Can the IRS Tax My Social Security Benefits?

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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UPDATED: Jul 16, 2021

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Whether your social security benefits are taxable is largely determined by your age and if you earn income in addition to receiving social security benefits. (Read about the Social Security program at https://law.freeadvice.com/government_law/social_security_law/.)

Social security benefits are exempt from taxation if either one of two conditions are met by the taxpayer. First, if the taxpayer has reached full retirement age, there is no limit on how much they earn and their social security benefits are exempt from taxation. For people born in 1943 through 1954, the full retirement age is 66. Beginning in 2017, the full retirement age will increase gradually each year until it reaches age 67 for people born in 1960 or later.

Second, if social security benefits are the only source of income, they will not be subject to taxation and it is not necessary to file an income tax return. However, if you do not meet either one of these conditions, then it is possible for the IRS to tax your social security benefits based on your income.

Why Pay Taxes on Benefits Already Paid for?

Taxpayers often ask why they have to pay tax on benefits that they already paid for over the course of time through payroll deductions. Under current law, if your income exceeds a certain level, a portion of social security benefits will become taxable. The rationale for this law is that taxes should be based on your total income and if income increases then taxes should increase as well.

Combined income is what determines how much of your income will be taxable. The IRS defines combined income as taxable income plus any tax-exempt interest and half of the amount of your social security benefits. Based on that total, the taxpayer can be either exempt from taxation or have a large portion of income subject to taxation.

Many taxpayers get around this by simply not working as they see no incentive in working in addition to receiving social security only to see their benefits taxed heavily. For 2018, if a social security beneficiary’s income exceeds $17,040, for every $2 above the earnings limit, $1 in benefits will be withheld.  However, if you find it necessary to work while receiving social security benefits, you can choose to have anywhere from 7% to 25% of your benefits withheld by filing a form W-4V, Voluntary Withholding Request, and file it with the Social Security Administration. If your situation changes and you no longer need to have taxes withheld, you can re-file the same form to stop withholding.

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