The Danger of Complacency

In another forum I recently addressed the question of whether SS benefits are included when determining if the taxpayer must file. I started my knee-jerk "no" response, then decided to look at the 1040 instructions since I had just been preaching to a class about not working from memory.

Lo and behold, there's now an indication to include 1/2 of the SS benefit (and the $25,000 and $32,000 thresholds) in determining the filing requirement. I went back and checked 2007, and sure enough, there was a flat exclusion of SS income.

I haven't had time to research it, but I suspect that in years prior to 2008 even if a couple got the maximum SS benefit they wouldn't have a filing requirement if they didn't have other income at least equal to the filing requirement, but the combination of indexed benefits and a static threshold for taxable benefits finally pushed it over in 2008.

Reply to
Phil Marti
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SS benefits are not relevant as to the filing requirement. Why? Because if one has the "other income" of $25k/$32k to make SS taxable, one already exceeds the filing requirement based on that other income. In the range where the filing requirement is an issue, SS benefits will be non-taxable by statute.

Of course, MFS filers get screwed - in that their threshold is zero, so they are the only group that always has to count it. However, in reality, how many senior citizens file separately from their spouses? Usually, its MFJ or single (widow[er]s) for that age group.

Reply to
D. Stussy

In Ohio, perhaps 1/3 of my older couples file MFS returns. Because Ohio pays them to do it. And when they would pay on 85% of social security whether filing MFS or MFJ, and Ohio allows a $200 pension credit per tax return and a $50 senior credit per tax return, and has a steeply increasing tax rate structure with a single tax table regardless of filing status, it is easy to see why.

Reply to
Arthur Kamlet

I love that phrase!

Nope, see IRS pub 915.

"Base amount. Your base amount is: ? $25,000 if you are married filing separately and lived apart from your spouse for all of [the tax year]"

-Mark Bole

Reply to
Mark Bole

SS benefits are now relevant to filing as the amount of SSA benefits have now reached a point where the taxable amount may take a taxpayer over the filing threshold. E.g: Married couple both under age 65. Filing requirement is Taxable GI of $17,900. Couple has Interest, Dividends and Pension that totals $17000. Their combined SSA benefits are $36000. 1/2 of $36000 $18000 + $17000 = $35000. That's $3000 over the $32000 limit. $1500 of SSA benefits is taxable. $1500 + $17000 = $18500 of Taxable GI. They have to file. This is why Pub 501 and the instructions for the tax forms now includes the clause that Phil mentioned.

Reply to
namlak

Wrong. IRC Section 86(c)(3) says "zero, in the case of ... [MFS filers] [who don't live apart....]

I'm still right - it is relevant for MFS filers and their filing threshold, because there may exist a condition where it does count from $1 up.

Remember that we're talking about thresholds, not actual inclusion into gross income.

Reply to
D. Stussy

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