:quality(75)/cloudfront-us-east-1.images.arcpublishing.com/elcomercio/CZKQAJO33VFK5JJEHOGDHYJV2I.jpg "How do you know if you must pay taxes on your Social Security pension? | MIX")
According to the Social Security Administration, about 66 million Americans are receiving Social Security pension payments, with approximately 40% of recipients subject to federal taxes. This tax obligation arises when an individual has substantial additional income outside of their Social Security benefits, such as wages, self-employment earnings, interest, dividends, and other taxable income that must be reported on their tax return.
The Internal Revenue Service (IRS) has established income limits for retirees to pay taxes on their Social Security benefits. For individuals filing their federal taxes, those with a combined income between $25,000 and $34,000 may have to pay taxes on up to 50% of their benefits. If the combined income exceeds $34,000, up to 85% of their benefits may be subject to taxation.
For married taxpayers filing jointly, taxes on 50% of their Social Security benefits are applicable if their combined income ranges from $32,000 to $44,000. If their combined income surpasses $44,000, they will be taxed on 85% of their Social Security benefits. It’s important to note that those who are married and file separate tax returns might also be required to pay taxes on their benefits.
Retirees who need to pay taxes on their Social Security benefits have the option to make quarterly estimated tax payments to the IRS or choose to have federal taxes withheld from their benefits. The IRS provides Form W-4V for those who are receiving benefits or wish to change or stop withholding.
For further information or assistance, individuals can reach out to the IRS at 1-800-829-3676 and press 2 for Spanish. For those who are deaf or hard of hearing, they can call the IRS’s toll-free TTY number at 1-800-829-4059.
In conclusion, it’s crucial for retirees with other income sources to be aware of the tax implications on their Social Security benefits and to understand the income limits set by the IRS. Consulting with tax professionals or financial advisors can provide valuable guidance in managing these tax obligations.