73Three Full-Time Workers Face Social Security Tax Issues
73Three full-time workers worried about unexpected federal tax notices when receiving Social Security. Federal taxation is determined based on provisional income, and because some states exempt income taxes, the individual tax burden varies significantly.
One reader 73said he works full time in three jobs and earns more per week than in the past. He was concerned that he might receive an unexpected tax notice regarding his Social Security benefits.
Federal tax law uses the concept of provisional income to combine income and determine whether Social Security is taxable.
For single filers, the provisional-income thresholds are divided into 25,000dollars and 34,000dollars. Depending on the applicable range, part of the benefits becomes taxable.
For married couples filing jointly, the thresholds are 32,000dollars and 44,000dollars. The taxable range varies depending on the couple’s combined income level.
Delaying Social Security benefits increases the amount received. The longer benefits are delayed, an additional annual payment of approximately 8% applies, and the additional payment applies up to age 70.
In many states, Social Security benefits are exempt from state income tax. However, some states have provisions that tax them, so the state of residence affects after-tax income.
Articles reported that as earned income increases and provisional income rises, part of Social Security benefits may become taxable, and advised checking the timing of benefits and adjustments to withholding.
They recommended checking with a tax professional because the tax amount may vary depending on each individual’s circumstances.
Sources: MarketWatch Top Stories
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