Q Will I have to pay taxes on my Social Security Benefits? If so, can I have the taxes taken out each month instead of paying a huge bill at tax time?
Whether or not you will have to pay federal income taxes on your Social Security benefits depends on the amount of your combined household income. Generally, beneficiaries will only be liable for taxation if they earn a substantial income in addition to their Social Security payments—usually in the form of interest, dividends, wages, or self-employment.
According to Internal Revenue Service rules, beneficiaries are taxed on a percentage of their Social Security benefits based on their income. The rules for calculating combined income are as follows:
Adjusted gross income
+ Nontaxable interest
+ ½ of your total Social Security benefits
= Your combined income
Individuals who earn between $25,000 and $34,000 may be liable for income tax on up to 50 percent of their benefits, while those who earn more than $34,000 may be liable for an 85 percent tax on benefits. Regardless of how much you earn, you will never have to pay federal income tax on more than 85 percent of your Social Security benefits.
IRS Form W-4V (Voluntary Withholding Request)
You can have your federal taxes withheld from your monthly Social Security checks. To do this, you can file IRS Form W-4V (Voluntary Withholding Request) and select the percentage—7%, 10%, 15% or 25%—of your benefit amount you want withheld.
Worried about your tax liability while you are collecting Social Security benefits? Contact NJ Social Security disability attorney Manfred F. Ricciardelli, Jr. to find out how to get the maximum amount of compensation for your injury. Call us today at (877) 360-0183 to start your FREE, one-on-one consultation.