Avoid hefty Social Security payments during tax time by paying in advance – here’s how – Community News
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Avoid hefty Social Security payments during tax time by paying in advance – here’s how

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If you’re planning to retire soon, now is the time to think about the 2022 federal income taxes, as taxation of retirement income is different than taxation of employment income. These changes are mainly due to the way taxes are withheld from retirement income, according to Fedweek.

See: At what age should I start worrying about Social Security?
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To avoid paying a lot of federal income taxes when filing the return, with some planning, it’s more beneficial to pay your taxes over the course of the tax year.

Fedweek says that with regard to federal annuities (CSRS or FERS), you probably filled out a W-4P with your retirement papers and now taxes are withheld from your monthly payments.

“You probably based this deduction on the last W-4 you filed while you were an employee and it will most likely cover any taxes owed from your CSRS or FERS annuity. There’s a little problem here. True it becomes problematic is when we get to your Social Security and TSP withholding,” Fedweek said.

The key to avoiding a tax surprise, especially in your first year of retirement, is to pay your Social Security income tax while you’re at it, recommends Fedweek.

See: Social Security Benefits Can Be Withdrawn Early – What Does This Mean for You?
Find: You Should Check Your Social Security Balance Regularly – Here’s Why

You can do this per Fedweek:

  • Ask Social Security to withhold your monthly payments.
  • Make quarterly estimated tax payments. For these payments, due on April 15, June 15, September 15, and January 15, remember to set aside the money for the payment and remember to actually send it.
  • Increase the amount of withholding by completing the withholding section of your Thrift Savings Plan (TSP) withdrawal form. If you’ve already started distributions and want more to be withheld, you can submit a W-4P.

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About the author

Yael Bizouati-Kennedy is a former full-time financial journalist and has written for several publications, including: Dow Jones, The Financial Times Group, Bloomberg and Business Insider. She also worked as a vice president/senior content writer for major New York City financial firms, including New York Life and MSCI. Yael is now a freelancer and most recently co-authored the book “Blockchain for Medical Research: Accelerating Trust in Healthcare”, with Dr. Sean Manion. (CRC Press, April 2020) She holds two master’s degrees, including one in journalism from New York University and one in Russian studies from Université Toulouse-Jean Jaurès, France.