Is This New? Filing My Taxes

[paddywakk]

What is the name of your state?Arizona

 

[quincy]

Is what new?

 

[paddywakk]

What is the name of your state?Arizona

Sorry, I messed that up!

So I'm using a well-known tax filing software, and it says I must take half of my Social Security retirement, add it to all my taxable income, and if the result is greater that $25,000 - then ALL of my Social Security becomes taxable income! This means I owe the feds nearly $1000 instead of getting the refund I expected.

Is this something new? When I filed for 2019, half my Social Security and all my taxable income totaled over $25,000, and I don't remember any thing like this. I would have remembered, as I always thought Social Security retirement was not taxable unless one had worked and earned over a certain amount.

TIA

 

[Taxing Matters]

So I'm using a well-known tax filing software, and it says I must take half of my Social Security retirement, add it to all my taxable income, and if the result is greater that $25,000 - then ALL of my Social Security becomes taxable income! This means I owe the feds nearly $1000 instead of getting the refund I expected.

Is this something new?

It is not something new. It has been the case for many years that if you have large enough taxable income other than Social Security that a portion of your Social Security becomes taxable, too. How much of it is taxable depends on how much that other taxable income is. However, it is not the case that ALL of it is taxable. The maximum amount that is taxable is 85% of it. For the details, see IRS Publication 915 starting on page 3, which begins the discussion of how much of your benefits are taxable.

 

[adjusterjack]

Use the Social Security worksheet on Page 31 of the 1040 Instructions to determine how much of your Social Security benefit is taxable.

https://www.irs.gov/pub/irs-pdf/i1040gi.pdf

It's a little complicated and annoying. Go over the figures a few times to make sure you have amounts on the right lines.

Also recheck your 2019 tax return to make sure you got the SS tax figured right. You can get the 2019 instructions from the IRS website and use the worksheet for that year.

 

[Taxing Matters]

Use the Social Security worksheet on Page 31 of the 1040 Instructions to determine how much of your Social Security benefit is taxable.

Paddywakk can run through those worksheets if she wishes in the publication, too, but as she's using Turbotax there is no need to really crunch the numbers. The program will do all that for her accurately as long as she provides correct information to the program.

 

[adjusterjack]

I know.

A second opinion helps.

 

[davew9128]

If by new you mean since 1984...

 

[LdiJ]

I know.

A second opinion helps.

In this instance not really. All of the software, whether professional or online calculates that properly if you input accurate numbers from the various tax documents.

 

[adjusterjack]

All of the software, whether professional or online calculates that properly if you input accurate numbers from the various tax documents.

Really? Is that why software like Turbotax has updates and bug fixes? There's likely more than just this one (link to Reddit removed by mod)

I know, nothing to do with SS. Still ............

 

[LdiJ]

Really? Is that why software like Turbotax has updates and bug fixes? There's likely more than just this one: (link to Reddit removed by mod)


I know, nothing to do with SS. Still ............

Repeat, nothing to do with SS. While I have seen temporary software bugs in just about any software (particularly when something new in the law effects other things) I have never seen a problem with SS calculations. Nothing in that arena has changed in umpteen years, so the odds of any bugs there are slim to none, and slim has left the building.

 

[Taxing Matters]

Really? Is that why software like Turbotax has updates and bug fixes? There's likely more than just this one:

Yes, it does have some bugs on occasion, generally for things that have recently changed. But the computation of what portion of SS is taxable hasn't really changed significantly in decades. So that portion of the program is well tested and based on what I've seen this year, is working just fine.

The publication I linked earlier does have a good explanation of the rule, and knowing that rule will help to eyeball the result you get. If it seems off, then it's time to crunch the numbers on the worksheets.

 

[paddywakk]

Thanks, everyone!

I guess I didn't catch this last year because I got a refund. For 2020, despite having more than 10% of ALL my income withheld by the pension fund, it wasn't enough. I'll ask them to start withholding more so I can cover 2021 taxes.

Another urban myth destroyed.

 

[FlyingRon]

It is not something new. It has been the case for many years that if you have large enough taxable income other than Social Security that a portion of your Social Security becomes taxable, too. How much of it is taxable depends on how much that other taxable income is. However, it is not the case that ALL of it is taxable. The maximum amount that is taxable is 85% of it. For the details, see IRS Publication 915 starting on page 3, which begins the discussion of how much of your benefits are taxable.

Makes me want to move to American Samoa.

 

[Taxing Matters]

Makes me want to move to American Samoa.

How do you think that would help with the Social Security issue?