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Income Tax and Social Security Benefits

November 19th, 2013

Why do some people have to pay income tax on their Social Security benefits?  The usual cause is substantial income from other sources (such as wages, dividends, interest, self-employment and other taxable income.)

No one pays federal income tax on more than 85 percent of their Social Security benefits based on the IRS rules.  Below is a guideline of what  you will pay based on the specific factors listed.

  • 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.  If your combined income is  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.  If your combined income is  more than $44,000, up to 85 percent of your benefits may be taxable.
  • Married persons that file a separate tax return, you probably will pay taxes on your benefits.
  •  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 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.

Withholding Income Tax

If you choose to have federal income taxes withheld from your benefits you can:

  • Elect to have taxes withheld when you apply for your benefits
  • If you want to change or stop your withholding, you will need to file IRS form W-4V, which can be downloaded from the IRS website or requested by calling the IRS at 1-800-829-3676.  You may also contact our office for assistance
  • When completing the form, select the percentage of your monthly benefit amount you want withheld.  You can have 7%, 10%, 15% or 25% of your monthly benefit withheld.

The Tucson CPA firm of Flowers, Rieger & Associates, PLLC offers income tax preparation services for businesses and individuals. The CPAs at Flowers, Rieger & Associates, PLLC also offer aggressive tax strategies and planning, accounting and bookkeeping, financial statement preparation, estate and trust tax preparation and other CPA services.

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