Benefits Specialists normally do not assist clients with their taxes unless they are qualified tax preparers. However, they should have a general knowledge of how Social Security benefits may affect a person’s taxes and what credits may be available to their clients. All Title II benefits may be subject to federal tax; this includes:
- Social Security Disability Insurance (SSDI)
- Survivor (Widow(er) and Child)
- Auxiliary benefits
Social Security benefits are federally taxable depending on a beneficiary’s total income and marital status. If Social Security benefits are a person’s only income, the benefits are normally not taxed and a federal income tax return need not be filed. Beneficiaries who receive Social Security benefits plus other income, need to complete the worksheet in the Form 1040 or 1040A instruction book to see if they must pay federal taxes on their benefits. The general guidelines are:
- When a beneficiary files taxes as an individual and has combined countable income of between $25,000 and $34,000, federal income tax may need to be paid on up to 50 percent of SSA benefits. If the combined income of an individual is more than $34,000, up to 85 percent of the benefits may be taxed.
- When a beneficiary files a joint return with his/her spouse and their combined countable income is between $32,000 and $44,000, federal income tax may have be paid on up to 50 percent of the SSA benefits. If the combined couple income is more than $44,000, up to 85 percent of the benefits may be taxable.
- When each member of a married couple files a federal return separately, taxes will probably be owed on any Social Security benefits received.
By January 31 of every year the Social Security Administration (SSA) sends each beneficiary Form SSA-1099 (Social Security Benefit Statement) which shows the total amount of the benefits paid in the previous year. The figures listed on this form should be used to determine taxable benefits.