Tax Tip – Taxable Amount of Social Security Benefits & Social Security Disability Payments

Tax Tips provided by Don Fitch, CPA

Example:

Georgia is single and files Form 1040 for 2013. In addition to receiving social security payments during 2013 year, she received a fully taxable pension of $18,600, wages from a part-time job of $9,400, and taxable interest income of $990, for a total of $28,990 for 2013. She received a Form SSA-1099 in January of 2014 following year that shows her net social security benefits of $5,980 in box 5. The sum of Georgia’s MAGI ($28,990) and 50 percent of her social security benefits ($2,990) exceeds her base amount ($25,000). Thus, Georgia must include a portion of her social security benefits in income for 2013. The amount of social security benefits Georgia must include in income for 2013 is $2,990, which is the lesser of (1) $2,990 (50% × $5,980) or (2) $3,490 (50% × ($28,990 + $2,990 − $25,000).

Example:

Tom and Ginny Smith file a joint return on Form 1040 for 2013. Tom is retired and received a Form SSA-1099 in January 2014 that shows net social security benefits of $10,000 in box 5. Ginny is a retired government worker and received a fully taxable pension of $38,000. The Smiths had $2,300 in taxable interest income. They also had interest of $200 on a qualified U.S. savings bond, which qualified for the Code Sec. 135 exclusion. The sum of the Smiths’ MAGI ($40,500, including the savings bond interest) and 50 percent of their social security benefits ($5,000) exceeds their base amount ($32,000). Thus, the Smiths must include a portion of Tom’s social security benefits in income for 2013. More than 50 percent of Tom’s net benefits are taxable because the sum of the Smiths’ MAGI ($40,500) and 50 percent of Tom’s social security benefits ($5,000) is greater than the Smiths’ adjusted base amount ($44,000). The amount of social security benefits the Smiths’ must include in income for 2013 is $6,275, which is the lesser of (1) $8,500 (85% × $10,000) or (2) $6,275 [(85% × ($40,500 + $5,000 − $44,000)) + (50% × $10,000)].

Please contact the office of Don Fitch Accountancy at (760)567-3110 or Email Don.Fitch@CPA.com if you have any questions or would like additional information.

DON FITCH, CPA
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Palm Desert, CA 92260

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Email: DonFitchCPA@paylesstax.com
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This blog post is intended to serve solely as an aid in continuing tax education for Don Fitch Accountancy blog and email members. Due to the constantly changing nature of the subject of the materials, this product is not appropriate to serve as the sole resource for any federal tax, accounting opinion, tax return position, and must be supplemented for such purposes with other current authoritative materials. The information in this blog post has been carefully compiled from sources believed to be reliable, but its accuracy is not guaranteed. In addition, Don Fitch Accountancy is not engaged in rendering legal or other professional services and will not be held liable for any actions or suits based on this blog post, email, or comments made during the above presentation. If legal advice or other expert assistance is required, seek the services of a competent professional.

(Updated 02/27/2021 06:05)

Published by Don Fitch, CPA

Offers in Compromise, Wage Levy Releases, Installment Agreements, IRS Audits, and much more IRS assistance. Also, allow us to Help you complete your Tax Returns from 1913 to present (100+ Years) and for any of the 50 States.

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