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Social Security Q&A

Are Social Security Benefits Taxable? Here is the Bad News from Social Security

Small business owners should know SSA has services online to help complete W-2s

Feb. 6, 2014 - Do you have to pay income tax on the Social Security benefits you receive? The answer in this week’s Social Security Q&A may surprise many. Did you know the Social Security Administration has online help to assist small businesses with their W-2s? Another answer that may be news to many.

Question:

Are Social Security benefits taxable?

Answer:

Yes, some people have to pay federal income taxes on their Social Security benefits. This usually happens only if you have other substantial income such as wages, self-employment, interest, dividends, and other taxable income that must be reported on your tax return in addition to your Social Security benefits.

There is never a case when a person pays tax on more than 85 percent of his or her Social Security benefits, based on Internal Revenue Service (IRS) rules.

Now, let’s get down to the numbers. If you file a federal tax return as an individual and your income is between $25,000 and $34,000, you may have to pay income tax on up to 50 percent of your benefits. If your income is more than $34,000, then up to 85 percent of your benefits may be taxable.

 

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If you are married and you file a joint return, and you and your spouse have a combined income that is between $32,000 and $44,000, you may have to pay income tax on up to 50 percent of your benefits.

If your combined income is more than $44,000, then up to 85 percent of your benefits may be taxable.

Your “income” for the purpose of determining whether you must pay taxes on some of your Social Security benefits includes your adjusted gross income, your nontaxable interest, and one half of your Social Security benefits.

In January, you should have received a Social Security Benefit Statement showing the amount of benefits you received last year. You can use this statement, or SSA-1099, when completing your federal income tax return to find out whether some of your benefits are subject to federal income tax.

If you did not receive yours, you can request one at www.socialsecurity.gov/1099. To learn more, read page 14 of our booklet, Retirement Benefits, available at www.socialsecurity.gov/pubs or visit www.irs.gov/  to obtain more detailed information on the subject.

Question:

I run a bed and breakfast. By this time every year, I am tired of all the paperwork involved with filing taxes. Is there an easier way for small businesses to file W-2s for their employees?

Answer:

Absolutely. If you are a small business owner or entrepreneur, you should check out Social Security’s Business Services Online (BSO) website. There, you can file your employees’ W-2s and W-2cs electronically and print out the W-2s to provide paper copies to your employees.

You also can verify the Social Security numbers of your employees. Our online services are easy to use, fast, and secure. Visit our BSO page at www.socialsecurity.gov/bso.

Oscar Garcia is a Public Affairs Specialist with the Social Security Administration. You can direct your questions to him at: SSA, 411 Richland Hills Drive, San Antonio, Texas, 78245. You can also email him at Oscar.h.garcia@ssa.gov.

 

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