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social security tax

How Taxation of Social Security Benefits Works

You probably are aware that a portion of your Social Security retirement benefit may be taxable.  Do you know how the tax is calculated?  Or how the taxable portion of your benefit is determined? The Rules There are a couple of different levels of income that determine how much of your Social Security Benefit is taxed. But first we must define Modified Adjusted Gross Income (MAGI). This is your Adjusted Gross Income (line 37 of Form 1040) plus all of your tax-exempt income. Next is to define Provisional Income (PI). This is your MAGI plus 50% of your Social Security benefits. Now to the taxation levels: The first taxation level is $32,000 of Provisional Income for a married couple filing jointly (MFJ) or $25,000 for single, head of household and qualifying widow(er) filing statuses.  If your Provisional Income is less than this first level for your filing status, none of your […]

Missing your SSA-1099? Here’s How to Get It

The Social Security Administration has a lot on their plate. Along with handling the tax rolls from some 150 million-plus wage earners, servicing around 50 million retirees and surviving spouses and 11 million-plus disabled workers and dependents, there are 10,000 baby boomers reaching retirement age each day. These folks (current recipients of benefits and newly-eligible) are generating nearly half-million phone calls a day to SSA’s 800 number, and nearly 200,000 per day visiting the local offices. Every day. And they’re doing all this on administrative expenses of less than 1% of all the money they handle. Much has been written about what the SSA is not capable of doing – such as advising folks on the best way to file – but little has been written about what they are doing well. One of those things is their website.  

Fixing Social Security

For quite a while now we’ve been reading the reports from the Social Security Administration’s reviews of the status of the trust fund – where the prediction is that we’ll end up in the year 2033 with only enough money to pay 77¢ on the dollar of the promised benefits from Social Security. So far this revelation has not resulted in policymakers’ taking any actual steps to fix things, but sometime someone has to act. What can be done about fixing Social Security?

Your Social Security Benefits: Are They Taxable?

If you’re receiving Social Security benefits, either for disability, retirement, or survivor’s benefits, when you file your tax return you will need to figure out if the benefits you’ve received during the prior year are taxable to you. You’ll receive a Form SSA-1099 from Social Security sometime in the first months of the year, showing what your benefits were in the prior year, as well as any deductions that were made throughout the year – including Medicare premiums (Part B and/or Part D) if applicable, and federal income taxes withheld. But are the benefits taxable to you?  At most, 85% of your benefit might be taxed – and it’s possible that none of your benefit is taxable, all dependent upon your total income for the year.  See this article for a detailed explanation of How Taxation of Social Security Benefits Works.  The IRS recently published their Tax Tip 2014-23, which […]

A Few Things for a Single Person to Consider When Planning Social Security Filing

The decision of when to begin receiving Social Security benefits can be a bit daunting, because there are many things to take into account when making this decision. The basic concept of the lifetime value of benefits taken at various ages is the most common thing to consider, when this is really not as important as you might think.  This is especially true for single person – since the benefit reduction and increase factors are designed to achieve a similar lifetime result for the average lifespan. In other words, if you are an average person with an average lifespan, it won’t make much difference at what age you file for benefits, as you’ll receive approximately the same amount by the end of your average life, whenever you begin receiving the benefits. However. Another factor that you need to keep in mind is how Social Security benefits are treated, tax-wise.  At […]

Another Good Reason to Delay Social Security Benefits

As you likely know from reading many of my articles on the subject, I have long advocated the concept of delaying your Social Security benefit as long as possible.  This shouldn’t be a surprise – many financial advisors have espoused this concept for maximizing retirement income. Lately there has been a white paper making the rounds, from a Prudential veep, Mr. James Mahaney, entitled Innovative Strategies to Help Maximize Social Security Benefits.  The white paper supports the very theme that I wrote about a couple of years ago in the post Should I Use IRA Funds or Social Security at Age 62?.  This paper seems to have struck a chord with a lot of folks, as I’ve received it no less than a dozen times from various folks wondering if the strategies Mr. Mahaney writes about would be useful to them. The point is very clear: It makes a great […]

2013 Social Security Wage Base Projected

jb update 10/16/2012: The wage base for 2013 was confirmed at $113,700. The Social Security Administration trustees recently projected the wage base for 2013.  This is the maximum amount of wage income that an individual earns for the year that is subject to Social Security withholding tax.  For 2013, this amount is projected at $113,700. The new amount is $3,600 more than the 2012 wage base, which is set at $110,100, for an increase of 3.27%.  Keep in mind that this is only the increase in the taxed wage base, and there is little correlation between this and any potential increase in benefits for the year. Future years’ estimated wage bases are projected as follows: 2014: $117,900 2015: $123,000 2016: $128,400 These are only projections, each year in October the SSA trustees will set the amount for the coming year.

The Do It Yourself Do Over For Social Security

Image by iNNoVaNDiS via Flickr Late last year the Social Security Administration made a change to the rules that took a powerful option off the books – the payback and Do-Over. Back in the olden days (prior to December, 2010), there was an option available that allowed a person to file for Social Security retirement benefits at any age, and then later pay back all of the benefits received and re-file at a later age, effectively cleaning the slate and starting over at your later age. When the rule was changed, the payback and re-file now has to be done within 12 months.  But all is not lost – there is still a way to reset things if you find yourself having filed earlier than you really needed to and you wound up working longer than you thought. The Do It Yourself Do Over If you’re still under Full Retirement […]

Don’t Forget – Social Security Tax is Going Up Next Year!

Image via Wikipedia This year you may have been blissfully enjoying an increase in your paycheck without realizing it.  Remember the Tax Act of 2010?  One of the provisions in that little gem of legislation was to reduce the Social Security withholding amount for the calendar year 2011 by 2%.  This means that you’re only having to pay out 4.2% for Social Security tax during the 2011 tax year – and next year you’ll back back in the 6.2% world. But that’s not where it stops.  There is another increase in the offing for 2012: the tax wage ceiling is scheduled to increase as well, from the $106,800 level that it’s been at for the past two years, to an estimated $110,100.  This means that if you’re at the top of the wage base, your withholding and employer portion of Social Security tax will increase from $11,107 in 2011 to […]

Proposed Social Security Wage Base Increases

October 19, 2011 update: the expected wage base increase has been confirmed as $110,100 for 2012.  For more information, see this article. The Social Security Administration has released the proposed figures for the increase in the wage base for taxation for 2012 and projected some figures for the years up to 2015.  This is the limited amount of income against which Social Security withholding tax is applied. For 2009 through 2011, the wage base has been static – at $106,800 for each year.  The amount did not increase for these years since the average wage index (AWI) actually decreased from 2008 to 2009, and the modest increase in the index from 2009 to 2010 did not make up for the decrease in the prior year.  For 2011, the AWI is expected to increase once again, by 3.08%.  This sets the projected wage base for 2012 at $110,100, up a total of […]

Windfall Elimination Provision for Social Security

If you have worked in a job where your pay was subject to Social Security tax withholding, and also have worked in a job where Social Security tax is not  withheld, such as for a government agency or an employer in another country, the pension you receive from the non-Social Security taxed job may cause a reduction in your Social Security benefits.  This reduction is known as the Windfall Elimination Provision (WEP) – and it’s named such since it was enacted to eliminate the “windfall” that would otherwise be received by a worker who fit into this description.  Without the WEP, the worker would effectively be double-dipping by receiving full benefits from both plans. This provision primarily affects Social Security benefits when you have earned a pension in any job where you did not pay Social Security tax and you also worked in other jobs long enough to qualify for […]

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