Even for those of us who think we have some knowledge about anything tax related, it can be a stressful time.
And this is certainly not a time when you want to play a guessing game.
The Internal Revenue Service gets many questions from many people, but these are the top frequently asked questions concerning Social Security income:
Q: If I retired last year and have started receiving Social Security payments, do I have to pay taxes on my Social Security benefits?
A: The taxable portion of your Social Security benefits basically depends on the total amount of your income and benefits for the taxable year.
Your benefits might be taxable if the total of one-half of your benefits, plus all of your other income (including tax-exempt interest), is more than the base amount for your filing status.
Here is the base amount for your filing status:
- $25,000 if you're single, head of household or a qualifying widow.
- $25,000 if you're married, filing separately and lived apart from your spouse for the entire year.
- $32,000 if you're married and filing jointly.
- $0 if you're married, filing separately and lived with your spouse at any time during the tax year.
Are you married and filing a joint return? In this case, you’ll need to combine your incomes and Social Security benefits when figuring the taxable portion of your benefits (even if your spouse didn’t receive any benefits).
You will report the net amount of Social Security benefits that you received from the Social Security Administration on line 5a of Form 1040, U.S. Individual Income Tax Return.
Q: If I received Social Security benefits this year that were back benefits for prior years, do I need to amend my returns for prior years, or are the previous back benefits paid in this year, taxable this year?
A: For starters, you cannot amend returns from previous years to reflect Social Security benefits received in a single lump-sum in the current year. You must include the taxable part of a lump-sum payment of benefits received in the current year in your current year's income, even if the payment includes benefits for an earlier year.
There are two ways to figure out the amount of income to include. Either:
- Use your current year's income to figure the taxable part of the total benefits received in the current year. - Make an election to figure the taxable part of a lump-sum payment for an earlier year separately, using your income for the earlier year.
You can select the lump-sum election method if it lowers the taxable portion of your benefits:
- Under this method, refigure the taxable part of all your benefits, which includes the lump-sum payment, for the earlier year using that year’s income. - Then, subtract any taxable benefits for the year that you previously reported. - The remainder is the taxable part of the lump-sum payment. Add that to the taxable part of your benefits for the current year (figured without the lump-sum payment for the earlier year).
Use the worksheets in Publication 915, Social Security and Equivalent Railroad Retirement Benefits to calculate the taxable portion using this method.
Q: Are Social Security survivor benefits for children considered taxable income?
A: In certain circumstances, yes, but a child won’t generally receive enough additional income to make their Social Security benefits taxable.
- The taxability of benefits must be determined using the income of the person entitled to receive the benefits. - If you and your child both receive benefits, you should calculate the taxability of your benefits separately from the taxability of your child's benefits. - The amount of income tax that your child must pay on the part of the benefits that belongs to your child depends on the child's total amount of income and benefits for the taxable year.
Fnd out whether any of the child's benefits may be taxable by comparing the base amount for the child’s filing status with the total of:
- One-half of the child's benefits. - All of the child's other income, including tax-exempt interest.
The base amount for the child’s filing status is $25,000 if they are single. If the child is married, see Publication 915, Social Security and Equivalent Railroad Retirement Benefits for the applicable base amount and the other rules that apply to married individuals receiving social security benefits.
Note: All data comes from the IRS website. Click here if you’d like to learn more. This story was first published in 2019. It has since been updated.