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?”
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
IRS article “Are your Social Security Benefits Taxable?”
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.
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.
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[Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.]
- Ask TaxMama :: Where taxes are fun and answers are free
- www.TaxQuips.com :: The number ONE free tax podcast online
- IRS Publication 915 :: Publication 915 – Social Security and Equivalent Railroad Retirement Benefits
- IRS Article :: IRS article “Are your Social Security Benefits Taxable?”
- IRS VITA and TCE programs :: Services where you can have volunteers do your tax return for free
- FileLater :: For your personal and Business extensions