The Social Security Administration administers retirement and disability insurance funds, which workers and employers pay for with mandatory payroll taxes. If you earn over a certain amount, you might have to pay income taxes once again when you draw the benefits from the Social Security trust fund. The SSA-1099 statement that shows these benefits is an important part of the calculation.
What's That Form?
If you receive Social Security retirement or disability during the year, you'll get a Form SSA-1099 the following January, showing the total amount received. If you're a non-resident alien, you'll receive a SSA-1042S. These forms show total benefits as well as any federal tax that was withheld. If you expect to owe income tax on Social Security benefits, you can set up voluntary withholding. If there's a mistake on the form, contact the SSA immediately If the wrong amount is reported by Social Security to the IRS, you're going to have some issues.
Taxes on Benefits
You may have to pay taxes on Social Security benefits. It depends on the amount of your income from all sources, and your filing status. You add up your taxable income -- such as wages, interest, dividends, and pension distributions -- as well as your tax-exempt interest income, and one-half of your Social Security benefit amount. The IRS then applies one of three tax rates, depending on this "combined income" amount. If you're single, you pay no tax on Social Security benefits if the total income amount is less than $25,000. You pay taxes on 50 percent of the benefits if your income falls between $25,000 and $34,000, and you pay taxes on 85 percent of the benefits if your income is higher.
If You're Married, Joint
For those who are married filing jointly, the combined income thresholds are higher. You won't pay taxes on Social Security benefits if your combined income is less than $32,000. You pay taxes on half your benefits if your combined income falls between $32,000 and $44,000, and you pay taxes on 85 percent of your benefits if your combined income is more than $44,000. If you're filing a married, separate return, the IRS shows no mercy -- up to 85 percent of your benefits are taxable no matter how small your combined income.
Hold That Form!
You don't need to send the SSA-1099 in with your tax return, although you shouldn't prepare your taxes without it. This is true of all 1099 forms, which show a variety of miscellaneous income such as interest, dividends, and payments for independent contractors. The income reported on these forms is sent to the IRS by the payers. The agency already has the numbers in its system and will use them to cross-check the amounts you report. If there's a discrepancy, you'll get a letter from the IRS correcting your return and the new amount of your refund or payment. Keep the 1099 with a copy of your tax return in a safe place.
Founder/president of the innovative reference publisher The Archive LLC, Tom Streissguth has been a self-employed business owner, independent bookseller and freelance author in the school/library market. Holding a bachelor's degree from Yale, Streissguth has published more than 100 works of history, biography, current affairs and geography for young readers.