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What Your CPA Wants You to Know
103. Important Social Security Updates! Teachers, Police, Firefighters, Public Employees!
The Social Security Fairness Act eliminates the unfair Windfall Elimination Provision that prevented public service workers from receiving their full Social Security benefits despite paying into the system.
• Nearly 2 million Americans including teachers, firefighters, and public sector employees can now receive previously reduced or denied benefits
• Workers who already receive some benefits will automatically see increases of $300-$700 monthly
• Those previously denied benefits entirely could receive around $1,500 monthly
• Eligible recipients can file for retroactive benefits back to January 2024 using form SSA-561
• Apply online at ssa.gov if you've never received benefits or were previously denied
• Spousal or survivor benefits may require in-person or mail application
• Consult your tax professional about handling lump sum and retroactive payments
• Even if previously denied, public service workers should reapply under the new law
Please share this episode with anyone who works in public service or has family members who might benefit from these important changes to Social Security benefits.
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I'm seeing here in the notes that this affects about 1 million teachers nationwide and then another million of people including, like first responders and other public sector employees. So this is actually really big news and I haven't even heard about it, which is crazy.
Speaker 2:I know I wish that we had more people listening, just so that we could make sure this gets out to everybody. Hopefully there's other sources of information for this, but with the number of people that listen, I'm sure almost everybody either has a spouse or a parent, or they themselves fit into one of these categories. Welcome to what your CPA Wants you To Know.
Speaker 1:Tax and accounting help can be expensive, so we've created this podcast to help guide you through it all and make you feel like you have a CPA in your back pocket.
Speaker 2:I'm Carson Sands.
Speaker 1:And I'm Taryn Sands.
Speaker 2:I'm a CPA with over 10 years of experience helping people start and grow their businesses.
Speaker 1:And I'm an MBA with a specialization in marketing and entrepreneurship. Taxes suck and we want to make sure you don't pay more than your fair share.
Speaker 2:We're here to share everything your CPA wants you to know.
Speaker 1:In a fun and easy to understand way.
Speaker 2:Let's get started.
Speaker 1:Let's do it If you haven't heard yet. There's been some recent social security benefit updates this year, and that's what this episode is all about today. If you or your spouse or a friend or anyone in your family have ever worked in the public service like police, teacher, firefighter, anything like that this episode is for you. So I don't know a lot about this new change, so Carson is going to explain this to all of you, and to me too. So we're all going to be learning today.
Speaker 2:Even I'll be learning some about this. There are a lot of moving parts here, and the most important thing is to get it on everybody's radar, because there's money that you could be getting that you're not getting, and so we want to make sure that happens.
Speaker 1:Okay, explain to us what is the change, and then we'll go into a little bit of the finer details, because there's always a lot of details.
Speaker 2:Okay, so the old rules for social security benefits had a provision in there called the windfall elimination provision, and it just meant that if you worked in some sort of public sector job like teachers are especially affected or firefighters, police officers, other public sector workers some of these jobs don't pay into social security, and so if you were receiving, you know, state or federal government pensions, then you could have a situation where you paid in social security just like everyone else, maybe through a second job or maybe for spousal benefits or something like that but you're not eligible because you have that public sector pension coming your way and that they consider a windfall, and so you either have your Social Security benefits reduced or maybe eliminated entirely, depending on the situation.
Speaker 1:So in the past, even though they had paid in in some way, they could not get those benefits once they retired.
Speaker 2:Yeah, that's the really sick part. So think about this. Let's say we don't pay teachers enough, so they want to go work in the summer to make extra money. Well, those jobs pay into Social Security, but the teachers either don't get any at all or the amount they get is greatly reduced compared to other people working similar jobs, just because they happen to be a teacher, with a teacher's pension Now, or even worse, you know, you think about firefighters. They risk their lives every day. But how many clients do we have that are firefighters? Because they have side businesses and they have to have those just to make ends meet, because we don't pay them enough. And now we want to punish them and say well, you're paying, we're stealing your social security taxes out of your paycheck and we're not going to let you have it back because you have this other retirement plan.
Speaker 1:Sorry, yeah, I didn't know that was happening, but that's completely unfair and I think almost anyone would agree with that.
Speaker 2:And also even if you are a teacher and you've been paying into this system that is, through your state or through your local school district, whatever it is and you don't qualify for your spousal benefits either. So most spouses, if you don't work at all, you get to file and get about half of what your husband or your wife gets if you were a stay-at-home parent or whatever the case and you just didn't work. And so people that didn't work at all get to make these claims, and people that have been working their whole life teaching your children or protecting us, they don't get to claim on their spouses either. So it just doesn't seem fair.
Speaker 1:That's awful. I didn't even know that, but that's awful. So hopefully you're here to tell us that this has changed and now they're going to be getting some of these benefits.
Speaker 2:It has changed. So on January 5th 2025, the Social Security Fairness Act was signed into law. Now, payments didn't start right away and it hasn't become maybe as newsworthy as it could have been, because it was being contested a little bit. So payments didn't go out until March or April. This is when some of the payments started going out for people that either knew to file or people that were already receiving social security. For some of them, it was just automatically increased based on the new law.
Speaker 1:Okay, so it's slowly been rolling out, but just like anything, it's a very slow process because someone didn't like it obviously.
Speaker 2:Exactly. Yeah, they were fighting and arguing about it, but they've decided that they're going to move forward with it and people are already starting to see some of those benefits. So for people that are already receiving some Social Security and it's just being reduced by the windfall elimination provision, you don't really need to do anything except prepare for your taxes to be a little bit higher, because your income will be higher, your monthly check from social security will increase and you know so. Your taxes will naturally increase right along with that.
Speaker 1:Right, so there's nothing that they need to do right now. It's going to automatically increase.
Speaker 2:That's true, yes, but if you have been in a situation where you weren't able to apply at all maybe you were a teacher and your spouse had worked and you weren't able to file as a spouse and get some of those benefits. Or maybe you had worked for 10 years after you retired from teaching, or in the summers while you were teaching, or whatever, and you're in one of the states where you're completely banned from getting Social Security at all. Well, you're not in their system and you need to go and file for Social Security benefits, all right. Well, how do you do that? So you just need to go to ssagov. That's the Social Security website and that's where you can get this started.
Speaker 2:Now, if this is a spousal or survivor claim survivor meaning widows and widowers, but a spousal or survivor claim then you might have to go do it either by mail or in person at the Social Security office. I'm very sorry that you have to go there, but I mean, we're seeing people that they're getting $1,500 a month when they were getting nothing before. So for 18 grand a year, it might be worth your time to go down there and actually deal with them, as unpleasant as it may be.
Speaker 1:Absolutely worth it. If you are due these benefits and if you're going to do anything online, as always, just make sure that the website you're using ends in gov, because I can imagine there's a lot of spam ones right now with this.
Speaker 2:Oh, I'm sure there's a socialsecurityadministrationcom and they'll trick you into. You got to pay this fee to file this and it's not even illegal, because they're filing something for you and just charging you some ridiculous amount something you could file all by yourself, Absolutely. So make sure it does say gov, that's true. Now there's also a special rule that for retroactive benefits you can only go back six months. Typically. That's a typical rule. This was for any other retroactive payments in the past that you were going to get for Social Security. Maybe you filed late or for whatever reason.
Speaker 2:A lot of times you forfeit those benefits, but in this case a lot of people are getting a special exception to that. There's additional forms that you have to file to make that happen. That form is called SSA-561, a request for reconsideration, and that's just your way of saying look, we didn't know about this and it was still being contested into law, and even if we knew about it the day it was signed into law, the benefits are retroactive to January of 2024. So we were already past that six month period. So, based on that, people are filing that request for reconsideration. Again, that's SSA-561. And in that way, a lot of people are going to be able to go back and get their benefits all the way back to January 2024. So you'll probably see, in the first month when they finally start paying you, they'll be paying you for all the way back there. So you'll get maybe 18 months worth of payments in the first check and then after that you'll start getting you just your regular monthly amount.
Speaker 1:Okay, so they can get a lump sum for retroactive payment if they file this form.
Speaker 2:Yes, and you need to talk to your tax person about how that affects you. Sometimes there's ways to go back and apply those amounts to previous years without filing amended returns. Social Security has some special rules that allow you to do that when you receive lump sums from previous years. The reason that's important is, if you put it all in one single tax year, it could bump you into a higher tax bracket, right and so by, but amending your return could cost you a lot of money too. So by using that special way of doing that and your tax professional should know how to do that or, if not, then get a new person, but and that will apply the at least the 2024 amounts back to 2024 tax brackets and tax rates, but still be all reported on your 2025 tax return, and that could reduce your taxes a great deal. So just ask them about that.
Speaker 1:I'm seeing here in the notes that this affects about 1 million teachers nationwide and then another million of people including first responders and other public sector employees. So this is actually really big news, and I haven't even heard about it, which is crazy.
Speaker 2:I know I wish that we had more people listening, just so that we could make sure this gets out to everybody. Hopefully there's other sources of information for this, but you know, with the number of people that listen, I'm sure almost everybody either has a spouse or a parent, or they themselves fit into one of these categories.
Speaker 1:So, yeah, absolutely. If you've never shared an episode ever before, this is definitely the episode to share, because I personally know a ton of people that this will affect and I'm sure you do too. You know somebody working in one of these jobs that they need to make sure that they're not missing out on these benefits or the retroactive benefits, or knowing if they need to go in and apply.
Speaker 2:Right From what we've read, the average increase for people that are already receiving payments at least this is just to get rid of the reduction and increase the monthly that's an average of $300 to $700 per month in increase. But for people that were not receiving it at all because they weren't able to claim the spousal or for whatever reason then we're seeing $1,500 a month or higher. So this could be a really big deal.
Speaker 1:For the people that are widowers or something like that, that they can now get all of those benefits. It's a really big deal. But also, $300 to $700 is a big deal too, right, and since?
Speaker 2:this affects specifically teachers in California and Texas, I know for sure, and a few other, I think, Illinois and Ohio and there's some others that are. They're completely cut off from the social security system. So these are the people that you can't claim your spousal half at all and so you haven't been receiving anything. And these are the people that can go now and get filed and start receiving benefits. So just to recap, some of the steps that you need to take if you're already receiving benefits and I don't mean that your spouse is, but you, specifically in your name, are receiving benefits, you shouldn't have to do anything.
Speaker 2:Any adjustments to the law. They should recalculate, eliminate the windfall provision and you should just see your amount go up monthly. But if you are not receiving anything in your name, then you need to go online to ssagov and start making sure that your information is in their system and you filed everything you need to file. And even if you were previously denied because of this reason, you need to reapply. And then, of course, if you wanna make sure that you can go all the way back to January of 2024, make sure to file that SSA-561 request for reconsideration. Also, be prepared to talk to your CPA about how this could affect your income taxes for the year and for previous years if you're doing that adjustment and getting the 2024 amounts paid.
Speaker 1:So if this affects you or someone you love, now is the time to do it. Please, please, please. Share this episode with anyone that could benefit from this new change and until next time, thank you so much for listening to.
Speaker 2:What your?
Speaker 1:CPA Wants you To Know Podcast.
Speaker 2:This podcast is intended to provide accounting and tax information for educational purposes only. All tax situations are unique and should be handled with the assistance of a tax professional.