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Social Security/New tax bill

How does the new tax bill affect the income tax on Social Security benefits? Has the formula changed or is it the same?  Have not seen anything addressing this, a subject that will affect millions of senior citizens.

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New tax bill continues to suggest the elderly divorce in order to keep more of their hard-earned savings: https://freddonaldson.com/2015/06/24/seniors-get-divorced-and-save-on-income-taxes/

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Does anyone have an Internet Source for the new (2019) Taxable Social Security Benefits Worksheet?

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@fdougadkins

Are you talking about for 2018 that will be needed for the filing season of 2019? Next Jan-April 2019 we will be filing for 2018.

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@fdougadkinswrote:

Does anyone have an Internet Source for the new (2019) Taxable Social Security Benefits Worksheet?


As of NOW, there have have been no changes to the taxable Social Security benefits.

The IRS explains it simply in this FAQ:

IRS.gov - Question on the tax on Social Security Benefit

 

IRS Publication 915 - Social Security and Equivalent Railroad Retirement Benefits
explains it further and the various type worksheets for differing situations begin on page 15 of this publication.

 

Unless Congress makes some changes to this taxation this year for 2019, it will remain the same.

Could it happen - yes, maybe, Social Security needs additional funds to pay benefits and that is where this taxation on Social Security benefits go - back into the SS Trust Fund.

Notice the Data from the Old-Age and Survivors Insurance Trust Fund Receipts

( 2nd one down) at this Social Security link - see the heading "Income form the Taxation of Benefits"

Social Security Trust Fund Data 1937 - present

 

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Thanks for asking this question. No one seems to be asking this question which should be our primary concern.  I have not seen anything that addresses this.  Under current tax law Taxes on Social Security retirement benefits are based on what is commonly referred to as your provisional income.  Provisional income encompasses your adjusted gross income + Tax-exempt income (i.e., income from municipal bonds) + 50% of your SS benefits.  For married persons filing jointly if your provisional income is less than $32,000 your SS income is tax free.  From $32,000 to $44,000 up to 50% of SS income is taxable.  More than $44,000 and 85% of SS income is taxable. Hopefully, this special treatment of SS benefits will be a part of the new tax bill.  I realize that hope is for fools and children.  If special consideration of SS benefits are not part of the new bill we need to vote those who supported this out of office.  We seniors have the political power to do it!

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@jk1920 wrote:

. . . .  Under current tax law Taxes on Social Security retirement benefits are based on what is commonly referred to as your provisional income.  Provisional income encompasses your adjusted gross income + Tax-exempt income (i.e., income from municipal bonds) + 50% of your SS benefits.  For married persons filing jointly if your provisional income is less than $32,000 your SS income is tax free.  From $32,000 to $44,000 up to 50% of SS income is taxable.  More than $44,000 and 85% of SS income is taxable. Hopefully, this special treatment of SS benefits will be a part of the new tax bill.  I realize that hope is for fools and children.  If special consideration of SS benefits are not part of the new bill we need to vote those who supported this out of office.  We seniors have the political power to do it!


Even though this tax on Social Security benefits, for certain people based on income, is complete during your Federal Income filing, it is actually NOT an income tax, it IS a Social Security tax.  What is paid, by those who have to pay it, goes directly into the Social Security Trust Fund just like payroll taxes.

 

It is an additional amount paid to Social Security to keep the program running.

Thus, it isn't a tax matter but is a Social Security matter.  Pull it away and the Trust Fund insolvency comes earlier - currently the date is 2034.

 

This is similar to people with higher incomes paying a MUCH higher Part B premium - the IRMMA ( Income Related Medicare Monthly Adjustment), which goes into Medicare to help it keep running along with payroll taxes.

 

If we want to keep these programs, there may be more such sur-taxes/sur-charges coming down the pike cause the current rate of payroll taxes ain't gettin' it.

 

So don't look for this taxation of SS benefits to go away but it can always be modified so that more people have to pay it.  To take one for the team, so to speak !!

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So bottom line we get nothing in our social security income based on the new tax law.

Figures........

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@BarbaraS298287 wrote:

So bottom line we get nothing in our social security income based on the new tax law.

Figures........


The Social Security benefits tax is NOT an income tax; it is a Social Security tax - it goes back into the Social Security Trust Fund when it is paid in whatever tax year..

 

The Social Security beneftis tax is only applicable on half of the benefit along with other countable income over the base line.  Only on half of the benefit because this is the part that has never been taxed - the employer contribution part. 

 

The income base for inclusion into this additional Social Security tax is not and has never been linked to inflation, thus more and more beneficiaries are becoming included in it.  That's pretty much the way it was designed since it help the Social Security Trust Fund to remain solvent - back then (1983) and now.

 

Any changes to this Social Security tax on benefit or even the income base line when it become applicable would have to be changed as part of Social Security reform and not income tax reform..

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@GailL1  You said, "The Social Security benefits tax is NOT an income tax; it is a Social Security tax"

 

I have read several of your post where you have written this, but, if what you are saying is true then why does my 1099 read, Voluntary Federal income tax withheld and shows the amount I had withheld. Am I missing something. 

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@cat0w wrote:

@GailL1  You said, "The Social Security benefits tax is NOT an income tax; it is a Social Security tax"

 

I have read several of your post where you have written this, but, if what you are saying is true then why does my 1099 read, Voluntary Federal income tax withheld and shows the amount I had withheld. Am I missing something. 


There is more than one " Federal Income Tax" .   Many different (income based Federal ) taxes flow through our Federal Income tax system to the IRS - it is a way to collect them all at one time and then disburse them to the different area to which they are owed.  You see, that is why they are broken out either by line or form on the tax return. 

IRS 2017 Form 1040 -

see page 1 - line 20a & 20 b

see page 2 - "other taxes"

 

Liken it to a self-employed person who has submitted Estimated Tax payments during the year on form 1040-ES.  At tax time, they complete their return and determine all the various Federal taxes which they have to pay. They are added together for the grand total of Federal Taxes even though they run the gamut from income taxes to self-employment taxes - however each is designated by a particular Form or Line on the Tax Return.  

 

The AARP also has explained this - AARP FAQ - Are My Social Security Benefits Taxable?

Q: How much money does the federal government collect from taxes on Social Security, and what happens to that money?

A: In 2012, Social Security beneficiaries paid a total of $45.9 billion in income taxes on their benefits. The Social Security Trust Funds, from which benefits are paid, received $27.3 billion, while the Medicare Hospital Insurance Fund (HI) got $18.6 billion.

These deposits accounted for 3.2 percent of the year's income for the Social Security Trust Funds and 7.7 percent of the income of the HI trust fund.

 

From the SSA -

SSA.gov - Taxation of Social Security Benefits

 

Under legislation enacted in 1983, the Social Security Trust Funds receive income based on Federal income taxation of benefits. The funds receive taxes on up to 50 percent of benefits from single taxpayers with incomes over $25,000 and from taxpayers filing jointly with incomes over $32,000.

 

Legislation enacted in 1993 extended taxation of benefits. The legislation increased the limitation on the amount of benefits subject to taxation from 50 percent to 85 percent for single taxpayers with incomes over $34,000 and for taxpayers filing jointly with incomes over $44,000. All additional tax income resulting from the 1993 legislation is deposited in Medicare's Hospital Insurance Trust Fund.

 

And here is the actual Old Age & Survivors Trust Fund Receipts table - notice the origin in the receipt category (2nd table):  Income from taxation of benefits began in 1984.

SSA.gov - Old-Age and Survivors Insurance Trust Fund Receipts 1937 - 2016

 

Total receiptsare made up of the following:
  • Net payroll tax contributions
  • Income from taxation of benefits
  • General Fund Reimbursements
  • Net interest on those special SS Treasuries

 

And this is from the 2017 Social Security Trustee Report Summary

 

Table 3. Program Income   (in billions) -

                                                            OASI      DI           HI         SMI

Source (in billions)                       
Payroll taxes$678.8$157.4$253.5
Taxes on OASDI benefits31.61.223.0
Interest earnings87.01.47.7$2.1
General Fund reimbursements0.1a1.229.9
General revenues$288.1
Beneficiary premiums3.385.9
Transfers from States10.0
Otheraa2.13.4
Total797.5160.0290.8

419.4

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@BarbaraS298287  That depends on your income. I plan on waiting until next year to see if I need to lower what I am having withheld for taxes. If I do then that would mean a little more for me each month.

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Thanks for that info, I pay the tax every year and always got a tad annoyed since I thought it was income taxes paid again on it

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We are definitely justified in arguing that we should never be taxed twice on any portion of our income.  And yet, this deceitful act by the federal government is not just limited to levying a tax a second time on our SS income, there are many in congress looking at ways to do the same with our money that we pay in state income taxes.

 

Furthermore, as it appears we retirees are still in the dark regarding taxation of our SS benefits under the new IRS tax laws, why does our AARP not come forth and provide this information for us?

I think we should expect more for our membership dues on this matter than just a forum for sharing our frustrations.  At the very least, we need to be kept in the loop.  And, has our AARP done enough to represent us as retirees and future retirees before congress?  Am I alone in this point of view?

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@s152429g wrote:

We are definitely justified in arguing that we should never be taxed twice on any portion of our income.  And yet, this deceitful act by the federal government is not just limited to levying a tax a second time on our SS income, there are many in congress looking at ways to do the same with our money that we pay in state income taxes.

 

Furthermore, as it appears we retirees are still in the dark regarding taxation of our SS benefits under the new IRS tax laws, why does our AARP not come forth and provide this information for us?

I think we should expect more for our membership dues on this matter than just a forum for sharing our frustrations.  At the very least, we need to be kept in the loop.  And, has our AARP done enough to represent us as retirees and future retirees before congress?  Am I alone in this point of view?


You are not being taxed twice - the Social Security benefit tax is only applicable to 1/2 of your benefit - consider it the half which your employer contributed which matched your contribution during your working years - this is the part that was never taxed.  You paid income tax on your part of the contributions during your working years but the part your employer matched was not taxed.

 

The amount of this Social Security Benefit tax is not an income tax - it is a Social Security tax and the amount paid is put into the Social Security Trust Fund because it was part of the Social Security reform back in the 80's.

 

The base line income amounts over which a beneficiary is required to pay this additional Social Security tax was not linked to inflation, therefore these amounts depending on your filing status have never change - that another part of this previous SS reform - as time goes by more and more beneficiaries are subject to this SS benefit tax.

 

Any changes to this Social Security tax on benefits would have to be part of Social Security reform and NOT part of any income tax changes.

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Well, I disagree.  The tax worksheet for annual SS income uses a multiplier that taxes a portion of this income.  And, this is a very sizeable portion for those of us who must still work to make ends meet, and then are penalized for it.  And, I repeat, this distribution indeed has already been taxed.  To wit, year end W-2 payroll deductions for SS contributions list it as "SS Tax Withheld" and this is not a deductible during the years in which it is paid by the employee.  You can explain the SS Administration budget in an attempt to claim that it has not been taxed, but the facts tell us otherwise.  To wit, the SS dministration was established to create retirement income, based upon workers' incomes without being taxed by the IRS.  It was only later by creative challenges to the SS ACT that joint congressional-executive branch efforts brought about changes in terminology, to tax once again a portion SS benefits, in order to balance the national budget.  These deceitful acts were done on the backs of american workers, and it is upon these changes in terminology which allows you to cite that it is not being taxed twice.  Furthermore, it doesn't make any difference to the retired benificiary whether it is a SS tax or an IRS tax.  It is still at the end of the day, simply a double tax. 

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@s152429g wrote:

Well, I disagree.  The tax worksheet for annual SS income uses a multiplier that taxes a portion of this income.  And, this is a very sizeable portion for those of us who must still work to make ends meet, and then are penalized for it.  And, I repeat, this distribution indeed has already been taxed. 

 

To wit, year end W-2 payroll deductions for SS contributions list it as "SS Tax Withheld" and this is not a deductible during the years in which it is paid by the employee.  You can explain the SS Administration budget in an attempt to claim that it has not been taxed, but the facts tell us otherwise. 

 

To wit, the SS dministration was established to create retirement income, based upon workers' incomes without being taxed by the IRS.  It was only later by creative challenges to the SS ACT that joint congressional-executive branch efforts brought about changes in terminology, to tax once again a portion SS benefits, in order to balance the national budget.  These deceitful acts were done on the backs of american workers, and it is upon these changes in terminology which allows you to cite that it is not being taxed twice.  Furthermore, it doesn't make any difference to the retired benificiary whether it is a SS tax or an IRS tax.  It is still at the end of the day, simply a double tax. 


You NEVER paid taxes on the part of the SS or Medicare contributions made for you by your employer.  That's why you only use 1/2 of your benefit to actually figure any tax owed on your SS benefit.     Social Security Benefit Tax Worksheet - see lines 1 and 2

 

Your W-2 during your working years showed ONLY the portion that was paid by you NOT the amount matched by your employer which they pay or deposit directly to the SSA on a periodic schedule during the year while you were working.   You paid income taxes on the amount which you paid as your contribution but the employers (matched) contribution was not taxed at all - no tax paid by you and no tax paid by the employer.  

 

The Social Security Amendments of 1983 made lots of changes to the Social Security system in order to save it from insolvency.  The taxation of benefits originated with this legislation.

 

There are lots of myths and misinformation about the system, its development and changes through the years.   SSA.gov - History: Myths and Misinformation - Part 2

Q2: Which political party eliminated the income tax deduction for Social Security (FICA) withholding?

A2: There was never any provision of law making the Social Security taxes paid by employees deductible for income tax purposes. In fact, the 1935 law expressly forbid this idea, in Section 803 of Title VIII.

 

Q3. Which political party started taxing Social Security annuities?
A3. The taxation of Social Security began in 1984 following passage of a set of Amendments in 1983, which were signed into law by President Reagan in April 1983. These amendments passed the Congress in 1983 on an overwhelmingly bi-partisan vote.

The basic rule put in place was that up to 50% of Social Security benefits could be added to taxable income, if the taxpayer's total income exceeded certain thresholds.

 

Q4. Which political party increased the taxes on Social Security annuities?

A4. In 1993, legislation was enacted which had the effect of increasing the tax put in place under the 1983 law. It raised from 50% to 85% the portion of Social Security benefits subject to taxation; but the increased percentage only applied to "higher income" beneficiaries. Beneficiaries of modest incomes might still be subject to the 50% rate, or to no taxation at all, depending on their overall taxable income.

This change in the tax rate was one provision in a massive Omnibus Budget Reconciliation Act (OBRA) passed that year. The OBRA 1993 legislation was deadlocked in the Senate on a tie vote of 50-50 and Vice President Al Gore cast the deciding vote in favor of passage. President Clinton signed the bill into law on August 10, 1993.

 

Part 1

Myth 5: President Roosevelt promised that the annuity payments to the retirees would never be taxed as income

Originally, Social Security benefits were not taxable income. This was not, however, a provision of the law, nor anything that President Roosevelt did or could have "promised." It was the result of a series of administrative rulings issued by the Treasury Department in the early years of the program.

In 1983 Congress changed the law by specifically authorizing the taxation of Social Security benefits. This was part of the 1983 Amendments, and this law overrode the earlier administrative rulings from the Treasury Department.

 

There is one way to stop these taxes on your SS benefit - decrease the amount of other income.

Millions of seniors live only off their SS benefit, nothing else - they pay no tax.

 

Perhaps it would be better to tax ALL employee benefits including their employer matched payroll taxes and even their employer subsidized healthcare coverage benefits.

 

With SS being in such dire financial shape, I would imagine we will have other changes coming real soon and there is only a finite manner of doing this -

  • increasing revenues to the programs
  • decreasing benefits in some manner
  • or some combination of both

 

 

 

 

 

 

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@GailL1  You said,

"There is one way to stop these taxes on your SS benefit - decrease the amount of other income." 

 

You are so funny, Ha, Ha, Ha.  

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When I supported my statement that SS income is being double taxed, I think it goes without saying that what is at stake here is the employee contribution.  A significant number of retirees ARE being taxed again on a variable portion, depending upon a total annual income that begins near the federally established poverty level.

 

As for balancing the federal budget, the congressional majority who voted in favor of the recent tax overhaul did not show nearly enough concern for the average wage worker when they threw it further out of balance with their 1.4 trillion welfare hand-out to the wealthiest. But then many of them have already stated that they want to eliminate social security all together, at which time they can be depended upon to impose double-taxes via further penalties on how we decide to use our private retirement accounts.

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@s152429g wrote:

When I supported my statement that SS income is being double taxed, I think it goes without saying that what is at stake here is the employee contribution.  A significant number of retirees ARE being taxed again on a variable portion, depending upon a total annual income that begins near the federally established poverty level.

 

As for balancing the federal budget, the congressional majority who voted in favor of the recent tax overhaul did not show nearly enough concern for the average wage worker when they threw it further out of balance with their 1.4 trillion welfare hand-out to the wealthiest. But then many of them have already stated that they want to eliminate social security all together, at which time they can be depended upon to impose double-taxes via further penalties on how we decide to use our private retirement accounts.


As far as I can see from your post, you haven't supported any of your statements.  I showed you on the (IRS) Tax worksheet where only 50% of the SS benefit is counted with other income towards the taxation computation

 

Maybe you can understand the rationale used for the 1983 Amendment as given by the agency.   Security History: Taxation of Benefits

 

As you can read, they liken it to a defined benefit pension where both the employee and the employer contribute to the plan.  The employee contributing after tax dollars and the employer contributing before tax dollars.  When the employee begins to take their pension benefit, they are taxed only on the portion which was contributed for them by their employers because that portions was contributed in before tax dollars.

 

Same is true of the tax on Social Benefits because only 50% of the benefit is used in the computation of any tax due - that is the employer part of the contribution during working years.  The employee really never sees this amount on any of their  working years tax forms.  The employer matched amount is sent directly to the SSA with a yearly balancing and reconciliation of the amount along with one copy of all the employee W-2.  Check one of your W-2s or one of your Social Security Statements and you will see that you have been credited with only with the part you paid, representing only 1/2 of the amount that was paid in total.

 

As far as the passage of the Tax Cut and Jobs Act, most working people will see some benefit if they pay taxes.

 

I am not aware of any plans to change Social Security except to fix it which has to be done, if not, according to the Trust Fund Trustees, come about 2034, the program will only be able to pay out about 77% of benefits if nothing is done to strengthen the program.

 

Like I said, strengthening it can involve:

  • bringing in more revenues
  • reducing benefits in some manner
  • or a combination of both

BTW, the FPL for 2018 is

1 person - $ 12,140

2 people - $ 16,460

course this is for ALL income.     ASPE.gov: Poverty Guidelines 2018

 

 

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  1. Social Security is not like a defined benefit pension plan because pension plans do not income or means test you when it comes time to make the pay out. Taxing more of my own money from social security because of other income I may make is socialism. I would much prefer an annuity than social security.  That way my money isn’t subject to the vultures of the Democratic Party such as Al Gore and Bill Clinton etc
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@pharmlaw

I'm not sure what you are trying to say because I do pay income tax on most of my pension income. I also have some withheld from my social security for income taxes, however, I did just drop that from 15% to 7%. I'll see how that works out come next filing time. 

I don't mind paying taxes to our government, after all I do enjoy all the great things we have here in the United States of America.

Just checked my checking account this morning and I have received my refund from this past years income tax filing.

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  1. Social Security is not like a defined benefit pension plan because pension plans do not income or means test you when it comes time to make the pay out
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@cat0w wrote:

@GailL1  You said,

"There is one way to stop these taxes on your SS benefit - decrease the amount of other income." 

 

You are so funny, Ha, Ha, Ha.  


Glad you liked my humor - perhaps I should have said - decrease the amount of  "countable" income.  Tax planning is helpful depending upon your retirement income - the amount and nature.

 

I hope I was able to explain and show you where this taxation of Social Security benefits goes and why it was established to help save the system.

 

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So it looks like if nothing changes that my taxes will be 50% or maybe 0% if my adjusted gross income is below $32,000 for the SS. Sounds like I should of been an accountant for a living lol. Just hope we do not lose this with the new tax bs.

Jim

 

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IN THE U.S. ENGLISH DICTIONARY, THERE IS NO PHRASE SUCH AS SHOULD OF. IT'S SHOULD'VE.
I LEARNED THAT IN 4TH GRADE.
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@l107489h  Should've vs Should of

AARPShouldOfvsShould've.JPG

 

 

 

 

 

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I want to retire next year(63), but all this is too scary with the new tax plans. My wife is now end stage renal disease and I wanted to be not working when we had to get her a new kidney. Now all looks to be doom and gloom. Probably have to retire now when I am 70. My job has a decent health/rx/eye/dental family plan. Of course she is now on Medicare also, to pay the approximate one million a year for treatment. All this talk about Medicare cuts is just frustrating and scary. I will be getting approximately $37,000 a year with 2 pensions and social security. It seems that tax bracket is vunerable now and we will just help the corporations and ultra rich get even richer. Maybe that is just all talk though. I wish politicians would stop playing chess with our lives.

Jim

 

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I haven’t seen anything either.. even if it stays the same, any increase in taxable income will possibly double % on the tax line under the current system

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It changes the way your COLA is calculated + it'll decrease your Social security check. https://newrepublic.com/article/145688/biggest-trojan-horse-republican-tax-plan
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