Social Security beneficiaries who find that they do have to pay taxes on their benefits have two options when it comes to paying Uncle Sam. First, they can have the Social Security Administration (“SSA”) directly withhold federal taxes each time they receive their benefits. There is an Internal Revenue Service (“IRS”) form that beneficiaries can complete and return to their local Social Security office. Beneficiaries can opt to have the SSA take 7, 10, 15 or 25 percent of their benefits taken out for taxes.
Second, beneficiaries can opt to make estimated quarterly payments to the IRS. Many business owners and self-employed individuals do this, as they are not having taxes taken out of their paychecks by their employers. The IRS has information on its website for those who wish to estimate their taxes and pay four times a year.
Determining your tax liability on Social Security benefits is something you should do before you begin receiving benefits or as soon as possible thereafter. As with other forms of income, the IRS can assess penalties and interest fees if you are paying taxes on your Social Security benefits later than you should be. Waiting until your taxes are due to figure out if you owed taxes on your past Social Security benefits is usually too late.
Do you have to pay taxes on your Social Security benefits? How do you handle payments to the IRS?
Troutman & Troutman, P.C. – Tulsa Social Security disability lawyers