Some taxpayers are required by law to pay taxes on their Social Security, the Internal Revenue Service said in a news release emailed on March 1.
Whether you owe taxes on your benefits and, if so, how much you owe are wonderful problems for people who love math, so it's a good idea to have a licensed tax preparer figure it out for you, or use the IRS' Free File program, which will make the computations for you.
Social Security beneficiaries should have received Form SSA-1099 in the mail by early January. The form reports the amount of benefits you received in 2012.
According to the IRS, these are the basic ways to determine whether you owe taxes on your Social Security money:
1. The amount of your income and your filing status affect whether you must pay taxes on your Social Security.
2. If Social Security was your only income in 2012, your benefits are probably not taxable. You also may not need to file a federal income tax return.
3. If you received income from other sources, then you may have to pay taxes on your benefits.
4. You can follow these two quick steps to see if your benefits are taxable:
• Add one-half of the Social Security benefits you received to all your other income, including tax-exempt interest. Tax-exempt interest includes interest from state and municipal bonds.
• Next, compare this total to the ‘base amount’ for your filing status. If the total is more than your base amount, then some of your benefits may be taxable.
The base amount varies, depending on your filing status.
Your base is $25,000 is you are filing as single, head of household, qualifying widow or widower with a dependent child or married individuals filing separately who did not live with their spouse at any time during the year.
Your base is $32,000 if you and your spouse are married and filing jointly.
Your base is zero if you are married filing separately and lived with your spouse at any time during 2012.
You can find detailed information about the taxation of Social Security benefits by downloading IRS Publication 915.
Comments