Taxable Social Security Income

Today TaxMama hears from Petey in Texas who is concerned. “I had to withdraw about $10,000 for air conditioner replacement and other household maintenance from my annuities. Because of these withdrawals, my taxable Social Security income has gone from $4,800 last year to $13,000. this year. Does this sound right to you? Could I be miscalculating the SS taxable amount?”

Dear Petey,

If you’re using a computer service, like Turbo Tax or Tax Cut or… this may very well be correct. Though it does sound a bit high to me. It’s as if the program added 100% of your draws to the taxable Social Security income.

Here’s how it works. Once you’ve exceeded the non-taxable income limit, up to 80% of your SS benefits can be taxed.

Here are links to a couple of IRS resources:
Publication 915 – Social Security and Equivalent Railroad Retirement Benefits
http://www.irs.gov/publications/p915/index.html

IRS article “Are your Social Security Benefits Taxable?”

http://www.irs.gov/newsroom/article/0,,id=179091,00.html

Incidentally, you can test the computation by trying out a couple of different services. See if you get the same result. You probably qualify for the FreeFile Alliance.
http://www.irs.gov/efile/article/0,,id=118986,00.html

If you’re still unsure…put your tax return on extension (Form 4868) and get some help from a VITA or AARP Tax-Aide site.

http://www.irs.gov/individuals/article/0,,id=107626,00.html

To file your extension electronically, you can use FileLater, your own tax software, or look for fill-in forms at the IRS FreeFile Alliance site.

And remember, you can find answers to all kinds of questions about Social Security Income and other tax issues, free. Where? Where else? At TaxMama.com

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