transportation services, informal caregivers and long-term care facilities. Almost half report having to reduce their own quality of living in order to pay for the care.
In addition, absences, reduced hours and chronic tardiness can mean a significant reduction in a caregiver’s pay. 77% of those surveyed missed time from work in order to provide care for a loved one, with an average of seven hours missed per week. About one-third of caregivers provide 30 or more hours of care per week, and half of those estimate they lost around one-third of their income. More than half had to work fewer hours, felt their career was negatively affected and had to leave their job as the result of a long-term care situation.
Caregivers who lose income also lose retirement benefits and social security benefits. They may be sacrificing their children’s college funds and their own retirement. Other family members who contribute to the costs of care may also see their standard of living and savings reduced.
Emotional and Physical Costs to Caregivers
In addition to the financial costs, caregivers report increased stress, anxiety and depression. The Genworth study found that while a high percentage of caregivers have some positive feelings about providing care for their loved one, almost half also experienced depression, mood swings and resentment, and admitted the event negatively affected their personal health and well-being. About a third reported an extremely high level of stress and said their relationships with their family and spouse were affected. More than half did not feel qualified to provide physical care and worried about the lack of time for themselves and their families.
Providing care to someone with dementia increases the levels of distress and depression higher than caring for someone without dementia. People with dementia may wander, become aggressive and often no longer recognize family members, even those caring for them. Caregivers can become exhausted physically and emotionally, and the patient may simply become too much for them to handle, especially when the caregiver is an older person providing care for his/her ill spouse. This can lead to feelings of failure and guilt. In addition, these caregivers often have high blood pressure, an increased risk of developing hypertension, spend less time on preventative care and have a higher risk of developing coronary heart disease.
What can be done?
Planning is important. Challenges that caregivers face include finding relief from the emotional stress associated with providing care for a loved one, planning to cover the responsibilities that could jeopardize the caregiver’s job or career, and easing financial pressures that strain a family’s budget. Having options—additional caregivers, alternate sources of funds, respite care for the caregiver—can help relieve many of these stresses. In addition, there are a number of legal options to help families protect hard-earned assets from the rising costs of long term care, and to access funds to help pay for that care.
The best way to have those options when they are needed is to plan ahead, but most people don’t. According to the Genworth survey, the top reasons people fail to plan are they didn’t want to admit care was needed; the timing of the long-term care need was unforeseen or unexpected; they didn’t want to talk about it; they thought they had more time; and they hoped the issue would resolve itself.
Waiting too late to plan for the need for long-term care, especially for dementia, can throw a family into confusion about what Mom or Dad would want, what options are available, what resources can help pay for care and who is best-suited to help provide hands-on care, if needed. Having the courage to discuss the possibility of incapacity and/or dementia before it happens can go a long way toward being prepared should that time come.
Watch for early signs of dementia. The Alzheimer’s Association (www.alz.org) has prepared a list of signs and symptoms that can help individuals and family members recognize the beginnings of dementia. Early diagnosis provides the best opportunities for treatment, support and planning for the future. Some medications can slow the progress of the disease, and new discoveries are being made every year.
Take good care of the caregiver. Caregivers need support and time off to take care of themselves. Arrange for relief from outside caregivers or other family members. All will benefit from joining a caregiver support group to share questions and frustrations, and learn how other caregivers are coping. Caregivers need to determine what they need to maintain their stamina, energy and positive outlook. That may include regular exercise (a yoga class, golf, walk or run), a weekly Bible study, an outing with friends, or time to read or simply watch TV.
If the main caregiver currently works outside the home, they can inquire about resources that might be available. Depending on how long they expect to be caring for the person, they may be able to work on a flex time schedule or from home. Consider whether other family members can provide compensation to the one who will be the main caregiver.
Seek assistance. Find out what resources might be available. A local Elder Law attorney can prepare necessary legal documents, help maximize income, retirement savings and long-time care insurance, and apply for VA or Medicaid benefits. He or she will also be familiar with various living communities in the area and in-home care agencies.
Caring for a loved one with dementia is more demanding and more expensive for a longer time than caring for a loved one without dementia. It requires the entire family to come together to discuss and explore all options so that the burden of providing care is shared by all.
We help families who may need long term care by creating an asset protection plan that will provide peace of mind to all. If we can be of assistance, please don’t hesitate to call.
To comply with the U.S. Treasury regulations, we must inform you that (i) any U.S. federal tax advice contained in this newsletter was not intended or written to be used, and cannot be used, by any person for the purpose of avoiding U.S. federal tax penalties that may be imposed on such person and (ii) each taxpayer should seek advice from their tax advisor based on the taxpayer’s particular circumstances.
The National Association of Elder Law Attorneys (“NAELA”) was instrumental in keeping the medical expense deduction in the tax bill. Our clients who might be paying out thousands of dollars a year in nursing home or assisted living expenses would have been especially harmed by this change in the law. Here’s a description of the efforts of NAELA:
NAELA Leads Fight to Save the Medical Expense Deduction
By David Michael Goldfarb, Esq., NAELA’s Sr. Public Policy Manager
As a person living outside “the beltway,” you might assume that the House tax reform writers must have understood the impact on something as straight-forward as getting rid of the medical expense deduction. It appears you’d be wrong.
For Congress, if you don’t ask, you don’t receive.
Unfortunately, the Medical Expense Deduction has no interest group dedicated to it. Health advocacy groups focus on health advocacy, not tax.
Since presumably no one asked over the years to keep the deduction, it must be okay to get rid of it!
The House tax reform bill passed in November 2017, seeking about $1.5 trillion in tax cuts. The cuts were split evenly between corporations and individuals (including pass-throughs). The individual tax cuts approximated the cost of repealing the estate tax and the Alternative Minimum Tax (AMT).
But the House bill did much more than just cut taxes. It sought to redefine the way individuals get taxed. First, it ends personal exemptions and removes as many itemized deductions as (politically) possible. It then lowers tax rates, expands family credits, and doubles the standard deduction.
A key philosophy underpinning this move to eliminate itemized deductions is that in the ideal world, we should have a consumption tax.
But even under a consumption tax, one must distinguish between “voluntary” and “involuntary” expenses. The former shouldn’t be exempt, the latter should.
Getting sick isn’t a choice. People don’t choose to get dementia or cancer.
In truth, the medical expense deduction acts more like hidden insurance. No clearer example exists than in paying for long-term services and supports (LTSS).
Under the deduction, “chronically ill” individuals can deduct “qualified long-term care expenses,” such as nursing home, assisted living, or personal care services.
Not every American will need LTSS. Half of Americans turning 65 today will not incur any LTSS costs; an unfortunate one in seven will have costs of more than $250,000.
In September, Republicans introduced an outline that sought to end all itemized deductions except the home mortgage interest and charity deductions. This implied the elimination of the medical expense deduction.
At the time, few health advocates, journalists, and policy wonks understood the issue.
NAELA began preparations in the event the implication proved correct. A few organizations were preparing as well, notably AARP and LeadingAge, the association for non-profit LTSS providers.
On November 7th, our worst fears were realized: total elimination of the medical expense deduction.
NAELA focused on how this would impact LTSS. Many individuals would not be able to pay for both LTSS and a new tax bill. Those that could afford both would see their life-savings dwindle more rapidly, spending down to Medicaid faster.
Eliminating the deduction would also wreak havoc on individuals relying on either a defined benefit plan or a tax-deferred retirement account, albeit in different ways.
Defined benefit plans, colloquially called pensions, pay guaranteed income during someone’s life. Those relying on a pension and paying privately in assisted living may not be able to pay the new tax bill and facility fee, facing potential eviction. Worse, those that ended up on Medicaid with a pension may have an uncollectable tax!
Tax-deferred retirement accounts raised another issue. Without the deduction, the higher your health costs, the higher your tax bill. Distributions from these accounts after all are income.
It gets worse from there, because distributions to pay the new tax are also taxable! It also threatens to raise taxes on someone’s social security benefits as well, which are excluded at lower income levels.
In addition, the elimination would harm family caregivers, because if an adult child pays more than half of the cost of a parent’s care, they can claim what they paid as a deductible medical expense.
Few journalists and no policy wonks reported on the medical expense deduction after the outline, but before the House bill got introduced. Many focused on the rumored “rothification” of retirement accounts, the state nd local tax deduction, and deficits.
The moment the bill got introduced, NAELA was ready.
NAELA quickly mobilized with AARP and a few others to educate Congress and importantly, other health organizations. Our loose coalition quickly grew from just a handful to over 60 groups. This included adding the power of large organizations such as the March of Dimes, the American Cancer Society, and the National MS Society.
Ultimately, NAELA helped change the public debate on the medical expense deduction, by focusing attention on its impact on LTSS. This was important, because a focus on the average deduction taken misses the point of the deduction.
After intensive lobbying, the Senate passed a bill that not only retains the deduction, but thanks to Senator Susan Collins, temporarily lowers the threshold to 7.5% of adjusted gross income for the next two years!
Now, the legislation will go to conference to resolve the difference between the chambers. With the Senate expanding the deduction, its prospects for remaining in the tax code have become much greater.
Since this article was written, NAELA continued to fight to retain the deduction which is now in the final tax bill.