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Author: SirTas Big gold star, 5000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121585  
Subject: taxes and social security Date: 12/30/2010 5:02 PM
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2010 is the first year that we (DW and I) have received SS. Actually, she is the one receiving it; but we file a joint tax return. Is there anything now that I should pay attention to on the 1040, or any tax or SS publication that I need to consult? I suppose these SS payments will have a some kind of tax impact, but I don't have any experience with this.

TIA

--SirTas
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Author: 0x6a74 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 111800 of 121585
Subject: Re: taxes and social security Date: 12/30/2010 5:28 PM
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2010 is the first year that we (DW and I) have received SS. Actually, she is the one receiving it; but we file a joint tax return. Is there anything now that I should pay attention to on the 1040, or any tax or SS publication that I need to consult? I suppose these SS payments will have a some kind of tax impact, but I don't have any experience with this.




last year, it was just form 1040, line 20 and the associated worksheet.

... should be much the same this year (conceivably a different linenumber)

the worksheet is pretty simple .. if you don't try to figure out the logic.

... if you use tax software, i've heard some programs aren't clear about whether to enter SS net of Medicare premiums .. (vs entering gross and programs nets it) --the worksheet is clear (IMO)


HTH

bottom line -- depending on other income, up to 85% of SS is taxable as ordinary income

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Author: JAFO31 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 111801 of 121585
Subject: Re: taxes and social security Date: 12/30/2010 6:08 PM
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SirTas: 2010 is the first year that we (DW and I) have received SS. Actually, she is the one receiving it; but we file a joint tax return. Is there anything now that I should pay attention to on the 1040, or any tax or SS publication that I need to consult?"

Another Fool recently linked to the following (and I saved it):

http://www.bogleheads.org/wiki/Taxation_of_Social_Security_b...

Kudos to someone but I forget whom it was.

"I suppose these SS payments will have a some kind of tax impact, but I don't have any experience with this."

Perhaps.

Regards, JAFO

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Author: BruceCM Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 111810 of 121585
Subject: Re: taxes and social security Date: 12/31/2010 3:34 AM
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The explanation and worksheets attached will help you understand how this process works in figuring out how much of your household SS must be added to your ordinary income. But here's an easier explanation in simple English.

Take your adjusted gross income, add to it 1/2 of your Social Security beneifits and add back any muni bond interest not included in your AGI. Also, you must add back to your AGI any of the following 3 'above-the-line' deductions you took: student loan interest, tuition and fees or the domestic production deduction(s) (note, most SS beneficiaries will not have any of these deductions). This is your 'provisional income' (PI).

If you are married filing jointly, and this amount is less than $32,000, then none of your SS is added into your income. If your household PI is over 32,000 but less than $44,000, then the amount of your SS you add to your ordinary income is the lesser of 1/2 of: 1) your household SS or 2) the amount by which your PI is greater than $32,000

If your PI is over $44,000, then the amount of your SS you include as ordinary income will be the lesser of:

1) 85% of your household SS benefits, or
2) 85% of provisional income in excess of $44,000 plus the smaller of a) $6,000 or
b) the lesser of 50% of SS benefits or 50% of PI>$32,000


This is actually not that hard of a calculation to do after you've done it a few times :-)

The killer with this calculation is that it is not indexed for inflation. 26 years ago in 1984, the above formula was adopted and the dollar 'base' amounts have not changed since then. Back then, I suspect, few SS beneficiaries had to include any of their SS benefits in their gross income. Today, I would guess, most retirees must include at least some of their SS benefits in their income.

BruceM

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Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 111812 of 121585
Subject: Re: taxes and social security Date: 12/31/2010 4:03 AM
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But here's an easier explanation in simple English.

<Four paragraphs of simple explanation snipped> which is why I always say "do the worksheet." <VBG> Thanks for taking the time.

The killer with this calculation is that it is not indexed for inflation. 26 years ago in 1984, the above formula was adopted and the dollar 'base' amounts have not changed since then. Back then, I suspect, few SS beneficiaries had to include any of their SS benefits in their gross income. Today, I would guess, most retirees must include at least some of their SS benefits in their income.

I'm pretty sure it was last filing season that I was answering a filing requirement question and included the standard "Gross income does not include SS benefits" that had always been there. Then I thought, "It's been a year, double check the instructions." To my surprise it wasn't there. Instead it used the quick calculation verbiage that's on the 1099-SSA, or something akin to it. To meake sure I wasn't crazy, I went back and looked at the prior year, which was as I remembered.

Turns out that 2009 was the first year in which you could have a filing requirement because of your SS benefit. Always before if you didn't have enough other income to generate a filing requirement on its own none of your SS benefit would be taxed. But for exactly the reason you offer, that had changed.

Phil
Rule Your Retirement Home Fool

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Author: stockmover Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 111825 of 121585
Subject: Re: taxes and social security Date: 1/2/2011 1:52 AM
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This is actually not that hard of a calculation to do after you've done it a few times :-)

I guess ... but if you add in a traditional deductible IRA contribution ... that is when the cost of Tax Act or other reputable tax preparation software pays for itself IMHO.

Best Regards,

Rich

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