If you make less than a particular amount of money each year and just get monthly Social Security payments, you might not be required to submit a federal tax form. Even so, there can be circumstances under which you’d be better off submitting a tax form for Social Security Payments.
Many people are surprised to learn that Social Security benefits can be taxed. After all, why is the government sending you a payment one day and asking for some of it back the next? But if you take a closer look at how the federal tax on Social Security is calculated, you’ll see that many people actually don’t pay any tax on their Social Security benefits. (Image via https://www.kiplinger.com/)
According to the Social Security Administration, if Social Security benefits were your only source of income, your benefits are often not taxable and you generally don’t need to submit a federal income tax return. But, if you got Social Security benefits together with additional income, your tax liability is based on your income.
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If you file a federal tax return as an individual and your total annual income exceeds $25,000, you are required to pay taxes on your Social Security benefits. If you and your spouse have a combined income of more than $32,000 and file a joint return, you must pay taxes. The SSA estimates that you will likely have to pay taxes on your benefits if you are married and file a separate return.
Although you aren’t legally required to submit a federal return, there are some circumstances in which you probably should.
You should file a return, for instance, if you had any tax withheld throughout the year from Social Security payments or from any other sources, such as quarterly anticipated tax payments or carried-over refunds from earlier years, according to MarketWatch. You’ll frequently receive a refund for the majority, if not all, of those taxes.
Around this time of year, many people find themselves asking if their Social Security benefits are taxable? For most Americans, Social Security benefits, including Social Security Disability Income and Social Security Supplemental Income (SSI), are not taxable. (Image via https://www.gudorftaxgroup.com/)
If you received interest, dividends, or profits from the sale of investments as additional income from investments, you need additionally file a return. Even tax-free earnings from municipal bonds or interest from U.S. savings bonds can cause your income to exceed the cutoff. If so, you need to submit a federal tax return.
According to MarketWatch, there are a few additional situations when you would need to file a return:
- If you are dependent on someone else or they are depending on you. Income issues may arise under certain circumstances, necessitating the filing of a tax return.
- You might need to file a return to reconcile premium adjustments and credits if you or someone else has health insurance coverage via an Affordable Care Act Marketplace, such as a spouse or dependent.
