How to Pay Income Tax on Social Security Benefits
Many taxpayers make the mistake of believing that Social Security benefits are tax-free. That's not necessarily so. Although Social Security benefits are taxed at a different rate than other forms of income, some or all of these benefits are still taxable. Recipients can pay income tax on Social Security benefits by having tax withheld up front or by paying the tax when they file their returns.
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Instructions
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Use the tax worksheet supplied in IRS Publication 915, Social Security and Equivalent Railroad Retirement, to determine how much of your benefits are taxable. Once you've determined what percentage of your Social Security benefits is taxable, enter the taxable amount on line 20b of Form 1040 or line 14b on Form 1040A. Complete the remainder of your tax return in the usual manner. If the taxable portion of your Social Security benefits results in a tax liability, you will need to pay the amount owed to the Internal Revenue Service.
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Mail your completed tax return to the IRS and enclose a check for the total amount of tax you owe. Make the check or money order payable to "Dept. of Treasury." Write your Social Security number, telephone number and form series (1040) on the check. If you cannot afford to pay the full amount, include a signed Form 9465, Installment Agreement Request, with your return. You can also make payments online using the Electronic Federal Tax Payment System (see Resources).
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Complete IRS Form W-4V, Voluntary Withholding Request, to have the Social Security Administration withhold federal tax from your monthly benefit check. Benefits can be taxed at a rate of 7 percent, 10 percent, 15 percent or 25 percent. You can download Form W-4V from the IRS website (see Resources) or request a copy by calling the IRS at 800-829-3676.
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Tips & Warnings
Citizens living in Canada, Egypt, Germany, Ireland, Romania and the United Kingdom are exempt from tax on their Social Security benefits.
Many people pay little or no tax on Social Security benefits. Generally, Social Security recipients who owe tax on their benefits receive additional sources of income during the year such as wages, pensions or income on investments.
References
Resources
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