Wednesday, February 22, 2012

Determine if Your Social Security Income is Taxable or Not

Many people are not aware that the 2011 social security income they received may be taxable. Under federal law, all social security income / SSI (SSI) recipients should fill up Form SSA-1099 provided by the Social Security Administration. The said form will reveal the total amount of a recipient’s benefits.

Here are a few guidelines to help you determine whether your Social Security Income / SSI and Social Security Disability Benefits are taxable or not:

• Know how much (if there is any) of your Social Security Income is taxable based on your total income and marital status.

• Worry no more if your Social Security Income is the only income you have for 2011. If this is the scenario, then your benefits are not taxable and, definitely, there would be no need for you to file an income tax return.

• If you have other sources of income, your benefits will not be taxable; certainly not if your modified adjusted gross income is more than the base amount for your filing status. Base amounts are as follows:

* For married couple filing jointly - $32,000
* For single or family head, qualified widow/widower, and married couple filing separately and do not live together - $25,000
* For married couples living together - $0

• Taxable benefits and modified adjusted gross income can be seen on a worksheet in the Form 1040-A or the Form 1040 Instruction booklet. A recipients’ tax software program can also figure this out.

• To determine if some of your benefits may be taxable, you can do your own quick computation. Just follow these few simple step below:

1. Add the half of the total security income you received from all your other income.
2. Compare your total income to the base amount of your filing status. If the result is more than your base amount, some of your benefits may definitely be taxable.

The Social Security Income / SSI is not based on a recipient’s prior work but on need, rather than the amount paid into the program or the length of time worked. It is a federal program created to supplement the income of less fortunate people. Thus, the Social Security Agency is taking into consideration which amount of the social security income is taxable and which is not.