Some people must pay taxes on their Social Security benefits. If you get Social Security, you should receive a Form SSA-1099, Social Security Benefit Statement, by early February of each year. The form shows the amount of benefits you received in the prior tax year.
Here are five tips that may help you determine if your benefits are taxable:
1. The amount of your income and your filing status affect whether you must pay taxes on your Social Security.
2. If Social Security was your only income last year, your benefits are probably not taxable. You also may not need to file a federal income tax return.
3. If you received income from other sources, then you may have to pay taxes on your benefits.
4. You can follow these two quick steps to see if your benefits are taxable:
• Add one-half of the Social Security benefits you received to all your other income, including tax-exempt interest. Tax-exempt interest includes interest from state and municipal bonds.
• Next, compare this total to the ‘base amount’ for your filing status. If the total is more than your base amount, then some of your benefits may be taxable.
The three base amounts are:
$25,000 for single, head of household, qualifying widow or widower with a dependent child or married individuals filing separately who did not live with their spouse at any time during the year;
$32,000 for married couples filing jointly; and
$0 for married persons filing separately who lived together at any time during the year.
5. If you use IRS e-file to prepare and file your tax return, the tax software will figure your taxable benefits for you. If you file a paper return, you can use the Interactive Tax Assistant tool on the IRS website to check if your benefits are taxable. The ITA is a resource that can help answer tax law questions. There also is a worksheet in the instructions for Form 1040 or 1040A that you can use to figure your taxable benefits.
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For immediate assistance with social security income, or another tax matter, contact us today at 1-714-382-6780 for a FREE and CONFIDENTIAL consultation with our CPAs and former IRS Auditors.
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