Social Security Benefit Taxes

Whether or not your social security benefits are taxable will primarily depend on the amount of income you receive on a regular basis. For instance, if your personal income is less than $25,000 a year, then any social security benefits that you collect will most likely not be taxable. Your social security benefits will also not be taxable if the level of income that both you and your spouse earn is combined and amounts to less than $34,000.

A simpler way to figure out this calculation is to add your total amount of yearly income (e.g., employment, assets, investments, property, etc.), plus one half of what you collect in social security benefits. If the final number amounts to over $25,000, then you will most likely need to pay taxes on the social security benefits that you receive. Again, couples who are married will need to do this calculation by combining the total amount of both spouses’ yearly income.

Another good rule of thumb is that if you have other sources of retirement income, then you will most likely have to pay taxes on your social security benefits. For example, if you earn income from rental property, hold a part-time job, or are collecting funds from a 401(k) and/or other standard retirement account, then you will probably owe taxes on any social security benefits that you collect.

On the other hand, if you have no other source of income save for social security benefits (e.g., Supplemental Security Income (“SSI”) benefits), then you most likely will not have to pay taxes on any social security benefits that you receive from the federal government.

In addition, you will also need to take into consideration the tax laws of each individual state. For instance, what you may be taxed on and the amount that you are taxed will vary from one state to the next. Some jurisdictions, like the District of Columbia (or Washington, D.C.), do not impose taxes on the income earned through social security benefits.

Thus, you may want to speak with a local financial advisor or a certified public accountant (“CPA”) if you are unsure of whether you will owe taxes on your social security benefits or not. Otherwise, you may be issued a penalty by the U.S. Internal Revenue Service (“IRS”) when it comes time to file your annual income tax return.

Finally, if you encounter any legal issues or have concerns about social security benefit taxes in general, then you should also contact a local government lawyer for further legal guidance.

How Much Tax Must I Pay?

The amount of taxes that a recipient of social security benefits will need to pay will depend on a number of factors, such as:

• Whether they are filing taxes as an individual or as a joint married couple;
• Whether they are collecting social security benefits for just themselves and/or also their spouse;
• How much income or combined income they earn per year;
• What state the recipient resides in and whether that state imposes taxes on social security benefits;
• If a state does impose taxes on social security benefits, which types of benefits are taxed (if not all of them) and the percentage that gets taxed by the state in which the recipient resides;
• Whether or not an individual and/or their spouse intend to withhold taxes from social security benefits;
• Whether their individual or combined annual earned income falls below the requisite threshold amounts provided by the U.S. Social Security Administration (“SSA”) and the IRS; and/or
• Several other variables that may change based on each social security benefits case.

For example, the calculations required for an individual that is attempting to figure out whether the social security benefits they collect are taxable or not include some of the following factors:

• If a recipient’s yearly earned income falls between $25,000 and $34,000, then fifty percent of the social security benefits that they receive will be taxable.
• On the other hand, if a recipient’s yearly earned income is above that of $34,000 per year, then eighty-five percent of the social security benefits that they receive will be taxable.

As for those recipients who are filing joint taxes as a married couple, the following types of elements will need to be taken into consideration when determining whether the social security benefits that they collect will be taxable or not:

• If the combined yearly income of a recipient and that of their spouse falls somewhere in-between $34,000 and $44,000, then fifty percent of the social security benefits that they receive will be taxable.
• On the other hand, if the combined yearly income of a recipient and that of their spouse comes out to more than $44,000, then eighty-five percent of the social security benefits that they receive will be taxable.

Those who collect social security benefits should also be aware that the percentage and set threshold amounts that the IRS and state government agencies impose on social security benefit taxes can fluctuate on a yearly basis.

Accordingly, recipients who earn income through social security benefits should always review both federal and state income tax requirements before filing their taxes each year. This can help them to avoid receiving a tax penalty and owing money to the government.

In addition, it is also strongly recommended that recipients of social security benefits hire professional experts to assist with this process, including a local tax or government lawyer and/or a financial advisor.

How Can a Lawyer Help?

If you are experiencing issues with your taxes or have encountered a tax issue specifically involving social security benefits, then it may be in your best interest to contact a local social security lawyer who specializes in social security benefit taxes. This is especially true if the issue involves a joint tax return or social security benefits for your spouse.

An experienced lawyer will be able to advise you and/or your spouse of your legal rights under the relevant law as well as can help you to navigate this often extremely complex legal process. Your lawyer can also make sure that you are in compliance with the applicable laws.

For example, if the amount of either combined or individual earned income you make each year exceeds the requisite threshold set by the SSA, then the SSA may stop issuing you and/or your spouse social security benefits. It also means that you might be penalized by the IRS when you file your individual or joint income tax return.

Regardless of the social security benefits or tax issue, a government lawyer will be able to answer any questions you may have and can assist you with the necessary legal procedures required to fix the problem.

In addition, if you are a surviving spouse and are unsure whether you owe taxes on social security benefits that you are receiving in connection with a deceased spouse’s plan, then you should absolutely hire a government lawyer for further legal assistance. This is especially true if your social security benefits have been denied and you earn less than the set maximum threshold amount each year.

Lastly, if you are truly concerned about tax penalties, you may also want to consult with a local financial advisor or a CPA. However, you should know that the right attorney will be able to answer tax-related questions concerning social security benefits as well.