Do You Pay Federal Taxes on Social Security Retirement?

by Amber Keefer

    Although not everyone who collects Social Security retirement benefits is required to pay taxes on the monthly payments, some people do have to pay federal taxes on a portion of their benefits. Generally, the federal government taxes up to 50 percent of your benefits if you exceed the base amount of income that the government allows. As much as 85 percent of your Social Security benefits might be taxable if you fall within a higher income bracket.

    Total Income

    Whether you have to pay federal income taxes on your Social Security retirement benefits depends on how much income you report on your tax return. Check Form SSA-1099 -- Social Security Benefit Statement -- which you receive from the Social Security Administration aftr the close of the tax year. The form shows the total amount of benefits you received. In most cases, none of your benefits are taxable, particularly if Social Security was the only income you received during the year.
    If you have other income, you must compare the base amount for your filing status with the total of one-half of your Social Security benefits plus your other taxable income and any tax-exempt interest income. In 2011, the base amount for the filing status single or married filing separately was $25,000, and for married taxpayers filing a joint return it was $32,000. Use Worksheet 11-1 to figure your total income.

    Taxable Benefits

    Complete Worksheet 11-1 to determine whether any portion of your Social Security retirement benefits is taxable. Enter the amount from box 5 of your Form SSA-1099. The amount showing in box 5 represents the net benefits you received for the year. Add one-half of that amount to any other taxable income and tax-exempt interest income you received.
    If the total amount is equal to or less than the base amount for your filing status, none of the benefits you received from Social Security are taxable. If the amount is more than your base amount, you must complete the Social Security Benefits Worksheet to calculate what portion of your benefits is taxable. Report any taxable Social Security benefits on Form 1040 or Form 1040A.

    Withholding

    The Social Security Administration does not withhold federal taxes from your monthly Social Security benefit payments unless you complete IRS Form W4-V -- Voluntary Withholding Request. For some taxpayers, withholding is easier than making quarterly estimated tax payments or a lump-sum payment at tax time.
    You can ask Social Security to withhold 7 percent, 10 percent, 15 percent or 25 percent of your benefit payment. The withholding rate you select will remain in effect until you change it or stop withholding by completing a new Form W4-V. Once you complete and sign Form W-4V, return it to the Social Security office nearest you.

    Working After Retirement

    If you continue working after you reach your full retirement age and begin collecting your Social Security retirement benefits, your employer must still withhold taxes from your gross earnings. The federal income tax withholding is separate from the Social Security and Medicare taxes. Likewise, if you are self-employed after retirement and earn a net profit for the year that exceeds $400, you must make quarterly estimated payments of federal income tax and self-employment taxes.

    Photo Credits

    • senior couple on white image by Pavel Losevsky from Fotolia.com

    About the Author

    Amber Keefer has more than 25 years of experience working in the fields of human services and health care administration. Writing professionally since 1997, she has written articles covering business and finance, health, fitness, parenting and senior living issues for both print and online publications. Keefer holds a B.A. from Bloomsburg University of Pennsylvania and an M.B.A. in health care management from Baker College.

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