Are You Ready for April 15th?
Some people have to pay federal income taxes on their Social Security benefits. According to the Social Security Administration (SSA) this usually happens only if you have other substantial income (such as wages, self-employment income, interest, dividends and other taxable income.) About one third of all Social Security claimants pay taxes. It is important to note that, Internal Revenue Service (IRS) rules state that no one pays federal income tax on more than 85 percent of his or her benefits. Here are a few of the guidelines, if you:
- file a federal tax return as an “individual” and your combined income* is
- between $25,000 and $34,000, you may have to pay income tax on up to 50 percent of your benefits.
- more than $34,000, up to 85 percent of your benefits may be taxable.
- file a joint return, and you and your spouse have a combined income* that is
- between $32,000 and $44,000, you may have to pay income tax on up to 50 percent of your benefits
- more than $44,000, up to 85 percent of your benefits may be taxable.
- are married and file a separate tax return, you probably will pay taxes on your benefits.
Here is how “combined income” is calculated
Your adjusted gross income
+ Nontaxable interest
+½ of your Social Security benefits
= Your “combined income“
According to the SSA each January you will receive a Social Security Benefit Statement(Form SSA-1099) showing the amount of benefits you received in the previous year. You can use this Benefit Statement when you complete your federal income tax return to find out if your benefits are subject to tax. If you receive Social Security and don’t receive your 1099 by the end of January 2014, you can request one online at www.socialsecurity.gov/1099.
Here are your options if you do have to pay taxes on your Social Security benefit
- If you do have to pay taxes on your Social Security benefits, you can make quarterly estimated tax payments to the IRS or choose to have federal taxes withheld from your benefits.
- For more information about taxation of benefits, read page 14 of our Retirement Benefits booklet or IRS Publication 915, Social Security and Equivalent Railroad Retirement Benefits.
