Are Social Security Benefits Taxable?

Are Social Security Benefits Taxable? 
Well, it depends, read our Tips of the Week for details.

The IRS recently posted an article about this topic.  Just in case you missed it, we’ve summarized the highlights here for you and included the appropriate links to the IRS website.

If taxpayers received Social Security benefits in 2016, they should receive a Form SSA-1099, Social Security Benefit Statement, showing the amount of their benefits.

The SSA-1099 may be given to taxpayers for Social Security retirement benefits, disability benefits and survivor benefits.

If Social Security was a taxpayer’s only income in 2016, their benefits may not be taxable because they may not have made enough money. They also may not need to file a federal income tax return.

However, if a taxpayer receives income from other sources, then they may have to pay taxes on some of their benefits.  Keep reading, we’ll go over this ways to find out with links to the IRS website for you.

The IRS provides this quick way to find out if a taxpayer must pay taxes on their Social Security benefits – this Tax formula:

Add one-half of the Social Security income to all other income, including tax-exempt interest. Then compare that amount to the base amount for their filing status. If the total is more than the base amount, some of their benefits may be taxable. 

Continue for the links to the IRS tools and Base Amounts listed.

Interactive IRS Tax Tools.  Taxpayers may be able to get answers to their tax questions with this IRS tool:  Are My Social Security or Railroad Retirement Tier I Benefits Taxable or Interactive Tax Assistant tool.  There are several websites including IRS.gov that provide information.

Base Amounts. The three base amounts are:

$25,000 – if taxpayers are single, head of household, qualifying widow or widower with a dependent child or married filing separately and lived apart from their spouse for all of 2016.

$32,000 – if they are married filing jointly.

$0 – if they are married filing separately and lived with their spouse at any time during the year

Taxpayers may use IRS Free File to prepare and e-file their tax returns for free. Per the IRS, if a taxpayer earned $64,000 or less, they can use brand-name software. If taxpayers earned more, the taxpayer may use Free File Fillable Forms. The IRS noted that this option uses electronic versions of IRS paper forms and per the IRS - it’s best for people who are used to doing their own taxes.

Here the link to the Free File is available only by going to IRS.gov/freefile.

Note: All taxpayers should keep a copy of their tax return. The IRS reports that beginning in 2017, taxpayers using a software product for the first time may need their Adjusted Gross Income (AGI) amount from their prior-year tax return to verify their identity.

Taxpayers can learn more about how to verify their identity and electronically sign tax returns at Validating Your Electronically Filed Tax Return.

Do you require assistance with your business and personal taxes?  FL-Accounting and Advisers – your Boutique Accounting Company – is here to provide you with a complimentary consultation to discuss your specific needs. Contact our office at (561) 939-2553 for your appointment. After-hours appointments are available as well as Accounting services in English and Spanish.

Wendy Ettorre