Disability Benefits and Taxes
Only about one-third of Social Security recipients pay taxes on their benefits. This situation arises when beneficiaries have significant additional income from interest, dividends, self-employment, or wages. The amount of tax assessed varies by the amount of additional income you make. A Boston Social Security lawyer at Kantrovitz & Associates can help you determine whether your benefits are taxable and, if so, how much you should pay the IRS or withhold from your benefits. We have more than 20 years of experience representing Social Security beneficiaries in Massachusetts, New Hampshire, and Rhode Island. We are available to assist you with all aspects of the disability benefits process, including planning for the tax consequences of receiving benefits.Getting Disability Benefits Can Affect Your Taxes
A key term in deciding how your Social Security disability benefits are taxed is “combined income.” This is comprised of adjusted gross income plus nontaxable interest, such as interest earned on a savings account, plus one-half of your benefits. The amount of tax you may pay primarily depends on two factors: whether you file singly or jointly and the amount of your combined income.
Regardless of your combined income, you will never pay income tax on more than 85% of your benefits. If you file federal taxes as an individual with a combined income between $25,000 and $34,000, you will pay income tax on up to 50% of your benefits. If you file singly with a combined income greater than $34,000, you will pay income tax on up to 85% of your benefits. If you file federal taxes jointly with your spouse with a combined income between $32,000 and $44,000, you will pay income tax on up to 50% of your benefits. If you file jointly with a combined income greater than $44,000, you will pay income tax on up to 85% of your benefits.
In January of each year, the Social Security Administration (SSA) will send you a form containing the amount of benefits you received in the prior year. Using the methods described above, you can use this form to determine whether your benefits are taxable and, if so, what percentage is taxed. If you find that your benefits are taxable, there are two payment alternatives. One option is to estimate your tax liability and make quarterly payments to the IRS. The other option is to ask the IRS to withhold federal taxes from your benefits. The IRS will withhold several pre-set percentages up to 25% of your monthly benefit amount.
The formulas and paperwork needed to determine your tax liability for disability benefits can be complex. You should not hesitate to consult a knowledgeable attorney to help you unravel the details of your situation and make a smart decision about paying taxes on your benefits.Consult a Massachusetts Lawyer About Your Social Security Concerns
If you have questions about your tax situation, the disability benefits attorneys at the Massachusetts firm of Kantrovitz & Associates can help. We are available to serve Social Security beneficiaries in Essex, Middlesex, Plymouth, Norfolk, and Suffolk Counties, as well as the Merrimack River area. Start the process of getting your concerns resolved by calling us toll-free at 1-800-367-0871 or filling out our online contact form to arrange a conversation with one of our lawyers.