Social Security Benefits

[aarp10]

A bill was recently introduced in the House by Rep. Angie Craig (D-Minn) called "You earned it You keep it". It would eliminate federal taxes from Social Security wages. A windfall for most retired people a great help in these trying times. What is AARP's stand on this not sure? What is your Representative's stand maybe time to ask? Time for the senior citizens voice to be heard. Why are all tax regulations aimed at businesses and the wealthy?  Seniors have been paying taxes for a long time. If you agree let's hear your opinion!

Ray G

[PaulR456348]

I Totally agree.

[WebWiseWoman]

I'd like to interject something that has affected folks known to me for decades... 

In the mid- to late- 80s, a couple I knew, both business owners and millionaires in their own rights, reached full retirement age. Both were survivors of mates who passed from cancer and found each other following those deaths.

They each, as the time came, requested to not receive SS retirement benefits; each was advised that wasn't possible per regulation at the time (I don't know if that has changed).

They chose to donate that social security retirement income to charities; that actually made them feel worse as they could deduct those donations; they chose not to use as deductions.

Perhaps the regulations have changed? If not, maybe that's what needs to be addressed?

just mho...

[PaulR456348]

That bill needs to be passed. I had to pay 4000 dollars of my SS income for 2023. I only made 60K total combined and paid a total of 10K federal. If my SS wasn’t taxed I would pay nothing but the 6K I withheld. 

[Tonster521]

@PaulR456348 I am unable to follow your math. I work with taxes for folks with various income amounts and cannot arrive at $10,000 of federal tax on $60,000 of income. I reduced the $60,000 by the Standard Deduction (i.e., $13,850 single 2023) which leaves $46,150 as taxable income. The first tax bracket is 10% up to $11,000 ($1,100). The next bracket is 12% from $11,001 to $44,725 (4047). Your next bracket is $44,726 to $46,150 ($314). I rounded any change to the next whole dollar and arrive at a total tax amount of $5,461 for 2023. If you had already deducted the Standard Deduction ($13,850) to arrive at $60,000, your combined income will increase by $13,850 to $73,850. And your amount of federal taxes would be $8,508 based on $60,000 of taxable income instead of $5,461 based on $46,150 of taxable income. How did you arrive at $10,000 of federal taxes?

[PaulR456348]

My total income without deduction and SS is 

$64,100

If you add my SS at 85% it would be $22,317 additional income 

So the total is $86,417 

Deduct the standard deduction of $16550 = $69,867

Based on the tax table for single it is $5146 first $47150 and 22% over that. 

So subtract $47150 from my taxable income of $69,867 = $22,727 x 22% = =$4997 + $5146 = $10,143 is what I owe 

Fed Taxes withheld are $5,918 I end up writing a check to the US treasury for $4,225 

My complaint is not owing but why should I pay 85% it should only be 50% because that would be on the employer contribution. 

Change  the formula to 50% and I end up owing $2,204 big difference 

The key is not taxing what I’ve already been taxed. The thresholds are certainly wrong as well. Come on, over $34,000 becomes taxable. The law was in 1983 it is over 40 years old. 

It is ridiculous. I will vote for the party  that wants to change that. 

Paul 

[PaulR456348]

I think you need a lesson in following guidelines it’s anything over 34K income 85% is taxable…because I file single.. you should check your knowledge before you comment on things you may not understand 

my argument isn’t paying taxes it’s the tax should only be on the 50% that the company contributes. The argument that I will or anyone will out last the total contribution is bull. That is why the contributions from many of the workers today are going up.

[Tonster521]

@PaulR456348 @You lost me regarding contributions. Depending on the amount of Earnings, a SS Beneficiary generally receives their OASDI (6.2%) contributions back in about 5 to 7 years. This is based on FICA taxes paid over a career (I.e., $2,000,000 X 0.062 or $124,000) compared to annual SS Benefits such as $24,000 or 5.16 years. Simply, taxes paid versus SS Benefits received. I am not including a discount rate that one may use in a present value calculation. Also, I am not including an employer’s amount of FICA taxes which are not credited to the individual, but to the SS Trust. I believe workers are paying greater FICA taxes because their Earnings have been increasing. The FICA percentage has remained the same for about 30 years or more. Also, I have not included the Medicare Part A portion which is 1.45%.

[JohnC728129]

your only paying taxes on 50% that’s why you only include 1/2 of your benefits on your taxes. Sorry I was using married filing joint tables. If anything AARP should be trying to get the tables that social security becomes taxable adjusted for inflation. They haven’t been adjusted since they went into effect 30&40 years ago

[Tonster521]

@JohnC728129 I agree that the thresholds need to be increased to reflect the current levels for what is considered to be low income. Congress has the power to do that. Indexing the thresholds may be complicated and cumbersome for some folks. We can debate appropriate amounts, but that may end up self serving. As you may not be aware, many of the lower income folks are not paying taxes on their social security benefits due to the increased standard deductible which may expire in 2025. The current thresholds were developed as sort of a “means testing” approach. In other words, if your income exceeds the established thresholds, you need to repay the SS Program, both OASDI and Medicare Part A. This is done via your annual federal income tax return. It surely makes the IRS look like the bad guys, but it is Congress who developed this repayment scheme. Personally, I believe the SSA has more than enough on their plate just getting SS Benefits calculated and paid to all of us. Adding a repayment and collection function would slow down  an otherwise very good administrative government agency. I realize that most folks are looking for some additional income especially if they may obtain such income from the government essentially risk free. However, some of the folks have substantial IRA and other tax deferred accounts that should be used to increase their income. That is the purpose of such accounts; namely, to provide retirement income in addition to SS Benefits. So, what is an appropriate percentage that folks should pay after all the available federal deductions? The answer depends upon which approach is used. Do we reduce federal taxes and tax SS Benefits or increase federal taxes and reduce taxes due on SS Benefits? 

[JohnC728129]

Your numbers are all over the place. Now you only add 1/2 of your social security benefit and anything over 32,000 to 44,000 you owe 50% in your case 6,000 anything over 44,000 you owe 85% ? Then add the 6,000 to that and see what you come up with. 

[Tonster521]

@PaulR456348 Thanks for the update. I agree that the federal tax should be only 50% of SS Benefits. FYI, the additional 35% was enacted by Congress in 1993 to help fund the Medicare Hospital Insurance Trust which provides Part A Medicare. I am providing a link that explains taxes on SS Benefits. https://www.concordcoalition.org/issue-brief/taxing-social-security-benefits/  IMO, it would be logical to increase the FICA payroll tax for Medicare Part A from 1.45% to an appropriate percentage. Using this payroll tax approach will require employers to contribute as well. Currently, only SS Beneficiaries contribute the additional 35% which is, in effect, an extra Medicare Part A premium. Employers are "off the hook".Please note that the Medicare Part A payroll tax has been 1.45% of earnings since 1986.

[cat0w]

I would like to see a bill like that passed.

What do you mean by, " Why are all tax regulations aimed at businesses and the wealthy?" Do you mean, aimed at helping?

I also hope that the Trump tax cuts are made permanent.

Border Collie and God Bless America