Dear Rusty: Is it possible for you to review how the federal withholding tax is calculated on social security benefits? Signed: Curious taxpayer.
Dear Curious: I’m not sure if you’re asking how FICA (or self-employed) tax on your earnings is determined, or if you’re asking how much income tax you should have withheld from your social security benefit, so I’ll address both:
The 7.65% FICA tax that your employer has withheld from your earnings consists of two elements – 6.2% is for Social Security and 1.45% is for Medicare Part A. Your employer pays a similar amount on your behalf. This is a standard amount that all U.S. workers pay, which – after earning enough credits – allows you to claim Social Security benefits when you retire and allows you to sign up for Medicare Part A for free when you are 65. If you are self-employed. -employee, you pay an “independent tax” on your net earnings instead of FICA tax, and you have to pay both the employee and employer part of the tax (15.3%). The only exception to this is that some U.S. states have opted out of participating in the Federal Social Security program, thus exempting some government employees from paying the Social Security portion of the FICA tax (they still have to pay the Medicare Part A portion). . These percentages are set by congressional legislation and will not change unless Congress passes future legislation to do so.
Determining how much income tax should be withheld from your social security is something that is best discussed with a qualified tax advisor with access to all of your income data. Your recommended tax withholding rate for income tax purposes depends on your total taxable income level and the tax rate resulting from that income (taking into account your relatives and your tax application status (single or married)). Getting income tax withheld from your Social Security benefit is optional, but if you choose to do so, you must file IRS Form W-4V with your local Social Security office. Form W-4V allows you to indicate that either 7%, 10%, 12% or 22% of your SS benefit is withheld for income tax purposes. Here is a link to IRS Form W4-V: https://www.irs.gov/pub/irs-pdf/fw4v.pdf.
The IRS may levy income tax on a portion of your Social Security benefits depending on your total income from all sources. Your “total income” consists of your adjusted gross income (AGI) on your tax return, plus 50% of your social benefits received during the tax year, plus any other non-taxable income you may have had. Tax on your SS benefits is calculated at your normal IRS tax rate and based on your tax application status.
If you file your income tax as “single” and your total income from all sources exceeds $ 25,000, then half (50%) of your SS benefits will become part of your total taxable income. And if your total income from all sources as a single Philistine exceeds $ 34,000, then up to 85% of your SS benefits will be taxable income.
If your income tax application status is “joint marriage application” and your total income is over $ 32,000, 50% of your social security benefits received during the tax year will be a portion of your taxable income. If your total income as a couple applying “married / joint” exceeds $ 44,000, then up to 85% of the SS benefits you received during the tax year will be part of your total taxable income.
This article is for informational purposes only and does not represent legal or financial guidance. It presents statements and interpretations from AMAC Foundation staff, trained and accredited by the National Social Security Association (NSSA). NSSA and the AMAC Foundation and its staff are not affiliated with or endorsed by the Social Security Administration or any other governmental entity. To submit a question, visit our website (amacfoundation.org/programs/social-security-advisory) or email us at [email protected].